The historical significance of the high court's decision in Federal Commissioner of Taxation v The Myer Emporium Ltd

Federal Commissioner of Taxation v The Myer Emporium Ltd ('Myer) marked a significant change in approach in tax jurisprudence. Since 1987, virtually every case dealing with the characterisation of receipts as income or capital has cited Myer, usually at some length. But it is going too far to suggest that Myer transformed the way in which income is characterised. The decision in Myer reflects a reduced emphasis on formalism and legal technicalities, the mainstream approach of the courts. Under that approach, the characterisation of amounts as income or capital is determined as a matter of commercial substance, and not by subtleties of drafting, or by unduly literal or technical interpretations. While some prominent cases could have been decided the other way on their facts, it is inherent in the fact-intensive distinction between income and capital that hard cases will arise which are capable of being decided either way. This circumstance does not detract from the enduring importance of the decision in Myer.