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Case V150

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 27 September 1988.

P.M. Roach (Senior Member)

In 1960 the first applicant (whom I shall refer to as Petrus) and his sister's husband, Dimitris, purchased a mixed business with residence attached in a suburban residential area. They renamed the business for their native land and they commenced trading in the way of shopkeepers of Greek extraction. They worked hard providing service over long hours to the local community. Their endeavours were not confined to shopkeeping. They also undertook farming operations on a property they purchased which was quite some distance away. In 1962, then aged 24 years, Petrus married Maria, the second of the applicants in these references. Initially they resided in the premises adjoining the shop with Dimitris and his wife. It is probably from about the time of that marriage that Maria came to be involved in equal shares in the business activities in which Petrus was involved.

2. However, the association of the foursome was not to continue long because during 1963 it was agreed that there would be a major reorganisation. As a result, in May 1963, a formal agreement for dissolution of partnership between the foursome was entered into. Thereby the businesses they had carried on in partnership as farmers and storekeepers pursuant to a verbal agreement were dissolved by mutual consent. The terms of the dissolution provided that Dimitris and his wife would thereafter be the owners of the farm and Petrus and Maria would be the owners of the freehold comprising the store and residence. Although prepared by a member of a locally prominent firm of solicitors (LPF) the dissolution agreement was not drawn as clearly as it might have been. It identified Petrus as being a party ``of the first part''; Maria as being ``of the second part''; Dimitris as being ``of the third part''; and the wife of Dimitris as being ``of the fourth part''; but provided that ``the parties'' [sic] hereto of the first part should take over the business premises and residence ``subject to any mortgage existing thereon in full satisfaction of their [sic] share and interest in the said partnership but the mortgage of 3,000 pounds to (representatives of LPF) shall be discharged by (Dimitris)''. The matter is of some significance in evaluating the evidence of

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both Petrus and Maria. Their evidence was that it was always their intent that the half-interest previously held by Dimitris would be transferred to Maria so that thereafter, just as Petrus and Maria were in equal shares in the business operations of their partnership, they too would hold title to the freehold from which that business was conducted in equal shares.

3. Be that as it may, Petrus and Maria thereafter carried on the storekeeping business in equal partnership. They continued to reside in the attached residence with their first-born child until, in 1966 or thereabouts, they moved to an adjoining property which they had purchased jointly. That move was occasioned by the circumstance that, by an agreement of 13 June 1966, it was arranged that the shop and dwelling house (but not including ``the back bedroom''), together with specified plant and equipment, would be let to a stranger for a term of two years from 21 May 1966 at a weekly rental of $74. That tenancy agreement was prepared by the same solicitor: a circumstance which may explain why Petrus alone was described as the landlord.

4. Then by an agreement prepared by the same solicitor on 2 May 1967, Petrus, again acting alone as landlord, leased the same premises (on this occasion not excluding the back bedroom) to another third party for a term of three years from 30 June 1967 at a weekly rental of $80 per week. Then by a further agreement of 13 April 1972, with Petrus again acting alone as landlord, there was a further lease to yet another stranger of the same premises for a term of one year from 30 April 1972 at a weekly rental of $56. On 27 February 1973 the term of that lease was extended for six months from 1 May 1973 at the same rental. When that tenancy came to an end Petrus and Maria resumed the conduct of the business.

5. The next person to occupy the premises as tenant was Yianis, brother to Maria. The transaction with Yianis marked new developments in the affairs of Petrus and Maria in a number of respects. First, such documentation as was produced in evidence, was prepared naming Maria in equal interest with Petrus. Furthermore, Petrus and Maria, in their return of income for the year ended 30 June 1978, acknowledged that they had dealt with Yianis receiving rental and also as having received on capital account of the sum of $3,500 for ``Sale of Goodwill''. A document was produced in evidence, and acknowledged as a document signed by Petrus, whereby the tenancy was to be granted to Maria and Yianis at a rental of $60 per week for a term of one year from 19 May 1976 and further acknowledging a sale by Petrus and Maria to Yianis and Maria of ``all that the goodwill of the said business being the business situate at (the site in question) for a sum of $2,600 payable by annual weekly [sic] payments of $50 the first of such weekly payments to be made on the second day of May next''. In consideration it was provided:

``5. The vendor (Petrus) shall not for a period of two years from the date of completion carry on or be concerned in the business of a general storekeeper within a radius of two miles of the property at...''

