Assignment | Assessable income for Jean.

TAXATION
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Question 1
1) Earnings From Koles
Issue
Determine which receipts would contribute to assessable income for Jean.
Discussion
In accordance with s. 6(5) ITAA 1997, ordinary income contributes to assessable income.
One of the key sources of ordinary income is salary from employment. As a result, the salary
derived as the store manager would contribute to assessable income (Krever, 2016).
It is essential to differentiate between allowance and reimbursement as highlighted in tax
ruling TR 92/15. The former is considered as assessable income since it is not linked to the
amount that the taxpayer has spent on the concerned expenditure. As a result, it is possible
that the taxpayer derives financial benefit on account of allowance which is not possible for
reimbursement. The entertainment allowance of $ 10,000 is completely spent on clients
owing to which no financial benefit arises, thereby no impact on taxable income
(Woellner, 2014).
As per s. 83-10 ITAA 1997, receipts on account of unused annual leave payment would be
considered as assessable income. Further, in accordance with s. 83-80 ITAA 1997, any
payment on account of unused long service leave would be fully included in the assessable
income if the same is received after August 17, 1993. Considering s. 83-10 and s. 83-80, the
receipts of the leave would fully be captured in the assessable income (Deutsch et. al., 2015).
Any gift received by the taxpayer would be exempted from tax provided if satisfies the
following conditions as indicated in TR 2005/13 (Sadiq et.al., 2015).
 The transfer should have actually taken place leading to ownership change.
 The transfer should be voluntary without transferee asking for the same.
 The transfer should be carried out without any reciprocal expectations owing to the
gift.
 The transfer should be done with benefaction of transferee in mind.
With regards to the Iphone and accommodation & travel voucher, it is apparent that Jean
never asked for the same and hence it is voluntary. Further, the change in ownership has

actually happened. Also, these items would provide some benefit to Jean. Lastly, since Jean is
leaving the company, hence no reciprocal expectations would arises. Thereby, the Iphone and
voucher would not contribute to assessable income.
Impact on Taxable Income
Salary would increase the taxable income by ($80,000 + $24,000) = $104,000
Since all allowance is spent, hence no impact of it on taxable income. Also, the Iphone and
vouchers are gifts and hence would not contribute to taxable income. Another contribution to
taxable income would be from leaves amounting to $ 10,500.
2) Further benefits from Koles
Issue
The objective is to ascertain the impact of the given benefits on taxable income of Jean.
Discussion
As per ss. 25(1) ITAA 1936, any benefit that the taxpayer derives on account of frequent
flyer program would be considered as assessable income especially when the points are
earned on account of work related travels. Further, tax ruling TR93/2 also indicates the same
(Gilders et. al.,2016). Hence, $1,500 worth benefit for personal use would be assessable.
Also, any payment received in relation to the employment would also be termed as assessable
income. As a result, the payment of $ 90,000 linked with the year of service would be
considered as assessable income while the remaining one time payment would be gift and
thereby exempt.
Impact on taxable income
A sum of $ 91,500 ($ 1,500 + $90,000) would be added to the taxable income.
3) Investment Earnings
Issue
The objective is to ascertain the impact of interest and dividends on taxable income.