ASSIGNMENT ABOUT THE TAXATION LAW

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Part A:........................................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Conclusion:............................................................................................................................4
Part B..........................................................................................................................................5
References:...............................................................................................................................14

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Part A:
Issues:
Will the taxpayer be held as Australian occupier inside the meaning of “sec 6 (1)
ITAA 1936” either for entire income year or a part of the income year?
Rule:
An “Australian resident” or “resident of Australia” within “sec 6 (1) ITAA 1936”
signifies a person separately from the establishment that lives in Australia and contains a
person that has their “domicile in Australia” (Norbury, 2019). Nevertheless a person might
be held as foreign occupant if the commissioner is satisfied that the person’s home is out of
Australia. For the tax purpose under “sec 6 (1) ITAA 1936” there are four different test for
individuals to be held as “Australian resident “.
1. “Resides Test”
2. “Domicile Test”
3. “183-Days Test”
4. “Superannuation Test”
Resides Test:
A person will be considered resident of Australia if they dwell on a perpetual basis or
for the considerable amount of time. Accordingly under “TR 98/17” relevant factors such as
it involves the intention of presence in Australia, taxpayer’s societal and living arrangements
is considered important (Blissenden & Kenny, 2019). In “IRC v Lysaght (1928)” the
taxpayer was held to be dweller of UK in spite of having a home in Ireland.

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Domicile Test:
An individual is an “Australian resident” if their home is in Australia. A person will
be held foreign occupant if they are able to satisfy the commissioner that they have set up
home outside Australia. relevant factors considered under “IT 2650” says that whether a
person has an enduring home outside Australia is reliant on whether the taxpayer has
established home out of Australia (Lam, 2018). In “FCT v Applegate (1979)” the taxpayer
was held to be having “fixed place of residence” outside Australia even though he returned to
Australia following his overseas stay.
183-days Test:
An individual is an Australian resident if they are found to be staying in Australia for
six months or more either constantly or intermittently.
Commonwealth Superannuation Test:
A person is an Australian dweller if they are eligible participant of “commonwealth
superannuation fund”.
Application:
Resides Tests:
Despite that Racheal has residential home in Australia where her husband and child
lives, this is not sufficient to consider her resident for the entire or part of 2019. Referring to
“IRC v Lysaght (1928)” this test is not met because Rachel was not existent in Australia for a
substantial length of time in 2019 and proposes to go back to Canada to set her family.

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Domicile Test:
During 2019, Racheal when living in Canada lived in hotels and during weekends she
visited her childhood house to live with her mother. This establishes that she has not set up
any fixed place of residence outside Australia during 1st July onwards to 31st December 2018.
Citing “FCT v Applegate (1979)” Rachel is an Australian resident under “sec 6 (1) ITAA
1936” for the part of 2019 (Jones, 2018). Whereas from 1st January 2020 forwards Racheal
has set up her home in Canada and did not provide any conclusive evidence of ever returning
back to Australia. Rachel has demonstrated that her choice of domicile is out of Australia and
she not an Australian resident from 1st January 2019. Her fixed home of dwelling is in
Canada.
183-Days Test:
Racheal was physically existent in Australia for one month, so she is not a resident
under this test.
Superannuation Test:
This do not apply in case of Rachel.
Conclusion:
Within “sec 6 (1) ITAA 1936” Racheal is an “Australian resident” only part of 2019
while starting from 1st January onwards she is a foreign resident as her fixed dwelling is out
of Australia in Canada.