6. Petrus gave evidence that the document so signed had never taken effect and that instead the arrangements which took effect with Yianis were wholly oral; did not take effect until a later date and had involved rental payments of $110 per week during his occupation and the payment of $3,500 for ``goodwill'' by interest-free instalments: the payments being interest free as a concession to a family member.

7. Records of bank deposits which were placed in evidence showed that during that period Yianis was paying in multiples of $110: the first recorded deposits being on 22 April 1977 and the last on 14 August 1978 when, on the last banking for twelve days, rent from Yianis for three weeks was deposited. The same deposit book shows that Yianis paid eight amounts of $500 each with the amounts so paid being deposited to the credit of Petrus and Maria on 16 May, 3 July, 25 July, 8 August, 15 August, 22 August, 5 September and 29 November 1977 - a total of $4,000 of which $3,500 was received in the year of income ended 30 June 1978.

8. When the tenancy of Yianis came to an end both applicants entered into a lease with a stranger for a term of nearly two years commencing from 20 August 1978 at a rental of $120 per week. Contemporaneously, they entered into an agreement providing for the sale of ``all that the goodwill of the said business'' for a price of $6,000 payable as to $1,000 on the signing of the agreement and the balance on completion: scheduled for 20 August 1978. The

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vendors - in this instance both of them - covenanted:

``3. The vendors shall not for a period of two years from the date of completion carry on or be concerned in the business of a general storekeeper within a radius of two miles of the property at...''

9. The first deposit of rent recorded thereafter in the deposit book was made on 11 September 1978, amounting to $240. Earlier, on 1 September 1978, the deposit was recorded of a cheque for $5,909 received from the firm of solicitors LPF.

10. In 1981 another similar arrangement followed with other tenants, whom I shall refer to as Nikolas and Irini. In this instance the same firm as before prepared a lease in the name of Petrus alone as landlord in favour of Nikolas and Irini providing for a tenancy for a term of six years commencing 1 March 1981 at a rental of $150 per week. By a second agreement of the same day Petrus and Maria agreed to sell ``all that the goodwill of the business of a general storekeeper carried on at...'' for the sum of $25,000 payable as to $3,000 as a deposit on the signing of the agreement; $10,000 on completion (scheduled for 28 February 1981); and $12,000 three months after completion. By the same agreement, the vendors were to sell ``all merchantable stock and [sic] trade on the premises at completion of valuation...'' with payment to be made within 12 months. The agreement for sale further provided:

``5. The vendors shall not for a period of six years from the date hereof be concerned or interested in a general store within a radius of one kilometre from the premises hereby sold [sic] provided that should the lease mentioned in the next succeeding clause be terminated for any reason this clause shall no longer apply.

6. This contract is subject to (Petrus) granting to the purchasers a lease of the premises for a period of six years from 1 March 1981 at $150 per week in accordance with the lease attached hereto.''

11. As the years passed, the rents were returned as income by the partnership comprising both applicants, and the receipt of capital sums by way of goodwill was acknowledged in the balance sheets presented to the Commissioner with each partnership return of income.

12. During 1985 officers of the Commissioner commenced an investigation into the affairs of the applicants and those investigations ultimately resulted in the issue of amended assessments in April 1986 which effected substantial increases in taxable income occasioned by (inter alia) numerous adjustments for a diversity of matters. Among them were adjustments made whereby the Commissioner treated the amounts described as ``goodwill'' and treated as capital by the applicants as constituting assessable income and, furthermore, as constituting assessable income in the hands only of Petrus. Similarly, the ``rent'' was attributed to Petrus only.

