SP Investments Pty Limited (as Trustee of the LM Brennan Trust) v The Commissioner of Taxation

SP Investments Pty Limited (as Trustee of the LM Brennan Trust) sought special leave to appeal from a decision of the Federal Court of Australia. The dispute concerned the taxability of an amount received by the trustee from the assignment of a right to receive future royalty payments. The Commissioner of Taxation contended that this amount constituted assessable income.

The High Court was required to determine whether the amount received by the trustee from the assignment of its right to future royalty payments was assessable income under the *Income Tax Assessment Act 1936* (Cth). Specifically, the Court needed to consider the application of principles derived from *Myer Emporium Ltd v FCT* and *Henry Jones (IXL) Ltd v FCT*, particularly in circumstances where the taxpayer was not carrying on a business related to the assigned right, and the assignment was not made in the course of such a business.

The applicant argued that the Federal Court had erred in its interpretation of *Myer*, suggesting that the "second strand" of that decision, concerning profit-making schemes, was not limited to business profits. The applicant highlighted that in the present case, unlike in *Myer* and *Henry Jones*, there was an express finding that the trustee was not carrying on a business activity involving the royalty right, nor was the assignment made in the course of business. The applicant contended that the assignment was part of an overall profit-making scheme, but that the consideration for the assignment reflected the true value of the chose in action, thus not giving rise to a profit. The Court considered whether the assignment and any associated loan agreement were interdependent elements of a profit-making scheme, as discussed in *Myer*.