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Part B
Memo
123 Accounting Pty Ltd
To: Douglas Parks
From: <student name>
Date: <04-04-2020>
Re: Objection to 2018 Notice of Amended Assessment for Julie Banks
Assessable Income:
Accordingly under the “sec 25 ITAA 1997” the taxable earnings of the resident
taxpayer involves gross income which is derived by direct or indirect means from all types of
sources. The explanation of the term “derived” is given in “Brent v FC of T (1971)” which
implies the time of deriving income should be determined by applying the necessary business
and commercial principles (Hundt, 2019). The derivation of income is also reliant on the cash
or accrual accounting basis to offer a right view of taxpayer’s taxable earnings.
Income may be viewed as earned ordinarily when the money has fallen due to a
person, if the accrual or cash basis of tax accounting method gives a right reflection of right
income earned by a taxpayer. Income would be viewed as derived ordinarily when a cash
basis of tax accounting offers a right reflection of true earnings of an individual taxpayer. As
per “doctrine of constructive receipts” within “sec 6-5 (4)” it alters the over-all sense of
derivation within specific situation (Woellner et al., 2016). Julie states a receipts of $10,000
as gross is received by her on 3rd day of each month for earlier month. Julie did not get pay
for the month of June 2018 until July 2018. The taxation commissioner has held Julie taxable
for the salary of June 2018 because the employer was legally obliged to pay her the sum on

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the given date. Julie should object regarding the taxability of $10,000 in her assessable
income. This is because under the cash method the taxpayers are required to consider only
those receipts that has been received actually. This is usually applicable on the income that is
received as reward of private effort such as the “provision of service” largely reliant on the
service provider’s individual skills. The decision made by law court in “Firstenberg v FCT
(1976)” was concerned regarding the right method of accounting for income earned by sole
practitioner with secretary as his only employee (Murphy, 2019). The judgement of the court
stated that cash basis was the right process. This is because a large part of the income that
was earned by the taxpayer constituted a reward for his personal exertion.
Accordingly in case of Julie, it can be stated that income derived by Julie will be
considered taxable under the cash receipt because the income that was earned by her mostly
constituted a reward for personal exertion. The provision of service which was rendered by
Julie was largely reliant on Julie’s personal skills. Referring to “Firstenberg v FCT (1976)”
the receipts of Julie is derived in “cash basis” and hence she must object regarding the
inclusion of salary in her taxable income for the month of June 2018. The sum of $10,000
will not be considered in her “taxable income”.
Allowable Deductions:
Expense relating to sales on Facebook:
The income from the business represents gains from trading transactions or it
constitute an ordinary incidence of the business activity. Proceeds from the business are
treated as “ordinary income” (Sadiq, 2019). While gains that is earned by the taxpayer from
the recreational activity or non-business activities are termed as hobby and will not attract tax
liability unless any general conception of income is applicable. Julie purchases unwanted
clothes to them into a fashionable clothing item. She further commenced a Facebook business

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page in order to sell her clothing creations. Julie kept all the records of expenditure and
received made by her. Furthermore, Julie expresses that she does not has any intent of
deriving profit from her clothing business activities. She only carried this activity as hobby or
for recreational purpose.
Julie reports that her outgoing associated to sales made on Facebook has not been
allowed deduction because her activities were treated as hobby and did not amounted to
business. Julie can raise objection regarding the disallowance of her expenditures associated
to sales made on Facebook since the receipts that Julie has earned will be treated as business
activities. The activities of Julie contains the necessary characteristics of business. The
outgoings that has occurred by Julie will be allowable as deduction and her business receipts
will be considered as taxable income.
According to “Taxation Ruling of TR 97/11” the necessary characteristics of
business involves whether the taxpayer has taken into the consideration any such commercial
approach are viewed as common indicators of classifying a business (Brown, 2018). The
ruling also states that certain types of ancillary activities such as maintenance of systematic
records would be helpful in ascertaining whether the activities of taxpayer will be viewed as
having business nature. The judgement made in “Stone v FCT (2005)” noted that that it is
not important to portray a profit making intention because of lack of profit making intent
cannot prevent an activity to be classified as business (Barkoczy, 2016).
Ideally the case fact of Julie suggest that the sale of clothes at Facebook will be
classified as business she has maintained all the records of expenses and receipts in a
business-like manner (Picciotto, 2019). Furthermore, Julie has also taken a commercial
approach when a Facebook page was set up by her for advertising her products to large
number of customers. Quoting the decision of “Stone v FCT (2005)” in case of Julie her