13. I accept the evidence of both Petrus and Maria that they had believed that, from the dissolution of partnership with Dimitris and his wife in 1963, they had been jointly and equally owners of the freehold. However, I am not persuaded that at all material times Petrus believed that Maria was equally entitled to deal with him in relation to the letting of the premises or as to any dispositions of goodwill. On the other hand I do accept that when Petrus had a new will prepared by the locally prominent firm of solicitors on 27 August 1985, he did consider that he had only a half-interest in the property in question and, similarly, only a half-interest in the family residence which had been purchased jointly in about 1966 from which date it had been occupied as the family home.

14. I also find that in April 1986, while Nikolas and Irini were still entitled to possession of the premises, Petrus and Maria successfully negotiated for the early termination of the lease. Those endeavours enabled them to resume possession of the premises and to recommence trading on their own account: something achieved only at a price of paying $10,000 to Nikolas and Irini to procure their surrender of the lease with less than one year to run. Since then the applicants have continued to trade from the premises but have resided quite some distance away in the family home. For the Commissioner it was conceded in argument that if the disputed amounts received constitute assessable income, then the amount expended to regain possession of the premises was probably deductible.

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Who derived?

15. In my view, it does not matter whether Maria was entitled in law or in equity to a half-interest in the freehold. What is at issue is the characterisation of certain moneys paid to Petrus and Maria pursuant to contractual arrangements made with persons to whom they assumed contractual obligations. The moneys paid were received jointly by Petrus and Maria: they were ``derived'' by Petrus and Maria. In my view it does not matter that Maria might only have been entitled to receive the moneys she received by consent of Petrus. The fact is that she received them; that Petrus had always acknowledged her right to receive them; and the Commissioner must accept that she received them. The Commissioner must accept the factual situation established by the conduct of the taxpayers and others. In the absence of scope of the application of sec. 260 of the Act, the Commissioner must accept things as he finds them (cf. observations of Beaumont J. in
MacFarlane v. F.C. of T. 86 ATC 4477 at p. 4486). He must tax persons on the basis of what they have derived - not on the basis of what he considers they ought to have derived (cf. comments to similar effect in
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 78 C.L.R. 47.

16. The argument for the applicants is that what they received was in consideration of a disposition by ``sale'' of ``goodwill''; that the goodwill was personal goodwill; that the disposition was rendered effective by restrictive covenants; that goodwill is an affair of capital; and that, therefore, what they received was capital and not assessable income.

Goodwill?

17. At this point it is convenient to consider whether or not the ``goodwill'' payments were only made in relation to the right to have possession of the premises as a tenant. Having regard to the nature of the business, I am satisfied that it is appropriate to consider the rent and goodwill payment to have been made only in relation to the gaining of the right to possession of premises. I am not persuaded by the evidence before me that it would be appropriate to attribute the amounts paid to any other recognisable interest such as goodwill distinct from the premises. I have reached that conclusion upon a consideration of the principles applied by Knox C.J. in the High Court of Australia in
Daniell v. F.C. of T. (1928) 42 C.L.R. 296. In that case his Honour was asked to determine whether, for the purposes of sec. 16(d) of the Income Tax Assessment Act 1922, any portion of a sum attributed to ``lease and goodwill'' on the sale of the unexpired term of the licence, and of goodwill, furniture, fixtures, fittings and effects of a Brisbane hotel and its 14 year lease should be attributed to ``goodwill''. Having considered many English cases his Honour said (at pp. 302-304):

``If, having regard to the decisions and dicta in these cases, I am at liberty to express an opinion on the abstract question whether the goodwill of a licensed victualler's business is separable from the premises in which it is carried on, my opinion is that while it cannot be said to be absolutely and necessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be should be treated as an enhancement of the value of the premises... There is no evidence that the goodwill as a separate item formed the subject of negotiations between the parties; on the contrary, the consideration for the lease and goodwill is stated in the agreement as a lump sum, and in the lease the whole sum is referred to as consideration for the granting of the lease... In my opinion the evidence does not establish either that the goodwill of the business regarded as property separate and apart from the premises on which it was carried on had, or that the parties treated it as having, any definite or appreciable value.''

