ABOUT TAXATION LAW QUESTION ANSWER 2022

Running head: TAXATION LAW
TAXATION LAW
Name of Student
Name of University
Author Note

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Question 1
(a) In the Taxation Ruling TR 2019/11 the topic that has been covered is the consideration of
a company’s activity to be carrying out a business as a small business entity defined
under the provision of section 23 of the Income Tax Rates Act 19862.
(b) Division 30 in the Income Tax Assessment Act 19973 is seen to be outlining the
legislations for the deductibility of gifts and contributions.
(c) The top tax rate that would be seen as applicable to a resident taxpayer in the tax year
2019-20 is $54,097 with an addition of 45% to any amount that exceeds $ 1,80,0004.
(d) As mentioned in section 118.5 of the Income Tax Assessment Act 19975 cars and
motorcycles should be treated as an exemption of capital gain tax.
(e) Under the provisions of section 104.20 of ITAA 19976 CGA event C1 deals with the loss
or destruction of any asset that is owned by the taxpayer and is a capital in nature.
(f) The current tax-free threshold for any resident individual is an income that could be seen
as amounting to less than $18,200.
(g) The legal principle that could be seen as evolving with High Court decision in Hayes v
FCT [1956]7 was that for the assessment of the CGT gain, any amount that has been
received by a taxpayer for the past services rendered by him, is required to be considered
as CGT gain. As an example an amount received by any employee for the past
1 TR 2019/1
2 Income Tax Rates Act 1986, s.23
3 Income Tax Assessment Act 1997, div.30
4www.ato.gov.au, "Individual Income Tax Rates", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/Rates/Individual-income-tax-rates/>.
5 Income Tax Assessment Act 1997, s.118.5
6 Ibid, s.104.20
7 Hayes v FCT (1956) 96 CLR 47

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employment services and the receipt for which has been accrued in the past would be
considered under the assessable income for CGT gain. However, in deciding upon the
situation in the given case the judge were seen to be reaching a dilemma between whether
the receipt that the employee had received from his past employers for previous services
of employment that had been rendered should be included in the capital gain or should be
treated as an ordinary income. The judges reached to the conclusion that any income
received by the taxpayer for applying to the personal exertion should be treated as an
ordinary income of that individual, however the receipt from a former employer that has
already been accrued but has not been provided to the employee would be acquiring the
nature of capital asset because the employee had received the same as a lump-sum
amount subsequently from its accrual.
(h) The categories of the taxable income that had been mentioned in the taxation law provide
for two different classes of income that an individual taxpayer can earn. These two
classes of income can be recognized as ordinary income and statutory income. Ordinary
income of an individual can be described as all the incomes that have been derived by an
individual directly or indirectly from any source during a financial year. An ordinary
income can be seen as including the salary of an employee or any payment received for
rendering personal services. Statutory income can be referred to as to incomes other than
ordinary income but are included in the assessable income through rule of law. Some of
the examples of statutory incomes can be seen as CGT gains, dividends, allowance and
redundancy payments. For the assessment of the ordinary incomes any stringent rules are
not seen as necessary to be in compliance with, however a statutory income would be
considered as taxable only if it is supported by any legal provision of a statute. For an

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ordinary income to be assessable income there is no need of any express mention in any
taxation statute, but for the statutory incomes statutory recognition is necessary to be
considered as assessable income8.
(i) Certain categories of the taxpayers are seen as required to be paying additional amount of
taxes over the payable income tax. These additional taxes are including Medicare levy
and Medicare levy surcharge. The Medicare Levy and the Medicare Levy Surcharge can
be seen as implying towards the taxpayers two additional tax rates. These two taxes are
imposed under the provisions of the Medicare Levy Act 19869 and the ITAA 193610. The
purpose of the introduction of the Medicare Levy Surcharge was for the encouragement
high income earning taxpayers to be paying health insurance which in turn would be
reducing the burden of the Medicare. The Medicare Levy Surcharge is applicable only
towards the taxpayers without any type of private health insurance. The Medicare Levy is
seen as imposable upon both the total income and the Fringe Benefits available to a
taxpayer. The rates for this type levy can be observed as varying between 1%, 1.25% and
1.5%11.
Question 2
For assessing the residency of any individual in Australia three tests are required under
the provisions of section 6.1 of Income Tax Assessment Act 193612. These three tests are the
domicile test, the resides test and the super admission test. In addition to these the ‘183 days test’
8 Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.
9 Medicare Levy Act 1986
10 Income Tax Assessment Act 1936
11 Krassnitze, L., & Willis, E. (2016). The public health sector and medicare. Understanding the Australian health
care system, 3.
12 Income Tax Assessment Act, s.6.1