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activities will be classified as business activities because the lack of profit making intent
cannot simply preclude her activity as business. Therefore, under the sec 8-1 ITAA 1997
Julie will be permitted to get a tax deduction for the expenses occurred on advertisement
made on Facebook.
Clothing Expenses:
As stated in the positive limbs given in “sec 8-1 (1)” deduction is allowed to
taxpayers for any sort of expenditure till the degree it has occurred in gaining or generating
the chargeable incomes (Morgan et al., 2018). Deduction is allowed to taxpayer for
expenditures that have happened necessarily while performing any kind of business with the
objective of producing the assessable earnings.
In the meantime, as per the negative limbs given in “sec 8-1 (2)” no permission of
deduction is allowed for outgoings or expenditures within this legislation that it is capital,
private or domestic in type (Robin & Barkoczy, 2020). Julie provides a report that an
expenses associated to the purchase of high-quality clothes that she uses to wear in her job is
occurred by her. A sum of $6,000 was occurred by Julie on purchasing gowns, suits and
numerous dresses. Julie in such a situation is required to not object the disallowance of
$6,000 because the outgoing is considered as private or domestic in type within the “negative
limbs” of “sec 8-1 (2) ITAA 1997”.
In order to justify the disallowance of ATO, it should be noted that private or
domestic is non-deductible in pursuant to “sec 8-1 (2) ITAA 1997”. The negative limbs
prevents deduction of conventional clothing within “sec 8-1 ITAA 1997”. The clothing
expenses are treated as daily living expenses (Lam & Whitney, 2016). These expenditure are
not occurred by the taxpayer in the producing chargeable income and are viewed as private
expenses. The decision of law court in “Westcott v FCT (1997)” explained that deduction is

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only permissible where the clothing is needed by taxpayer in producing income. The
taxpayers are permitted deduction for occupation specific clothing, protective clothing and
uniforms which is usually allowed as tax deduction.
By making reference to above given explanation it can be stated that Julie should not
object to the ATO’s disallowance because the high quality clothing is a conventional clothing
and not occupation specific (Taylor et al., 2017). The judgement made in “Westcott v FCT
(1997)” is referred to explain that Julie has not occurred expenses in “derivation of
assessable income”. Conclusively, the expenses occurred is not allowable for deduction
under “section 8-1 ITAA 1997”.
Home-Office expense deduction:
Julie states that she on a regular basis takes the office laptop to her home so that she
can reply to her mails and finish up her tasks whenever she is unable to finish in office. Julie
states that the nature of work done by her is very much demanding and constantly needs her
to work from home for numerous hours even after the office hours. As a result Julie reports
an expenses of $300 occurred for home office purpose on electricity for cooling and
lightning. Julie in such a situation should raise disallowance relating to her home-office
expense. The main reason for objecting for the disallowance is that within “Taxation Ruling
of TR 93/30” where home is viewed as place of business then a certain portion of both forms
of outgoing is allowable for tax deduction.
According to this ruling the tax deduction of home office expenditure is reliant on
“running expenses” or “occupancy expenses” and whether the taxpayer is using the home
office as a “genuine home office” or they are using “home office convenience” purpose only
(Braithwaite et al., 2019). The examples of occupancy expenses include “rent, interest rates,
and insurance premiums” while the “running expenses” involves heating, cooling, lightning

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and depreciation. The “taxation ruling of TR 93/30” explains that where the home office is
regarded as the place of business or the relevant portion of the both outgoing might be
deducted (Main, 2019). The taxpayers are permissible to get deduction for the work-related
part of the heating and electricity costs.
The verdict made by the law court in “Swinford v FCT (1984)” provided an
explanation that a script writer was permitted deduction for a portion of rent paid for the flat
where the taxpayer has devoted a distinct room in flat for use as her study (Braithwaite,
2017). The taxpayer had the only place where she can conduct her writing activates.
Mentioning to the judgement made in the above specified case, Julie will be allowable
to claim deduction for the sum of $300 occurred for her home-office purpose because the
expenses fall within the category of running expenses. Referring to “Swinford v FCT
(1984)” Julie will be permitted to avail an income tax deduction under “sec 8-1 ITAA 1997”
for the work-related portion of the heating and cooling as electricity costs (Oishi et al., 2018).
The expenses are occurred in deriving the assessable income and it is relevant to her income
generating activities.
Repair Expenses:
“Specific deduction” happens when the “specific provision” in the income tax
legislation permits a taxpayer with the deduction. Deduction is allowed for repairs occurred
on “premises or depreciating asset” that is used for generating income under “sec 25-10
ITAA 1997”. As explained in “sec 25-10 ITAA 1997” an item should be used for generating
income for repairs in order to be allowed for deduction under “sec 25-10 ITAA 1997”
(Miller, 2018). This involves repairs occurred while carrying any business or repairs is made
to a rental or investment property. A repair that is capital in type is not allowed for deduction
under “sec 25-10 (3) ITAA 1997”.

