Federal Commissioner of Taxation v Slater Holdings Ltd

The Federal Commissioner of Taxation appealed to the High Court of Australia against a decision of the Full Court of the Federal Court concerning the assessability of certain payments made by a company limited by guarantee to its member. The dispute centred on whether these payments constituted dividends for the purposes of the *Income Tax Assessment Act 1936* (Cth) and were therefore assessable income of the member.

The High Court was required to determine whether payments made by a company limited by guarantee to its member, which were derived from moneys originating from a gift to the company and from capital profits realised by the company, were assessable as dividends under section 44(1)(a) of the *Income Tax Assessment Act 1936*. This involved considering the definition of "dividend" in section 6(1) of the Act and the nature of distributions made by companies limited by guarantee.

The Court reasoned that the definition of "dividend" in section 6(1) of the Act was broad enough to encompass distributions of profits by a company limited by guarantee, regardless of whether those profits were derived from trading income, capital profits, or gifts received by the company. The Court held that the character of the moneys from which the distribution was made was irrelevant; what mattered was that the distribution was made by the company out of its profits. Consequently, the payments made to the member were properly characterised as dividends and were assessable income.

The High Court allowed the appeal with costs, setting aside the order of the Full Court of the Federal Court and ordering that the appeal to that Court be dismissed with costs.