18. The same conclusion was reached by Morris C.J. in
Cascade Brewery Co. Limited v. Barker ((1949) Tas. S.R. 189). That case concerned a hotel in a Hobart suburb of Moonah. His Honour said that licensing laws:

``... have the effect of making each hotel particularly in less populous places - a local monopoly with the emphasis upon its location in relation to its demand. If Barker left Moonah and went to another suburb, none of his Moonah customers would normally be expected to follow him. The reason is obvious. Refreshment is a need to be satisfied if not quite on the spot, at least with reasonable ease, and while the customer may choose between two fairly

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easily accessible hotels, he will not travel any substantial distance to follow a licensee. It may be that Barker is a particularly competent licensee. But what he has to sell when he puts the balance of his lease upon the market is the right to earn money in the hotel for that period - a right whose value depends upon the business which might be expected to be done in the house.''

(The same comments may be made of a suburban store.) Those cases, and the facts in this case stand in sharp contrast to the circumstances considered by the High Court of Australia in
Box v. F.C. of T. (1952) 86 C.L.R. 387 where it was held that the ``goodwill'' of a business was wholly unrelated to the premises in question.

19. Nor is that view of ``goodwill'' inconsistent with the decision widely reported in the press in recent times whereby, in an as yet unreported decision, the Supreme Court of New South Wales held that, as between a one-year tenant of a brewery hotel and the brewery which owned it, the right to have the financial benefit of the goodwill attaching to those premises lay with the tenant. (
Bonds Brewing (N.S.W.) Pty. Limited v. Reffell Party Ice Supplies Pty. Limited - Equity Division No. 4312 of 1986 - 17 August 1987). If anything, that decision reinforces the view I have expressed. The basis upon which the tenant was there held to be entitled was not anything to do with the nature of ``goodwill'', or of ``goodwill'' in relation to leased premises, or of leased hotel premises but rather that, in the circumstances existing between the tenant and the brewery, a case for the application of the principle of promissory estoppel had been made out:

``There is no doubt that, if the plaintiff (brewery) is permitted to exercise its legal rights to obtain possession of the premises from the defendant (tenant) without paying reasonable compensation (for the goodwill which had been purchased by the defendant from a previous tenant), there will be a very considerable detriment to the defendant.''

I conclude that what was paid for ``goodwill'' was a price, or ``premium'', to secure the tenancy of the shop.

Premium or rent

20. Professor Parsons in Income Taxation in Australia has said:

``The distinction between what is in substance rent - a receipt for allowing the use by another for one's property - and what is in substance premium - a receipt for giving one's property to another - is even more difficult to define than the distinction between interest and premium.''

21. Historically the Income Tax Assessment Act 1936 (``the Act'') as in force from time to time, and earlier income tax legislation in the form of the Income Tax Assessment Act 1922 and, before that, the Income Tax Assessment Act 1915, have attempted to resolve the difficulties by different means. Section 15(d) of the 1915 Act stated:

``The assessable income of a taxpayer shall include `money derived by way of royalty or bonuses, and premiums, fines or fore-gifts or consideration in the nature of premiums, fines or fore-gifts demanded and given in connection with leasehold estates...'''

Section 16(d) of the 1922 Act provided:

``The assessable income of any person shall include...

  • (d) and any amount received by way of premium, fine or fore-gift, or consideration in the nature of a premium, fine or fore-gift demanded and given in connexion with a lease,... or for goodwill or a licence in respect of a business carried on on the leased property...''

