Tawfik and Commissioner of Taxation (Taxation)

This matter concerned a review of the Commissioner of Taxation's decision to disallow Mr Tawfik's objections against amended income tax assessments. The dispute centred on when certain bonus instalment payments, earned by Mr Tawfik while he was a non-resident of Australia, were to be considered "derived" for the purposes of Australian income tax. The payments were received by Mr Tawfik after he had become an Australian resident.

The Administrative Appeals Tribunal was required to determine whether the bonus instalment payments were derived by Mr Tawfik when they were earned or when they were actually received. This involved interpreting the meaning of "derived" in section 6-5(2) of the *Income Tax Assessment Act 1997* (Cth), particularly in light of section 6-5(4) which deems an amount to be received when it is applied or dealt with on behalf of the taxpayer.

The Tribunal reasoned that, in accordance with established High Court principles, income derived from personal exertion, such as employee remuneration, is generally treated as derived upon receipt. This approach is considered to provide a substantially correct reflection of the taxpayer's true income. The Tribunal found no basis to conclude that the bonus payments had been applied or dealt with on Mr Tawfik's behalf before he received them. The fact that Mr Tawfik was a non-resident when the bonus was earned was not considered a relevant distinction, as the nature of the income as a reward for personal services dictated that derivation occurred upon receipt, not when the entitlement arose or the work was performed.

The Tribunal affirmed the Commissioner's decision, holding that the bonus instalment payments were derived by Mr Tawfik upon their receipt in Australia.