CASE Y24
Members:P Gerber
Tribunal:
Administrative Appeals Tribunal
Dr P Gerber (Deputy President)
The applicant company was, at all relevant times, what was referred to as a ``contract carrier'' for the John Fairfax Group of companies (``Fairfax''). In March 1988, after the closure of The Sun newspaper, Fairfax terminated the contract of carriage and paid the applicant an amount of $40,839 in circumstances which will be set out below. The Commissioner treated this payment as assessable income pursuant to sec 25(1) of the Income Tax Assessment Act (``The Act''), whilst the applicant asserts that the payment constitutes an affair of capital. Hence this reference. The applicant's representatives did raise at one stage the issue that the receipt may well constitute an ``eligible termination payment'' within sec 27A of the Act, thus receiving concessional treatment. However that argument was abandoned in a letter to the respondent dated 14 February 1991 (a copy of which was sent to the Tribunal on the same date).
2. The following is a copy of the breakdown of the $40,838.69 which was provided as an attachment to a letter dated 8 April 1988 from Fairfax to Richard Roe, a director of the applicant company at the time (Exhibit F):
Name: Richard Roe Department: Sun Owner Drivers
Length of Service (rounded up to nearest quarter):23.25
Gross Tax
$ $
Accrued Annual Leave (*) 377.04 117.83
Accrued Long Service Leave:
- Pre 15/8/78 4379.21 68.43
- Post 15/8/78 3131.61 978.63
Lieu Days:
- 11 days @ $75.06 825.66 12.90
Redundancy Pay:
40.00 Weeks @ 4 Weeks/Year To 10 Years
39.75 Weeks @ 3 Weeks/Year From 10 Years
Total Weeks: 79.75 @ $375.30 29930.18
Ex-Gratia Payment 2000.00
Transport Allow. @ $15.00/Week 195.00
Total Redundancy Pay 32125.17 501.96
-------- --------
40838.69 1679.75
Total Net Payment 39158.94
- (*) Please note that Annual Leave payment was calculated by using the standard weekly rate of $375.30.
- A further payment for Annual Leave will be made, where applicable, next week to reflect the difference between the standard weekly rate of $375.30 and your actual rate calculated for the last 13 week period.
- Kilometre rate adjustments from the first day on or after February 5 will also be paid next week.
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3. In the previously mentioned letter, dated 14 February 1991, from the office of Mr John Eager, consultant solicitor, who ably represented the applicant, also advised as follows:
``At the hearing the Applicant also will not contest the Respondent's assertion that the undermentioned amounts are properly included in the Applicant's assessable income for the year of income ended 30 June 1988 -
(a) accrued annual leave - amended as mentioned below $383.48 (b) accrued long service leave $7,510.82 (c) lieu days payment $825.66 (d) back pay on hours ($45.50)/kilometres ($73.28) $118.78 --------- Total Amount Conceded $8,838.74 ---------''
4. In the result, the only issue before the Tribunal is whether the balance not conceded ($32,125.17), described as ``redundancy pay'', constitutes assessable income in the hands of the applicant under sec 25(1) of the Act.
5. The chronology of events is as follows. In or about October 1963, Mr Roe and his wife Maud commenced a milk-vending run in partnership. Shortly after the milkrun commenced, the partnership entered into a contract with Fairfax to deliver The Sun to newsagents each Monday to Saturday. In 1967/68, the partnership sold the milkrun and concentrated exclusively on delivering The Sun for Fairfax. At that time that was the only business the partnership operated. Some time in the early 1970s, the partnership also began delivering Fairfax magazine publications two mornings a week. Those magazine deliveries were made pursuant to a contract the partnership entered into with Eastwood Harris Transport Pty Ltd (``Eastwood Harris''), a company which had acquired the right to deliver the various Fairfax magazines. Under the original contract with Fairfax, the partnership was obliged to provide its own vehicle for the deliveries and used a lorry, registered in the partnership name, for all deliveries. There was also a station wagon (registered in Mr Roe's name) which was used as a backup vehicle in case the lorry was ``off the road''.
6. In June 1983, the business of the partnership was transferred to the applicant, a $2 company (henceforth referred to as ``UPEC''), the directors and shareholders being Mr and Mrs Roe, each holding one $1 share. From the time of transfer of the partnership's business to UPEC, the only source of UPEC's income was derived from the delivery of The Sun and Fairfax magazines.