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As evident Julie during the year 2018 purchases a second hand dishwasher which
needed repair at the time of purchase. Julie occurs a repair expense of $200 for repairing the
dishwasher to install it in her rental property. Julie here must not raise objection to ATO
regarding the disallowance of repair expenditure on dishwasher. This is because the repair
expenses occurred by Julie will be treated as initial repair and it is capital in nature under
“sec 25-10 (3) ITAA 1997”.
The initial repairs are normally taken to remedy the defects that is present at the time
of purchasing the asset and such kind of repairs are considered as capital in nature. Repairs
even though taken at the later stages of purchasing the item of asset will be viewed as initial
repair given the defect was present at the time of purchasing the asset (Schenk, 2017). The
decision of law court given in “Law Shipping Co. Ltd v. CIR (1924)” stated that expenses
that are occurred on initial repair are considered as non-deductible capital expenditure. These
expenses are considered as the cost of repairs which would have been factored into the
purchase price of property.
Ideally in case of Julie it can be stated that the expenses amounting to $300 will not
be permitted for deduction since it amounts to initial repairs. Citing “Law Shipping Co. Ltd
v. CIR (1924)” the expenses will be classified as capital in nature within “sec 25-10 (3)”.
Objection Process and relevant time:
In order to raise objection against the decision of ATO, Julie is required to denote that
the objection must be lodged in writing inside a particular given time period. Objecting to the
ATO decision would not cost any fee to Julie. She can easily submit her objection by using
the objection form of ATO (Bankman et al., 2018). This will assist Julie in offering her with
required info and would set down the correct wording. Since Julie is lodging her tax return as
an individual taxpayer she should use the objection form for taxpayers.

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Apart from objecting to the ATO judgements, Julie must furnish a detailed info to
support her decision as correct. The objection must contain declaration that information
furnished in objection and supporting document is right. Julie should sign the objection form
and it should be dated. To avoid any delay Julie must also furnish a full detail regarding the
detailed transaction on which she is raising objection. This must comprise of relevant taxation
year and tax periods.
Julie should include the necessary facts, information and argument along with the
document which supports the reason for disagreement with the ATO decisions. This must
comprise of reference to particular legislation, rulings and case laws. To avoid any further
unwanted delay a supporting document must be provided containing information relating to
decision that is being reviewed.
The Australian Taxation Office has implemented time restrictions relating to
amendment of income tax. The law lay down the required time limit for amending the tax
returns. For individual taxpayer and small business the ATO has set down the time limit of
two years. Therefore, Julie is needed to denote that she has the time limit of two years for
amending her income tax. The time limit also offers Julie with the certainty relating to her tax
affairs since the ATO will not be able to amend her tax after the time limit is over.
Administrative fees charged by property manager on rental property:
As per the ATO, when it is noticed that an individual has made a mistake on the
income tax return that is already lodged by them, he or she can make a request for
amendment of their tax assessment. There may be a certain circumstances where an
individual may have committed an error at the time of correctly answering to the question or
might have forgot to include certain items relating to capital gains, or might have forgot to
make a claim for the deduction or tax offset to which he or she may be entitled for (Miller,

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2018). A taxpayer in such a situation can make a request for amendment of their assessment
through online process.
Accordingly in case of Julie, she forgot to claim the property administrative fee in her
tax return. As a result Julie can make a request for amendment of their tax assessment. The
request for amendment of assessment can be made by Julie through online mode.

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resident CGT witholding tax. LSJ: Law Society of NSW Journal, (21), 84.

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Main, J. (2019). Taxation: Buying or selling: beware the sting of GST. LSJ: Law Society of
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