Taxation Law Name of the Student Name of the University Author's Note Part A Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314 Case Facts
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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthor’s Note
1TAXATION LAWPart AArthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314Case FactsDuring the relevant years, the involvement of the company can be seen in the business forproviding the tuition of dancing and received fees of different amount based on each hour. Asper the case, the available basic tuition courses were of 5, 15 and 30 hours of the private tuitionto be taken on appointment on a time span of one year. The payment used to be made in advance,in the form of installment and discount is provided for the immediate payments.The payment of the fees used to be immediately credited in the books of the companybased on their receipts under the account name of ‘Unearned Deposits- Untaught LessonAccount’. The amounts of the above-mentioned account were similar to the lessons taught andthey were transferred periodically to the account named ‘Earned Tuition Account’. The companymade the income tax returns based on the footings that are the fees; the fees received in advancewas exempted from the income tax during the time of the receipts. The commission used to dothe income assessment by taking into consideration the fees received in advanced as they weresupposed to be considered as income in case they were received in the income year (Kenny2013).The taxpayer did treat the prepaid of the tuition as income as it was obtained and it wasalso recorded in the books of the account after the completion of the lessons. Apart from this, theprepaid sum of the tuition fees was no included in the income of the taxpayer. However, whilecalculating the income, the fees were found that was included in the assessable income duringthe year it was received. For this reason, the taxation commission concluded that the tax payer
2TAXATION LAWdid obtain the assessable income as prepaid fees during the year of providing the tuition or theyear in which the company obtained the fees. Based on “section 25 (1) of the ITAA 1997”, thereceipts of the prepaid tuition fees did develop an ordinary income (Somers and Eynaud 2015). IssueThe main issue in this case is to determine whether the taxpayer obtained the prepaidtuition fees during the year in which received or not. This issue of this case demands theassessment of the aspect that whether the taxpayer’s taxable income develops a prepaid tuitionfees or not.ConclusionThe main objective of this case involves in understanding that whether income of thetaxpayer in the form of prepaid fees was taxable or not. According to the verdict of the court oflaw, the received fees of tuition in advance but yet to be received would not be a part of thetaxable income of the person (Somers and Eynaud 2015). Apart from this, the count alsomentioned that there would be an agreement between the taxpayer and the student about the factthat no refund would be possible against the advanced fees. However, in actual, the taxpayer wassupposed to refund the advanced fees in case there is no tuition provided to the student.According to the verdict of the count of law, the taxpayer did not include the tuition fees as theincome in the year due to the probability to refund the money in case there was no tuitionprovided to the student by the taxpayer. For this reason, in the presence of all these facts, thetaxation commission passed the final verdict that the tuition fees that were obtained by thetaxpayer do not possess any characteristics of being income until the rendering of the service(Somers and Eynaud 2015).
3TAXATION LAWAnswer to [a]oi)As per6-5 of the ITAA 1997, the sum must be treated as the income in case the personreceive any amount in the behalf of the taxpayer. Moreover, the requirement for thetaxpayer is to include any derivation in such income in the taxable income in respect ofthe taxation law of 6-5 of the ITAA 1997 (Richards 2014).Two methods are there for the computation of income for the purpose of taxation incomeand they are earning method and receipts method. The taxpayer is needed to choose themethod based on the suitability. As per98/1, it is involved with the income ascertainmenton the based on the receipts or earnings methods. As per Subsection 6-5(2) of the ITAA1997, the taxpayer is required to include the gross amount of their taxable income for thederived gross amount (Jones 2017).As per the taxation ruling of 98/1, the receipts method is the most appropriate method toascertain the income obtained from investment. However, exemption of this rule is there.The earning method is regarded as the most suitable method to determine the incomegenerated from manufacturing or trading business. As per the general rule, the earningsmethod is considered as the most suitable method to treat the income for the purpose oftaxation.ii) As per the case study of RIP, the business has been engaged in providing the funeralrelated services. In the year 2016, the net profit of the company was $2.45 million. Inaddition, the company has other sources of income that is to provide credit to theircustomers with the conduction for payment with 30 days span. For treating the income ofRIP for assessment, it is crucial to take into consideration the earnings method as perSubsection 6-5(2) of the ITAA 1997. In order to provide the appropriate reflex to
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