7. At the time of forming UPEC, Mr Roe informed the person who was responsible for contract carriers at Fairfax that the partnership business had been transferred to the company and requested that the contract payments be made henceforth to UPEC. There is evidence that from at least June 1987, Fairfax made weekly payments into UPEC's bank account. In addition, monthly payments were made to that account under the sub-contract with Eastwood Harris. Significantly, as soon as the partnership began the newspaper run, Mr Roe joined the Transport Workers' Union (``TWU'') as the nominated driver for the partnership and, upon transfer of the partnership's business to UPEC, as the nominated driver for UPEC. In fact, Mr Roe was the driver at all times the vehicle was used to deliver The Sun and Fairfax magazines, whether by the partnership or by UPEC. (If Mr Roe could not make deliveries for whatever reason, Fairfax would provide a relief driver.)
8. The NSW Industrial Gazette vol 27, dated 24 February 1988 (pp 783-797) was tendered, evidencing that an industrial agreement was made on 9 September 1986 between the TWU (NSW branch) and Fairfax with respect to the cartage of The Sun and other publications by contract carries, and filed on 2 April 1987 under sec 91H of the Industrial Arbitration Act 1940 (NSW) (``the Arbitration Act''). Relevant clauses of that agreement are set out as follows:
``Whereas it has been agreed by and between the parties hereto that the following conditions shall apply during the currency of this Agreement in respect of contracts of carriage between the Principal Contractor and contract carriers who are members of the Association and are engaged by the Principal Contractor to deliver The Sun newspaper and such other publications as it may designate. It has been agreed by and between the parties hereto that this
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Agreement shall become an Agreement filed under Section 91H of the Industrial Arbitration Act, 1940.
Now it is agreed by and between the parties -
...
3. Definitions
...
3.2 (a) For the purposes of Clauses 8, 10, 11 and 12 of this Agreement, each contract carrier will nominate in writing to the Principal Contractor within four weeks of engagement -
- (i) where the contract carrier is a partnership - a member of the partnership;
- or
- (ii) where the contract carrier is a company - a director or shareholder of the company, who will be entitled to the benefits prescribed by those clauses in discharge of the Principal Contractor's obligations under those clauses of the contract carrier.
(b) Unless the Principal Contractor, the Association and the contract carrier otherwise agree, the person nominated by the contract carrier under paragraph (a) above will be the normal driver of the vehicle required to be supplied by the contract carrier under this Agreement.
4. Weekly Remuneration
...
8. Annual Leave
...
9. Contract of Carriage
9.1 A contract carrier covered by this Agreement must supply a motor van, motor utility, or motor truck, and it must be a vehicle acceptable to the Principal Contractor and capable, in the opinion of the Principal Contractor, of performing the work to be done, namely the carriage and distribution of such of the Principal Contractor's publications as the Principal Contractor may designate, to such depot, shop or place as the Principal Contractor shall require. The services of the contract carrier shall be supplied for such work and the contract carrier shall load or assist in loading other vehicles in addition to the contract carrier's own vehicle.
9.2 The contract of carriage of a contract carrier engaged on a weekly basis pursuant to Clause 4 may be terminated by one week's notice on either side or by the payment or forfeiture, as the case may be, of one week's remuneration in lieu of notice. Such notice may be given on any day of the week, to take effect one week after the day on which it was given. This shall not affect the right of the Principal Contractor to terminate any contract of carriage without notice for malingering, inefficiency, neglect of duties or misconduct by the driver of the contract carrier's vehicle in all of which cases remuneration shall be paid to the contract carrier up to the time of termination of the contract of carriage only.
...
12. Long Service Leave
12.1 Subject to clause 3.2 of this Agreement, the Principal Contractor will grant to its contract carriers, benefits identical to those prescribed by the New South Wales Long Service Leave Act, 1955 as if the contract carriers were in fact employees of the Principal Contractor.
...
13. Disputes
...
13.2 Any question or matter in dispute which may arise during the currency of this Agreement shall be officially referred by the Association to the Principal Contractor (or vice versa) for discussion and if not settled as a result of that discussion shall be referred by either party to the Industrial Commission of New South Wales or to a relevant Contract Regulation Tribunal or Commissioner pursuant to the provisions of the Industrial Arbitration Act, 1940, as amended.
...
14. Payments under this agreement
All payments to be made by the Principal Contractor to a contract carrier under this Agreement will be made by bank transfer to
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a bank account or other account nominated to the Principal Contractor in writing by the contract carrier. The Principal Contractor shall supply the contract carrier with particulars of each payment made under this clause....
