Murray v Federal Commissioner of Taxation

The case of *Murray v Federal Commissioner of Taxation* concerned an appeal by William Ronald Murray, as executor of the estate of William Murray, against an income tax assessment. The deceased, who was resident and domiciled in England, held shares in companies incorporated in England and Queensland. These companies conducted business in Australia and derived their principal income from Australian sources. Dividends declared by these companies were paid to the deceased in England. The Commissioner of Taxation assessed the executor on a proportion of these dividends, calculated by reference to the proportion of each company's profits derived from Australia.

The legal issues before the High Court were whether the Commonwealth Parliament had the constitutional power to tax dividends received by a non-resident shareholder from companies whose profits were derived from Australian sources, and whether the *Income Tax Assessment Act 1915-1916* extended to taxing such income in the hands of a non-resident. The appellant argued that the taxing Act should not apply to persons or circumstances outside Australia's territorial jurisdiction and that the deceased, as an absentee shareholder, did not have a proprietary interest in the profits derived in Australia.

The Court, applying the principles established in *Commissioners of Stamps (Qd.) v Wienholt* and *Nathan v Federal Commissioner of Taxation*, held that the Commonwealth Parliament possessed the power to tax income derived from sources within Australia, irrespective of the recipient's residence. The Court reasoned that a dividend, when distributed, represents an aliquot part of the company's profits, and if those profits are derived from Australia, the dividend is treated as income arising in Australia for taxation purposes. The Court found no provision within the Act that excluded non-resident shareholders from this taxation, noting that the Act contained provisions specifically addressing absentees.

The Court answered the questions posed in the special case, affirming that the assessed proportions of the dividends were income within the meaning of the Act and that the provisions of the Act were within the competence of the Commonwealth Parliament. Consequently, the appeal was dismissed.