(Section 16(d) was considered by the High Court of Australia in cases such as
Executor Trustee & Agency Co. of South Australia Ltd. v. F.C. of T. (1932) 48 C.L.R. 26;
Clarke v. F.C. of T. (1932) 48 C.L.R. 56;
D.F.C. of T. v. Evans Ltd (1933) 49 C.L.R. 480.

In the Third Report of the Royal Commission on Taxation (delivered in 1934), the Royal Commissioners said:

``729

In all (the instances cited) the owner parts with the possession of his property for a certain term for a consideration which, however described and however paid, is in effect rent.''

22. There is much to be said for that proposition. If matters were as simple as that the entire consideration received by a lessor in relation to his premises, whether described as

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``goodwill'', ``premium'' or ``rent'' would be treated as ``rent'' and thereby as assessable income of the recipient. Conversely, it might be expected that the lessee would be entitled to a deduction for payments so made however described, subject to satisfying the provisions of sec. 51. Be that as it may, as a result of the recommendations of the Royal Commissioners, Div. 4 (sec. 83 and following of the Act) was enacted in 1936. It provided (inter alia) by sec. 84:

``The assessable income of the taxpayer shall include, in addition to rent, a premium received by him in the year of income.''

23. But, upon the enactment of sec. 26AB of the Income Tax Assessment Act 1936 (``the Act'') in 1964, Div. 4 ceased to be the operative Division of the Act in relation to leases entered into after 22 October 1964. As all of the amounts now in question were paid in relation to tenancies which came into existence after that date, Div. 4 is no longer of any direct relevance.

24. Before considering the effect of sec. 26AB of the Act it is appropriate to consider the issue which would have arisen if there had been no specific statutory provisions relevant to the present problem. In that event liability in the landlord would have had to be determined by reference to only sec. 25 and, possibly, sec. 262 of the Act; and the question of entitlement on the part of any tenant to deductions would have had to be determined by reference to sec. 51 of the Act. The landlord would have been liable if the moneys he received for the use of his premises, or for the grant of that right of use, whether described as rent or as premium or anything else, constituted assessable income. But he would not have been liable to bring the moneys received to account as assessable income if the amount received constituted capital in his hands. Conversely, the tenant would be entitled to a deduction if the premises in relation to which his outgoings were made were used for income-producing purposes provided that the payment was not to be considered as a payment ``of capital or of a capital nature'' (cf. sec. 51). That is not to say that, so long as the outgoings were applied to an income-producing purpose and the outgoings were described as rent, the tenant would be entitled to a deduction. So much has recently been confirmed by the decision of the Full Bench of the Federal Court of Australia in
F.C. of T. v. Creer 86 ATC 4318. Even to prepay ``rent'' may require that the amount paid be characterised as capital expenditure. It is also to be observed that the circumstance that a payment may be an outlay of capital in relation to one person (for example, the tenant in Creer - ante) does not ensure that the amount will not constitute assessable income to the recipient. (See also the payments in relation to service station ties: deductible to the payer (
B.P. Australia Ltd. v. F.C. of T. (1961-64) 110 C.L.R. 387; and (1965) 112 C.L.R. 386, but not assessable to the payee (
Dickenson v. F.C. of T. (1957-1958) 98 C.L.R. 460).)

25. So considered it is appropriate to have regard in the present circumstances to the following considerations:

  • - that the liability in relation to the premium was a ``once and for all'' obligation;
  • - that it related to the entire term;
  • - that the terms ranged from one to six years;
  • - that payment was to be made by instalments;
  • - that, when the term of tenants was varied by surrender, the premium for ``goodwill'' was adjusted by agreement; but
  • - that no provision was made for abatement should the tenants default.

26. On the other hand, it must be acknowledged that the evidence is open to the construction that the parties to the tenancies had agreed that so much of the moneys as they had chosen to identify as the price of ``goodwill'' would neither be deductible to the tenants nor assessable to the applicants. But in addition, it needs to be borne in mind that I have already held that the disputed moneys were paid only in relation to the claimed entitlement to possession of the premises.