17. Leave Reserved
17.1 Leave is reserved to the parties with respect to the following matters:
- ...
- (b) Severance pay.
...
20. Notification of Redundancy
20.1 Where the Principal Contractor has made a definite decision to terminate the contracts of carriage of contract carriers as the Principal Contractor no longer wishes the work the contract carriers have been doing done by anyone and this is not due to the ordinary and customary turnover of contract carriers, the Principal Contractor shall hold discussions with the contract carriers directly affected and with their Association.
20.2 The discussions shall take place as soon as is practicable after a definite decision has been made and shall cover any reasons for the terminations, measures to avoid or minimise the terminations and measures to mitigate any adverse effects of any terminations on the contract carriers concerned.
20.3 Nothing in this clause shall prevent the Principal Contractor's decision to terminate the contracts of carriage of contract carriers from coming into effect.
21. Incidence and Duration
21.1 This Agreement will take effect on and from September 9, 1986 and shall remain in force until September 9, 1987.''
9. Section 91H of the Arbitration Act provides:
``(1)...
(2) An association of contract carriers may enter into an agreement in writing with a principal contractor, or with an association of employing contractors, with respect to the conditions of contracts of a specified class made with carriers by that principal contractor or, as the case may be, with principal contractors represented by the association.
(3) Where an agreement entered into under subsection (1) or (2) is registered and is for a term, specified in the agreement, not exceeding 5 years from the date on which it is entered into, the agreement, or the agreement as varied in accordance with this section, is binding on the parties to the agreement and, in the case of a party that is an association, on all members of the association.
(4) An agreement under this section is registered when it is filed in the office of the registrar.
(5) An agreement that, by the operation of subsection (3), is binding on a corporation as a member of an association of contract carriers is, except to the extent that the agreement otherwise provides, also binding on -
- (a) any director of the corporation, or any member of the family of any such director, who personally does work under a contract to which the agreement relates and to which the corporation is a party;
- (b) any holder of shares in the corporation who personally does work under any such contract where that holder, together with the members of his family, has a controlling interest in the corporation; and
- (c) any member of the family of the holder of shares in the corporation who personally does work under any such contract where that holder, together with the members of his family, has a controlling interest in the corporation.
(6)...
(7)...''
10. Section 91I of the Arbitration Act provides:
``A registered agreement continues in force after the expiration of the term specified in it until varied or rescinded by the parties or by the commission or until notice of
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termination is given by a party to the agreement to the other party or parties and to the registrar.''
(The Industrial Registrar of the Industrial Commission of New South Wales confirmed by letter, dated 21 February 1991, that the abovementioned agreement continued in force by virtue of sec 91I of the Arbitration Act up until the date of the cancellation of UPEC's contract of carriage on 22 March 1988.)
11. I am satisfied on the evidence that at the date of filing of the abovementioned industrial agreement on 2 April 1987, it fulfilled the necessary descriptions under sub-paragraphs 91H(2), (3) and (4) such that it became binding on the parties to the agreement, specifically on Fairfax and Mr Roe as a member of the TWU. Mr Wilson, of learned counsel for the respondent submitted that as Roe and not UPEC was the member of the TWU, the terms of the industrial agreement were not strictly binding on UPEC pursuant to either sub-paragraph 91H(3) or (5). However, even if UPEC was not strictly bound by the terms of the industrial agreement by virtue of the provisions of the Arbitration Act, I am satisfied on the evidence that UPEC, through Mr Roe, acted throughout as though the terms of the industrial agreement were the terms of the contract between UPEC and Fairfax. Any other approach would be ``so blinkered by form as to ignore entirely the substance of a transaction'': per Hill J in
McLennan v FC of T 90 ATC 4047 at p 4052.
12. On 14 March 1988, Fairfax caused to be distributed the following three letters (Exhibit E):
``REDUNDANCY PACKAGE ON CLOSURE OF THE SUN AND TIMES ON SUNDAY
The package provides fair and equitable severance pay to those employees who are to be retrenched. The package is:
1. Redundancy Pay
- (a) 4 weeks pay for each year of service up to and including 10 years continuous service.
- (b) 3 weeks pay for each year of service beyond 10 years continuous service.
- (c) Payment for employees on the above basis will be calculated on their Award or Agreement base classification rate, personal margin and shift loading.
