Annual Assessable Income of Emmi

Running head: INTERNATIONAL FINANCE
Taxation Theory, Practice and Law
Name of the Student
Name of the University
Author Note

1
TAXATION THEORY, PRACTICE AND LAW
Table of Contents
Answer to Question 1........................................................................................................2
Issue...............................................................................................................................2
Relevant Legislation.......................................................................................................2
Application of Law..........................................................................................................3
Annual Assessable Income of Emmi..............................................................................4
Answer to Question 2........................................................................................................5
Issue...............................................................................................................................5
Relevant Laws................................................................................................................6
Application......................................................................................................................7
Computation of Tax Liability of Liu.................................................................................8
References...................................................................................................................10

2
TAXATION THEORY, PRACTICE AND LAW
Answer to Question 1
Issue
The issue is related to the computation of the taxable income of Emmi. She is
studying accounting at Holmes Institute and also working part-time in Crown Melbourne
restaurant. The main aspect to be discussed in this regard is whether the fringe benefits
and the income received by her are a part of her annual assessable income for taxation
purposes or not. The benefits received by her in the given financial year are as follows:
 Received $335 from the customers of the restaurant in cash;
 Her annual income from working in the Crown Melbourne Restaurants is $25000;
 A gift received by her, a perfume is worth $250 from a regular customer as a part
of the Christmas benefits. However, she does not use this perfume and has
given the same to her mother;
 Entertainment allowance received by her from her restaurant owner. The meals
consumed by her is worth $380. She considers them to be a part of the rewards
received for her hard work; and
 $15000 has been received by her from father as a Christmas gift.
Relevant Legislation
The relevant legislations regarding the assessable income of Emmi are as
follows:
 As per the guidelines of ATO, tips received from customers are a part of the
assessable income of an individual. This is the case in all situation irrespective of
the manner in which they are received by the individual, i.e. either directly from
the customer or the employer. As suggested by the case law Wrottesley v
Regent Street Florida Restaurant, a system may also be agreed with regards to
the tips by the employees and the employers. With regards to cash tips, the rules
of ATO suggest that they should be declared in the income tax return of an
individual (Ato.gov.au. 2020). The source of payment is irrelevant in this case;
 According to section 6.5 of 1997, the assessable income of an individual
includes all income earned by them as a part of their job (Classic.austlii.edu.au.
2020). The provisions of ATO suggest that the salaries and wages received by
an individual form a part of the assessable income if they earn enough money to
cross the tax-threshold;
 According to section 78A of ITAA 1936, there are a few circumstances under
which a Deductible Gift Recipient (DGR) is not an allowable deduction under
Division 30 of ITAA 1997. There is no fixed definition of the word ‘gift’ under ITAA
1997. In Federal Commissioner of Taxation v. McPhail (1968) 117 CLR 111
(McPhail), the same was suggested by the court. There are a few conditions that
the court has identified as a part of their characteristics. They include the transfer
of the beneficial interest in a property and it is made voluntarily. The giver also
does not expect anything in return for giving the gift to the other party. The rules
of ATO state that the rewards or gifts received on special occasions and gifts
received out of love are not taxable in the hands of an employee;
 The provisions of ATO related to gifts suggest that gifts are included as a part of
the assessable income of an employee if they are received as part of a business-