Taxation Law Student ID: AUSTRALIAN STUDENT ID

AUSTRALIAN
TAXATION LAW
STUDENT ID:
[Pick the date]

PART 1
The objective is to compute the taxable income of Wendy (taxpayer). In order to achieve the
same, the various receipts and outgoings would be considered separately in order to
determine which would contribute to assessable income and deductible outgoing respectively.
Receipts:
1) Salary from Young Price & Associates – This would be categorised as ordinary income
and as per ss. 6(5) ITAA 1997, it would contribute to assessable income of the taxpayer.
2) Payment from CPA Australia for training program – This would be categorised as
ordinary income in accordance with ss. 84(5) ITAA 1997. This section highlights that any
personal services income based on skills or personal services would be ordinary and
thereby assessable for tax purposes.
3) Prize money – It is evident from the details provided that this prize money is not attributed
to her skills through which she derived assessable income. Her primary skills is related to
accountancy and finance. Hence, golf would be categorised as a hobby and hence the
proceeds would not be assessable as indicated in TR 97/11.
4) Gift from a friend – Even though Wendy did not expect any payment for her work from
John but it is evident that payment has been made by John owing to the work performed
by Wendy. If she had rendered her personal services and skills, then John would not have
gifted her wine worth $ 1,200. As a result, the proceeds would be assessable income in
line with ss. 84(5) ITAA 1997.
5) Rental Income – One of the components of ordinary income is rental income and hence it
would be considered as assessable income as per ss. 6(5) ITAA 1997.
6) Sale of rental property – The sale of any capital asset would return in capital proceeds
which are different from revenue receipts. Capital proceeds amounting to $600,000
derived from the sale of the property would not be subject tot tax.