Federal Commissioner of Taxation v Murry

Holding

Goodwill of a business, for capital gains tax purposes, is a single asset comprising the attractive force that brings in custom and cannot exist independently of the business itself; it is therefore disposed of when, and only when, the business in which it is generated is disposed of.

Facts

Ms Murry held a taxi licence used in a small taxi business. She sold the licence and the Commissioner assessed capital gains. The taxpayer argued that the consideration related to goodwill that pre-dated the introduction of CGT on 20 September 1985 and so was outside the regime.

Reasoning

The majority distinguished goodwill from the sources of goodwill such as licences, locations, and clientele. Goodwill is legal property, sourced in the business as a whole. Because Ms Murry's business changed character over time, the goodwill in 1988 was not the same asset that existed before CGT commenced. The disposal was therefore caught by CGT.