Fadden v Federal Commissioner of Taxation

This case concerned Arthur William Fadden, the taxpayer, and the Federal Commissioner of Taxation, the respondent. Fadden had transferred shares in a company to each of his four children for a stated sum, but no money was paid by the children at the time of the transfer. Approximately two and a half years later, the Commissioner assessed gift duty on these transactions under the *Gift Duty Assessment Act 1941-1942*. The taxpayer appealed this assessment to the High Court, which stated a case for the Full Court.

The legal issues before the court were whether the transactions constituted gifts within the meaning of the Act, and whether Fadden had acquired any interest in other property by way of future payment or contract for his benefit, as contemplated by section 16 of the Act. The Commissioner contended that the consideration was not fully adequate and that section 16 applied, deeming the transactions to be gifts.

The Court held that the transactions were not gifts. It reasoned that a genuine promise to pay, even if payment is deferred, constitutes adequate consideration in law for the transfer of property. The Court found no basis to distinguish such promises based on the financial capacity of the promisor, nor to treat a debt or chose in action arising from such a promise as an "interest in any other property" within the meaning of section 16. Section 16 was interpreted as applying only after a disposition has been established as a gift, and not as a provision that itself defines certain dispositions as gifts. The Court concluded that the Commissioner's arguments failed.

The Court answered all questions in the case stated in the negative, finding that no gift duty was payable. The costs of the case were to be costs in the appeal.