Hickman v Federal Commissioner of Taxation

The case of Hickman v. Federal Commissioner of Taxation concerned an appeal by George Hickman against an assessment for war-time profits tax. Hickman, a grazier, had sold his grazing property, including improvements and livestock, on 1 January 1918. The Commissioner of Taxation assessed Hickman for war-time profits tax on a portion of the proceeds from the sale of the cattle, treating it as profit arising from his business. Hickman objected to this assessment, and the matter was brought before the High Court of Australia.

The central legal issue before the Court was whether any portion of the proceeds from the sale of the entire grazing business, specifically the cattle, constituted "profits arising from any business" as defined by the War-time Profits Tax Assessment Act 1917-1918, and thus liable to war-time profits tax. The Court was required to interpret the meaning of "profits arising from any business" within the context of the Act, particularly in relation to the sale of a business as a whole, as opposed to profits derived from ongoing trading operations.

The Court, comprising Knox C.J., Starke J., and Higgins J., held that the expression "profits arising from any business" referred to trading profits derived from the carrying on of a business, not the proceeds from the realization or sale of the business as a whole. They reasoned that the Act was designed to tax profits enhanced by war conditions during the operation of a business, not capital gains from the sale of assets upon ceasing operations. The sale of the property and livestock was considered a single transaction representing a change of ownership of a continuing business, rather than a trading operation by the vendor. Therefore, no portion of the purchase price allocated to the cattle was considered taxable profit under the Act.

The appeal was allowed, the Commissioner's assessment was set aside, and the assessment was reduced to nil. The Commissioner was ordered to pay the appellant's costs of the appeal, including the costs of the special case stated. Higgins J. also commented on the absence of provisions for interest on overpaid tax, suggesting this was an unjust aspect of the Act.