- (d) Payments for contract drivers on the above basis will be calculated on their hourly rate (X38) plus the weekly retainer of $13.08.
or
- The Award entitlement, whichever is the greater.
2. Long Service Leave
Pro rata Long Service Leave shall be based on the Long Service Leave Act; ie it will be paid after 5 or more years of continuous service.
3. Superannuation
Superannuation benefits shall be paid in accordance with the Trust Deed of the relevant funds. The employee's contribution, the company's contribution, and entitlements to the fund earnings will be paid in full.
4. Retirees
Employees who have indicated a retirement date to the Company shall continue to be paid normally to that date of retirement.
5. Job Vacancies
No redundant employee will be precluded from applying for any job vacancy in any other Fairfax establishment. Where vacancies occur in a department such vacancies may be filled by other employees provided such employees are suitable. However, a decision to select any employee to fill such a vacancy rests entirely at the discretion of the company.
6. Particulars
The Company will provide full calculations of details of each applicant's entitlements under this agreement as soon as is practicable.''
``TO ALL EMPLOYEES AND CONTRACT CARRIERS
It is well known that The Sun and the Times on Sunday have for many years been struggling for circulation and revenue.
The Sun along with most afternoon newspapers all over the world, has for a considerable time been experiencing
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substantial losses. The Times on Sunday has not met either circulation or revenue targets and has also been losing heavily.The Board, after an exhaustive review of all options, has decided that the losses on these papers cannot be further sustained and, with regret, announces the closure of both.
The final edition of The Sun will be on March 15, 1988. Yesterday's Times on Sunday was the final issue of the paper.
The closure means that a substantial number of positions will become redundant. Individuals involved will be told personally as soon as possible.
The Company will pay all redundant employees (other than those who have elected to retire early) four weeks' pay for each year of service up to ten years and three weeks' pay for each year beyond ten years. Those who have agreed to retire early will be paid their wages to their agreed retirement date. In the case of the A.J.A., the payment will be whichever is the greater of the redundancy package or the Award entitlements.
All outstanding long service leave, holiday pay and lieu days (where applicable) and full superannuation entitlements will also be paid.
The Company tomorrow proposes to explain its redundancy package to the Executive of the N.S.W. Labor Council and the unions involved.
All staff will be kept on the payroll until March 22, 1988.
The Board and senior management regret today's decision but they were made to preserve the long term viability of the Company.
Peter King
Chief Executive Officer''
``Mr R. Roe
SUN CONTRACTOR
Dear Mr Roe,
The Board, after an exhaustive review of all options, has decided that the substantial losses on The Sun cannot be further sustained and that its last issue will be March 15, 1988.
The formal announcement is contained in a letter from the Chief Executive, Mr. Peter King. A copy is available from your union delegate if you do not already have one.
Regretfully, The Sun's closure means the termination of the contracts of carriage of all `Sun' contract carriers, following the March 15th issue.
Whilst this will be the last issue, your contract with the Company will not formally come to an end until March 22, 1988.
In due course I will be able to give you full details of your redundancy payment as outlined in Mr. King's letter, however, apart from this: -
- (1) You will be paid your hourly rate plus retainer until March 22, 1988, but not be required to report for work after March 15, 1988.
- (2) You will be paid your Agreement entitlement of pay in lieu of notice, calculated as at March 22, 1988.
- (3) You will receive accrued holiday pay (including the 17½% loading) calculated at March 22, 1988 of $275.61.
- (4) You will also receive long service leave pay calculated at March 22, 1988 of $7488.36.
- (5) Payment will be made for outstanding lieu days of $825.66.
Whilst it will not be necessary for you to report to work after March 15, 1988, it is important that you leave with me an address and telephone number at which you can be contacted when the payments to be made to you are available.
Yours sincerely,
John Fairfax & Sons Limited''
13. At a meeting of TWU members affected by the closure of The Sun which Mr Roe attended, the union delegate informed the meeting that the union was placing pressure on Fairfax to increase the ``redundancy pay'' component of its members' redundancy package, and in particular, to include an additional amount of $2,000.00 to all contract carriers ``in respect of their vehicles''. In fact, this amount was subsequently included in the ``redundancy pay'' component of the package.
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14. Notwithstanding Mr Wilson's strongly pressed submission to the contrary, I am satisfied that there is no significance in the fact that Exhibits E and F were addressed to Mr Roe rather than UPEC. As UPEC's nominated driver under cl 3.2(a)(ii) of the Industrial Agreement, it was only to be expected that Fairfax would address those letters to Mr Roe as a means of ensuring they were received by UPEC.
