Mowling v Federal Commissioner of Taxation

Eleanor Mowling, the widow of George Mowling, appealed to the High Court against a majority decision of the Board of Review No. 2, which had refused to uphold her objection to an amended income tax assessment for the year ended 30 June 1947. The amended assessment increased her assessable income by £855, representing a portion of an annuity she received from the Colonial Mutual Life Assurance Society Ltd. The dispute centred on the interpretation of section 26(c) of the *Income Tax Assessment Act 1936-1947*, which deals with the assessable income from annuities.

The primary legal issue before the court was whether the exclusion provided by section 26(c) for purchased annuities applied only when the annuitant was the purchaser, or if it extended to annuities purchased by a third party for the annuitant. The appellant contended that the annuity in question was purchased, and therefore the exclusion should apply, arguing alternatively that the wording of the section did not require the annuitant to be the purchaser. The respondent maintained that the section was intended to apply only when the annuitant themselves had purchased the annuity.

Taylor J. found that the history of the legislation provided significant guidance. He noted that earlier provisions, particularly amendments made in 1930, suggested that the legislature considered situations where deductions might have been allowed for the purchase price of an annuity, and that the subsequent amendments were designed to prevent double tax benefits. Crucially, he observed that deductions were allowable in specified circumstances where an annuity was purchased for the annuitant by another person, indicating that the expression "an annuity which has been purchased" was not exclusively understood to mean an annuity purchased by the taxpayer for themselves. Consequently, his Honour concluded that the annuity received by the appellant was purchased within the meaning of section 26(c).

The appeal was allowed, with a declaration that the £855 was not assessable income of the appellant. The amended assessment was ordered to be amended accordingly, and the respondent was ordered to pay the appellant's costs.