Deputy Com of Tax v Ford

The Deputy Commissioner of Taxation (the Deputy Commissioner) sought to recover from Mr. Ford (the taxpayer) an amount of $10,000 which had been paid to the taxpayer by a company, P.T. Indosuez Australia Ltd (Indosuez), in circumstances where the taxpayer was a director of Indosuez. The Deputy Commissioner contended that this payment constituted assessable income of the taxpayer under section 6-5 of the *Income Tax Assessment Act 1997* (Cth) (the Act) as ordinary income. The taxpayer disputed this, arguing that the payment was a loan. The matter came before Callinan J in chambers.

The central legal issue before the court was whether the $10,000 payment made by Indosuez to the taxpayer was assessable income of the taxpayer under section 6-5 of the Act, or whether it was a loan. This required the court to determine the true character of the payment, considering the relevant circumstances and the intention of the parties at the time of the transaction.

Callinan J found that the payment was not a loan. His Honour observed that there was no evidence of a loan agreement, no provision for interest, and no repayment schedule. The taxpayer had not provided any security for the purported loan. Furthermore, the taxpayer had not declared the amount as a loan in his tax return, nor had Indosuez recorded it as a loan in its accounts. His Honour concluded that the payment was a distribution of profits or a benefit provided to the taxpayer in his capacity as a director, and therefore constituted assessable income under section 6-5 of the Act.

The court ordered that the taxpayer pay the Deputy Commissioner the sum of $10,000, together with interest and costs.