15. As foreshadowed in Fairfax's letters of 14 March 1988, the last issue of The Sun was delivered the following day. UPEC's sub-contract to deliver Fairfax magazines for Eastwood Harris was also terminated on 14 March 1988 due to the restructuring of the Fairfax publishing group.
16. I do not consider that the character of the ``redundancy payment'' is changed by the fact that its calculation was primarily based, not only on the years Mr Roe had worked as the nominated driver of UPEC, but also on the years he had worked as nominated driver for the partnership. The business of the partnership was transferred to UPEC shortly after UPEC was acquired by the Roes and the payment merely reflects this fact, being calculated on the combined years of service.
17. The letter from Mr Straub, Chief Accountant for John Fairfax Group Pty Ltd, in response to a requisition by the respondent dated 3 July 1990 (attached to Exhibit 1), confirms that:
``As per an Industrial Agreement, discussions took place between Fairfax and the Labor Council to cover, amongst other matters, `measures to mitigate any adverse effects of any terminations on the contract carriers concerned'.
As a result of these discussions, a redundancy package was agreed upon. The basic package was 4 weeks pay for each year of service up to and including 10 years continuous service, 3 weeks pay for each year of service beyond 10 years continuous service and an ex gratia payment of $2,000.
Under an Industrial Agreement between Fairfax and the Transport Workers Union of Australia, NSW branch, contract carriers were also granted Annual Leave, Long Service Leave and Lieu Days.
The entitlements for these were also paid out upon termination of the agreement.
The lump sum was itemised in order to provide details to the contract carriers as to how the amount was calculated. This was thought to be necessary due to the inclusion of various entitlements such as Annual Leave and Long Service Leave, in addition to the Redundancy Package.
There was an industrial agreement between Fairfax and the Transport Workers Union, a duly registered Association of contract carriers.
The Industrial Agreement was registered in accordance with Section 91H of the Industrial Arbitration Act 1940, which falls within Part VIIIA of the Act dealing with contracts of bailment of a public vehicle and contracts of carriage.
The basic redundancy package, as detailed above, was the same for both employees and contractors.
The package was not negotiated on an individual basis but was negotiated with the Labor Council of NSW representing all the affected unions.''
18. The letter also contained Fairfax's opinion as to the nature of the ``redundancy payment''. However my task is to look at the character of the payment in the hands of the recipient rather than what the employer believed the payment was designed to achieve; cf
Federal Coke Co Pty Ltd v FC of T 77 ATC 4255.
19. Exhibit F (the final details of the calculation of UPEC's redundancy package) further supports the finding that the terms of the contract between UPEC and Fairfax at the time of cancellation of the contract were as per the industrial agreement, if only because it deals with the details of annual leave, lieu of notice payments and long service leave, all of which appear to accord with the entitlement to those items under the industrial agreement. However, the ``redundancy'' component of the package was not determined pursuant to any entitlement under the agreement, as cl 17.1(b) of the agreement specifically reserved leave to the parties with respect to severance pay. Further, pursuant to cl 20 of the agreement, in the event (which in fact occurred) that the contract carriers agreements were terminated due to
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retrenchment, Fairfax was required to hold discussions with the contract carriers directly affected. These discussions were to cover ``any measures to avoid or minimise determinations and measures to mitigate any adverse effects or any determinations of the contract carriers concerned''. Clause 13.2 further supplemented the procedure put in place by the parties by providing that any matter in dispute which may arise during the currency of the agreement, if not settled as a result of discussion, could be referred by either party to the Industrial Commission of New South Wales or to a relevant Contract Regulation Tribunal or Commissioner pursuant to the provisions of the Arbitration Act. Clause 13.2 is a clear reference to the right of either party to the agreement to apply, under Div 4 of Pt VIIIA of the Arbitration Act, for a determination of the claim for the redundancy component. An example of such a procedure being adopted appears in the decision of Glynn J of the Industrial Commission of New South Wales in Brickworks Ltd and Brick Carriers' Association 1983 AILR ¶53, where an award of a redundancy payment was made to brick carriers whose contracts had been terminated due to retrenchment. That case can also be regarded as implicitly accepting Lord Denning's view inLloyd v. Brassey (1969) 1 All ER 382, where, when dealing with an Act specifically relating to the creation of a statutory right to a redundancy payment, his Lordship said:
``a worker of long standing is now recognised as having an accrued right in his job; and his right gains in value with the years. So much so that, if the job is shut down, he is entitled to compensation for loss of the job - just as a director gets compensation for loss of office. The director gets a golden handshake. The worker gets a redundancy payment. It is not unemployment pay. I repeat `not'. Even if he gets another job straightaway, he nevertheless is entitled to full redundancy payment.''
