FCT v Cooke: * It is not necessary that income must be received as money; it is sufficient if what is received is in the form of money’s worth. * An item of income need not to be paid over to the taxpayer; it is sufficient that it be dealt with on his behalf or as he directs * If a taxpayer receives a benefit which cannot be turned to pecuniary account, he has not received income as that term is understood according to ordinary concepts and usages * The conversion of an item into money may occur in a variety of ways * In the present case, the taxpayer could not have turned the benefits in fact received by them to pecuniary account. * It is immaterial that the respondent would have had to expand money themselves had they wished to provide holidays for themselves * If the receipt of an item saves a taxpayer form incurring expenditure, the saving is not income * Income is what comes in, it is not what is saved from going out. * A non-pecuniary receipt can be income if it can be converted into money * If the receipt is inconvertible, it does not become income merely because it saves expenditure. * The inconvertible benefit falls outside the revenue net, not because it is a gratuity, but because it is not money or money’s worth, and there is no statutory provision which widens the net to catch it.

S21A of ITAA 1936 reverses the decision of Cooke

Tennant v Smith: established the valuation rule: a benefit, which cannot be turned into cash, is income with a zero value Abbott v Philbin: * This case concerns share options given to employees as part of their salary- this raises question of valuation and derivation issues * HL: no amount could be included- any tax consequences arose only when the option had been granted * The terms of the grant prevented the taxpayer from assigning the option * This was probably the reason why the tax authority had waited until some convertible benefit was generated before assessing the taxpayer. * Tax authority relied on Tennant v Smith to argue that there was no income when the option was granted, but only when the option was exercised. * Option is a valuable right. * Viscount Simonds: * The tax authority said the option was itself not transferable * This should be rejected * There was no bar to a sale of the shares as soon as the option was exercised. The employee could arrange with a 3rd party so that he would exercise the option and then transfer the shares to that person * In order for the tax authority to succeed, they must show that an option to acquire shares at a fixed price is not a perquisite of office. * They must show that, even if at the date of the option being granted the market price is higher than the option price. * Draw analogy to allotting new shares to existing shareholders * From the moment the shareholder receives the letter, he has a right of more or les value according to the circs. * The employee of such an option has a right which is of its nature valuable and can be turned to pecuniary account Apportionment: * Taxpayer may receive payment in respect of a number of matters, some of which are income while others are not * Tax authority’s power to apportion is circumscribed, and if apportionment is not possible the payment is treated as not being income at all. * McLaurin v FCT * M claimed $30K for losses. A lump sum of 12K was paid out of court in full settlement of M’s claim. This figure was recommended by a valuer and was based on a list of particular items of damage. * Taxpayer was never informed of the means by which the lump sum was calculated. * HC held that none of the payment was assessable * The account of the manner in which the valuer reached his total is only an account of his reasons for the recommendation he made to the Railway commissioner; even though those reasons may have been adopted by the Commissioner, the offer that was made was not of a total of itemized amount, but was a single undissected amount * It would be plainly unsound to allow a determination of the character of a receipt in the hands the recipient to be affected by a consideration of the uncommunicated reasoning which led the payer to agree to pay it. * It is true that in a proper case a single payment of a mixed nature may be apportioned amongst the several heads to which it realtes and an income or non-income nature attributed to portions of it accordingly. * Eg: where the payment is in settlement of distinct claims of which some at least are liquidated, or are otherwise ascertainable by calculation. * It is not appropriate where the payment is in respect of a claim for unliquidated damages only and is made or accepted under a compromise which treats it as a single, undissected amount of damage – this amount must be considered as a whole.