13 May 2010

Turning income into capital or capital into income

Can a trustee treat receipts or outgoings as being on capital or income account irrespective of the nature of the receipt or outgoing? Since Cajkusic v Commissioner of Taxation (2006) 155 FCR 430, Bamford v Commissioner of Taxation (2009) 176 FCR 250 and Wood v Inglis [2009] NSWSC 601, legal and tax advisers have expressed various views on the proper classification of receipts or outgoings in circumstances where the terms of a trust provide a trustee with a power to classify receipts or outgoings as either on capital or income account. The decision of the Full Court of the Federal Court of Australia in Forrest v Commissioner of Taxation [2010] FCAFC 6 has perhaps qualified a trustee’s power to determine the character of a receipt in its hands. This article highlights the key points of this decision.

Download: Income into capital.pdf (83 Kb)

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