(at p 383)
I, too, respectfully adopt Lord Denning's analysis that a payment of that kind, paid to a worker whose job ``is shut down'' is indeed compensation for loss of that job, just as is the compensation a director receives for loss of office.
20. It is clear from the bundle of notices sent by Fairfax to employees and contract carriers on 14 March 1988 (Exhibit E) that those employees or contract carriers who agreed to retire early would not receive a redundancy payment, but only their normal pay to the day of their retirement. This accords with Lord Denning's acknowledgement in Lloyd v. Brassey (supra at p 383), that there is no entitlement to redundancy pay in the event that there is a retirement rather than a dismissal by reason of redundancy. Hence a redundancy payment is not a payment for past services. Nor is the fact that the payment is primarily computed by reference to years of service, although relevant, necessarily determinative of the character of the payment; cf
Scott v. Commissioner of Taxation (NSW) (1935) 3 ATD 142; (1935) 35 SR (NSW) 215;
Californian Oil Products Ltd (in liq) v. FC of T (1934) 3 ATD 10; (1934) 52 CLR 28; and
Allied Mills Industries Pty Ltd v. FC of T 89 ATC 4365.
21. As identified in both Shop,
Distributive & Allied Employees' Association (NSW) & Ors v. Countdown Stores & Ors (1983) 7 I.R. 273 and the Brick Carriers' case, one of the major reasons for awarding redundancy payments is to compensate for loss of the expectation of continuation of service - in the case of contract carriers, the carriage contract - even though, technically, the terms of the contract may indicate that continuity is not guaranteed. As appears from Mr Roe's evidence, there was such an expectation in relation to UPEC's contract despite the fact that UPEC's engagement could be terminated by a week's notice. However, a payment designed to compensate for loss of an expectation of continuity does not necessarily give such a payment the character of income.
22. One of the letters dated 14 March 1988 (Exhibit E) also mentions that redundant employees would not be precluded from applying for any job vacancy in any other Fairfax establishment. Implicit in this statement is the recognition that the redundancy payment is not intended to compensate for loss of future income. Indeed, as Lord Denning had already recognised in Lloyd v. Brassey (supra), even if UPEC immediately obtained another contract, it would nevertheless still be entitled to a full redundancy payment.
23. In the result, I have concluded that the instant payment, being compensation for the loss of the expectation of continuity of UPEC's
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contract, is of a capital nature, analogous to the type of payment in Scott (supra), and thus readily distinguishable from the kind of payment involved in cases such asCommissioner of Taxes (Vic) v. Phillips (1936) 3 ATD 330; (1936) 55 CLR 144 and
Carter v. Wadman (1946) 28 TC 41.
24. In the events that occurred, UPEC failed to find another carriage contract and, other than transferring its vehicles to Mr and Mrs Roe, it did nothing further until the company was sold to a client of the couple's accountant in August 1988. Furthermore, Mr Roe has not performed any work for Fairfax or any of its associated companies since the termination of UPEC's Fairfax delivery contracts. Be that as it may, I do not see any significance in the fact, Mr Wilson's strenuous submission to the contrary, that UPEC did not go looking for other cartage contracts subsequent to the termination of the Fairfax delivery contracts - Mr Roe never regarded the company as being a general carrier and the only things that UPEC had ever carried were The Sun and Fairfax magazines. Once those contracts were terminated the very purpose for which the company was set up no longer existed. Alternatively, the redundancy payment can be viewed as compensation for the sterilisation of a capital asset, and thus an affair of capital; cf
Glenboig Union Fireclay Co Ltd v. IRC (1922) 12 TC 427; Californian Oil Products (supra),
Heavy Minerals Pty Ltd v. FC of T (1966) 14 ATD 282; (1966) 115 CLR 512 and Allied Mills (supra).
25. It follows that the payment in question is not income under sec 25(1).
26. The objection decision (to the extent not conceded by the applicant) is set aside, with the result that the taxable income of the applicant for the year ended 30 June 1988 is reduced by $32,125.17.
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