Crown Melbourne Limited v Commissioner of Taxation; Burswood Nominees Limited as Trustee for the Burswood Property Trust v Commissioner of Taxation

Crown Melbourne Limited and Burswood Nominees Limited (as Trustee for the Burswood Property Trust) (the taxpayers) appealed to the High Court of Australia against decisions of the Federal Court of Australia, which had affirmed assessments of additional income tax made by the Commissioner of Taxation. The dispute concerned the tax treatment of payments made by the taxpayers to their respective parent companies, Crown Limited and Burswood Property Trust, for the provision of services and the use of intellectual property. The Commissioner had assessed these payments as assessable income of the parent companies, arguing they were derived from sources within Australia.

The central legal issue before the High Court was whether the payments made by the taxpayers to their respective parent companies constituted assessable income in the hands of those parent companies, and if so, whether they were derived from a source within Australia. This involved determining the character of the payments and the location of the source from which that income was derived, particularly in light of the services and intellectual property provided by the parent companies to their Australian subsidiaries.

The High Court, in a joint judgment delivered by Kiefel CJ and Edelman J, held that the payments were not assessable income of the parent companies. Their Honours reasoned that the payments were not derived from a source within Australia because the services were performed and the intellectual property was made available by the parent companies outside of Australia. The Court applied the principle that the source of income is a question of fact and degree, and in this instance, the factual matrix pointed to the source of the income being located offshore. The Court distinguished the present case from previous authorities where payments for services rendered in Australia were held to be Australian sourced.

The appeals were allowed, and the assessments of additional income tax were set aside.