Analysing the Judicial Definition of Income in Light of Folk Justice

Abstract

Fairness is integral to the effective operation of a tax system. However, Australia’s judicial interpretation of income has been criticised for departing from the measure of accrued income and, thus, lacking fairness. This article revisits the judicial meaning of “income”, assuming that judges reflect a social justice mentality. It examines cases dealing with bonus shares, which can be viewed as having applied the concept of “flows”, as well as cases that deal with welfare payments, income from hobbies, windfalls, gifts and business income. The article finds that the court has confined the definition of income to what people expect to receive and depend on to live; however, business income is examined to identify actual profit. It concludes that accrued income need not be the only way for income tax to appeal to fairness.