27. Accordingly, I have concluded that the reward received by the applicants was a reward paid, not for personal goodwill, nor for ``goodwill'' as something distinct from the right to possession of the premises, but rather as something paid in relation to the acquisition of the right to use those premises, albeit something to be distinguished from rent - something which might be described as a ``premium''.

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Section 262

28. As counsel for the Commissioner supported his argument by reference to sec. 262 of the Act, it is appropriate that I should refer to that. Section 262 of the Act provides that:

``Where under any contract... a person assigns, conveys, transfers or disposes of any property on terms and conditions which include the payment for the assignment, conveyance, transfer or disposal of the property by periodical payments which, in the opinion of the Commissioner, are either wholly or in part really in the nature of income of that person such as those payments as are derived in the year of income shall, to the extent to which they are in that opinion in the nature of income, be included in his assessable income.''

(The emphasis is mine.)

I find no need to place reliance on that longstanding but rarely adverted to section. The Commissioner sought to rely upon the comparable provision in the 1922 Act in
Californian Oil Products Ltd. (In Liquidation) v. F.C. of T. ((1934) 52 C.L.R. 28) but was unsuccessful. I content myself by saying that, if any payment is either wholly or in part ``really in the nature of income'' then it is to that extent income and, should it be assessable income, will be liable to be brought to account in the determination of taxable income.

Section 26(a)

29. It was also argued for the Commissioner that the moneys constituted ``profit'' from a ``scheme'' assessable pursuant to sec. 26(a) of the Act. I reject that. Whatever may be the meaning to be attributed to ``scheme'' in that section, it at least must mean something more than bargaining for a reward on a particular basis on the granting of a lease.

Section 26AB

30. Section 26AB of the Act makes provision for the assessment of ``premiums'' as defined by sec. 26AB(1). The definition provides:

``(1) In this section, `premium' means a consideration payable in one amount, or each amount of a consideration payable in more than one amount...,

  • (a) in the nature of a premium, fine or foregift payable for or in connexion with the grant or assignment of a lease; or
  • (b)...

    but does not include an amount in respect of goodwill or a licence.''

31. By reason of the authorities already cited, I am satisfied that the amount here in question is not ``an amount in respect of goodwill''. Nor is it suggested that it is an amount in relation to any ``licence''. Furthermore, whatever difficulty there may be in defining the distinction between ``rent'' and ``premium'' I am satisfied that it was at least the intent of the parties in the several agreements entered into to bring into play a distinction between ``rent'' and ``goodwill''. Against that background I find that it is appropriate to hold that the disputed payments received under the title of ``goodwill'' are appropriately described as a ``premium'' for or in connection with the grant of a lease. Accordingly, I am satisfied that, whatever operation sec. 26AB may have, it does apply to the moneys in dispute.

32. Professor Parsons says of sec. 26AB of the Act:

``The theory of Section 26AB is that a person who pays a premium in respect of the lease of property he intends to use for the purpose of producing assessable income, will not be entitled to a deduction under Section 51. He would have been entitled to a deduction had he paid rent. In the circumstances it is appropriate that the person receiving the premium should not be treated as receiving income. A person who makes a payment in respect of the lease of property that he does not intend to use for the purpose of producing assessable income, will not be entitled to a deduction whether the payment is in the form of a premium or rent. In these circumstances it is appropriate that the person receiving the premium should be treated as receiving income. Otherwise the receipt of premium rather than rent would become a method of tax planning.''

(Para. 2.305.)

But the Professor goes on to say of that theory:

``The assumptions that may explain Section 26AB are not made law by Section 26AB. Deductibility of a premium paid continues to depend on the operation of Section 51, and premium which is not income by force of Section 26AB may yet be income as a

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gain derived from property, or may include income as a gain from carrying on a business.''

