F and G Hooper Limited v Federal Commissioner of Taxation

F. & G. Hooper Limited appealed to the High Court of Australia against an assessment for war-time profits tax for the financial year 1918-1919. The dispute concerned the correct calculation of the company's pre-war standard of profits. The company had been formed in 1915, taking over a manufacturing business previously carried on by its two principal shareholders in partnership. These shareholders continued to hold the majority of shares and devote their full time to the company's operations.

The legal issues before the Court were whether the pre-war standard of profits for the company should be determined by reference to the profits of the former partnership business, and if so, by what method. Specifically, the appellant argued that section 16(6)(b) of the War-time Profits Tax Assessment Act 1917-1918 should apply, potentially allowing for a higher pre-war standard based on the profits of the partnership in its final pre-war years. The Commissioner, however, had calculated the pre-war standard based on the average profits of the partnership business over two of the last three pre-war trade years, as provided by section 16(3) of the Act.

The Court found that the Commissioner's method of calculating the pre-war standard was correct. While acknowledging the arguments regarding the applicability of section 16(6)(b), the Court determined that it was not necessary to definitively rule on its application in this instance. The Court reasoned that even if section 16(6)(b) were applicable, the method prescribed by section 16(3) for determining the pre-war standard by averaging profits from two of the last three pre-war trade years, which resulted in a standard of £1,518, was the correct approach. This average was derived from the partnership's profits in the 1911-1912 and 1913-1914 financial years.

The High Court answered "Yes" to the first question posed in the case stated, confirming that the pre-war standard of profits was correctly assessed at £1,518. The Court deemed it unnecessary to answer the second question. The costs of the appeal were ordered to follow the event.