Norman v Federal Commissioner of Taxation

The taxpayer, Norman, sought to assign to his wife certain future income, specifically future interest on a loan and future dividends from shares he expected to acquire. The Commissioner of Taxation assessed these amounts as part of the taxpayer's assessable income. The dispute ultimately came before the High Court of Australia.

The central legal issues before the High Court were whether the purported voluntary assignments of future interest and future dividends were legally effective, and if so, whether these assignments could exclude such income from the taxpayer's assessable income under the relevant provisions of the *Income Tax and Social Services Contribution Assessment Act 1936* (Cth). The court was required to consider the principles governing equitable assignments, particularly in relation to future property, and distinguish between the assignment of an existing proprietary right and the assignment of a mere expectancy or possibility.

The High Court held that the assignments were ineffective to divest the taxpayer of his right to receive the future income. The Court reasoned that an assignment of future property, in order to be effective in equity, must relate to property that, although not yet in possession, is an existing proprietary right or a chose in action. A mere expectancy or possibility, such as the expectation of receiving future dividends or interest that has not yet accrued or been declared, does not constitute an existing proprietary right capable of assignment. Therefore, the taxpayer remained entitled to the income, and it was correctly included in his assessable income.