(Para. 2.308.)

33. In my view, the summary expressed by the Professor is correct. Section 26AB(2) makes the premium assessable to the landlord where the property was ``not intended to be used by the grantee for the purpose of gaining or producing assessable income''. In those circumstances, by force of the section, the premium in connection with the grant of the lease becomes assessable income of the grantor. Further, by reason of the definition of ``premium'' in sec. 26AB(1), in so far as a payment made is made for ``goodwill or a licence'', it will not constitute assessable income of the payee by reason of sec. 26AB. But whether a premium paid in other circumstances; whether a premium paid for ``goodwill or a licence'' or for or upon the granting of a lease is assessable to the payee or deductible to the payer is not to be determined by sec. 26AB. Accordingly, there is no foundation for any view that by force of that section a willingness on the part of the tenant to treat his outlay on the premium as capital provides, as a consequence, that the moneys received by his payee constitute capital.

Section 25

34. That being so in my view the question of the liability of the application is to be determined by reference to sec. 25. Having regard to the considerations expressed in earlier paragraphs of these reasons, I am satisfied that the correct conclusion is that the premiums received for the terms of one and two years did constitute a reward derived by the applicants from the use of property and, as such, constituted assessable income. That accords with views expressed in the Supreme Courts of Queensland (
Re Income Tax Acts (1902-1907) 1912 Q.W.N. 5; R. and McG. 271) and Tasmania
Re Anonymous (1915) 11 Tas. L.R. 145; R. and McG. 350) prior to the enactment of any income tax legislation by the Commonwealth of Australia. In the latter case his Honour's reasons for decision were expressed with brevity:

``I am satisfied this is not a sale of property. There is no distinction between receiving a lump sum for the lease and an increased rent. It is all income from property. It would be different if the lessee were selling his lease to a purchaser but here the lessor is selling a lease and the same distinction is drawn in the Queensland case. The appeal is dismissed.''

35. But that is not to say that it is never possible for a ``premium'' to be paid upon either the grant or the assignment of the lease so as to constitute it as an outgoing of capital from the hands of the payer and a receipt of capital in the hands of the payee. That is particularly so in the case of an assignment because, during the period of a long-term lease, there may very well be an increase ``in'' the value of the investment: the lease.

36. In the case of the third lease for a term of six years, I have concluded that it is appropriate to characterise the ``goodwill'' payment as a price or ``premium'' paid to the applicants to induce them to forgo possession of their premises for a quite substantial period. The decision in Creer's case (ante) suggests that, even if the payment be characterised as a prepayment of ``rent'', to prepay for a five year term gives the payment the character of a capital payment. Bearing in mind that the payment here in question was to proceed in three stages in quick succession - $3,000 as a deposit; $10,000 upon possession; and $12,000 within three months of the commencement of the six year term; and recognising that there was no express provision for abatement should the tenancy prematurely determine and the applicants resume possession, I have concluded that the $25,000 assessed for the year of income ended 30 June 1981 is a receipt of capital; and does not constitute assessable income.

The power to amend

37. One issue whether the Commissioner had power to issue the amended assessments he did and thereby assess such of the moneys in dispute as I have held constitute assessable income. Understandably, the matter was not argued closely. Accordingly, I propose to deal with this aspect of the matter by simply observing that such information as was disclosed was quite insufficient to constitute the ``full'' disclosure necessary to be made to deny the Commissioner the right to issue an amended assessment necessary to effect a correct assessment of taxable income.

Conclusion

38. For the foregoing reason I conclude that all of the ``rent'' whenever paid by tenants in

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relation to all of the years in dispute and the price of ``goodwill'' received by Petrus and Maria in the years of income ended 30 June 1978 and 1979 only constitutes assessable income jointly derived by Petrus and Maria.

39. Having regard to those findings and to other issues said to have been resolved by agreement, I will call on the parties to lodge drafts of Orders considered appropriate.


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