Symon v Federal Commissioner of Taxation

The case of Symon v Federal Commissioner of Taxation concerned a dispute over the deductibility of a monetary gift made by the taxpayer, Sir Josiah Henry Symon, to the University of Adelaide. The taxpayer had resolved to gift £10,000 and deposited this sum with a company, with the funds to be repayable on demand with interest. These deposits were made in various instalments between October 1926 and March 1927. The taxpayer claimed that the portion of these deposits made in 1927, totalling £2,500, constituted assessable income for that year. Subsequently, the £10,000 was transferred to the State Treasurer to be held in a trust fund, from which payments could be made for the specified university works. During 1927, £2,200 was paid out from this fund to contractors. The taxpayer sought to deduct this £2,200 as a gift made out of his assessable income for 1927, pursuant to section 23 (1) (h) (ii) of the Income Tax Assessment Act 1922-1929. The Commissioner allowed a deduction of only £550, representing a proportion of the £2,200 based on the ratio of the 1927 deposits to the total gift amount. The matter was referred to the High Court of Australia.

The legal issue before the High Court was whether the £2,200 paid out by the Treasurer in 1927, for the purposes of the gift, could be considered as having been made out of the taxpayer's assessable income derived during that year, thereby entitling the taxpayer to a full deduction under section 23 (1) (h) (ii) of the Act. This section allowed for the deduction of gifts made out of assessable income derived during the year in which the gifts were made. The core of the dispute lay in how to attribute the payments from the mixed fund, which contained both assessable income from 1927 and funds from previous years, to the specific deduction claimed.

A majority of the High Court, comprising Starke, Evatt, and McTiernan JJ., held that the taxpayer was entitled to attribute the entire £2,200 payment to his assessable income for 1927. Their reasoning was guided by English authorities, such as *Sterling Trust Ltd. v. Commissioners of Inland Revenue* and *Edinburgh Life Assurance Co. v. Lord Advocate*, which established a principle that a taxpayer has the right to attribute payments made out of a mixed fund to the portion of the fund that is most beneficial for tax purposes. In this instance, the taxpayer had deposited £2,500 of his 1927 assessable income into the £10,000 fund. The Court concluded that the taxpayer was entitled to treat the £2,200 paid out in 1927 as having been drawn from the portion of the fund that represented his 1927 assessable income, even though the funds were not physically segregated. Rich and Dixon JJ. dissented, arguing that such a broad principle of attribution was not applicable to the specific wording of the Australian Act and that the Commissioner's pro rata apportionment was more appropriate.

The High Court answered the question referred by the Board of Review in the affirmative, finding that the gift of £2,200, or at least a portion thereof, was made out of the assessable income derived by the taxpayer during the year ended 31st December 1927, within the meaning of section 23 (1) (h) (ii) of the Income Tax Assessment Act 1922-1929. Consequently, the taxpayer was entitled to the deduction claimed.