ORCHARD & ORCHARD

The parties to this proceeding were the applicants, Orchard & Orchard, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the applicants for the 2017 income year. The applicants sought to have this assessment set aside. The matter came before Middleton J of the Federal Court of Australia.

The primary legal issue before the court was whether the Commissioner had correctly determined that the applicants were carrying on a business of providing services to a related entity, and consequently, whether the income derived from these services was assessable to the applicants. This involved an examination of the nature of the activities undertaken by the applicants and whether these activities constituted a business for the purposes of the *Income Tax Assessment Act 1997* (Cth).

Middleton J considered the evidence presented regarding the arrangements between the applicants and the related entity. His Honour applied the established legal principles for determining whether a business is being carried on, which involve a consideration of various factors including the scale of operations, the repetition of activities, the profit motive, and the commercial character of the undertaking. The court found that the applicants' activities, when viewed as a whole, did not amount to the carrying on of a business. The Commissioner's assessment was therefore found to be incorrect.

The court ordered that the assessment be set aside and remitted to the Commissioner for redetermination in accordance with the judgment.