Income Tax for Paul's Golf Lessons

This assignment analyzes the income tax situation for Paul, who earns income from teaching golf lessons. It examines the assessability of his earnings under the Income Tax Assessment Act 1936 and discusses how his income will be considered in calculating his overall tax liability.

Running head: TAX
Tax
Name of the Student:
Name of the university:
Authors Note:

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Table of Contents
Answer to Question 1......................................................................................................................2
Issue:................................................................................................................................................2
Laws:................................................................................................................................................2
Application:.....................................................................................................................................2
Conclusion.......................................................................................................................................4
Answer to Question 2......................................................................................................................5
Issues:..............................................................................................................................................5
Application:.....................................................................................................................................6
Reference.........................................................................................................................................9

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Answer to Question 1
Issue:
In this case, the issue is to determine the tax consequences for salary or wages that is
derived from leaving Australia for working overseas.
Laws:
 Subsection 6 (1) of income tax assessment act 1936;
 Taxation rulings of IT 2650
 Henderson v. Henderson [1965] 1 All E.R.179
 F.C. of T. v. Applegate (1979) 9 ATR 899
 F.C. of T. v. Jenkins 82 ATC 4098
Application:
The report explains the treatment of tax of income that have been derived from working
in an oversea university as a coordinator. The terms of work for the coordinator is that Can
Robyn can continue to works as long as he wished or as long as the course existed in the Calcutta
University. The Taxation Ruling IT 2650 provides certain guidelines that is useful in determine
whether an individual leaving Australia for working overseas should be determine as resident or
nonresident for the purpose of tax for the time of staying outside Australia1.
The section 6(1) of the Income Tax Assessment Act 1936 provides that an individual
whose domicile is in Australia is considered as an Australian resident for the purpose of tax
unless the commissioner is satisfied that individual is nonresident for the purpose of tax2. The
1 Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’ view." Procedia-Social and
Behavioral Sciences 109 (2014): 1069-1075.
2 Braithwaite, Valerie, ed. Taxing democracy: Understanding tax avoidance and evasion. Routledge, 2017.

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section provides that an individual staying in Australia continuously for more than 6 month is
generally regarded as a resident for the purpose of tax. However, if the commissioner is satisfied
that the individual does not have the intention of residing in Australia in that case the individual
will not be regarded as resident for the purpose of tax.
On evaluating the current case under section, 6(1) of the Income tax Assessment Act
1936 Can Robyn should be regarded as the resident of Australia as she has stayed in Australia
for more than 6 months before leaving the country for employment overseas3. In addition to this
Can Robyn continued to have the place of residence in Australia and did not sell the flat of
Melbourne. It is assumed that the flat was mortgaged as she paid the mortgage amount from the
income received from employment. The income from employment was received in Australian
bank.
In the case of Henderson v. Henderson [1965] 1 All E.R.179 it was provided that a
person is taken to have the domicile of the place of origin unless the individual taken a domicile
in any other country. In the current case, it can be seen that Can Robyn has continued to maintain
the flat in Melbourne that indicates she has the clear intention to come back to Australia after the
employment with Calcutta University is ceased4.
The Taxation Ruling IT 2650 provides that the income received in an Australian bank
for working overseas is taxable. In applying the ruling, the residence of the taxpayer should be
considered. In the case of F.C. of T. v. Applegate (1979) 9 ATR 899 the most important thing
3 Davis, Angela K., David A. Guenther, Linda K. Krull, and Brian M. Williams. "Do socially responsible firms pay
more taxes?." The Accounting Review 91, no. 1 (2015): 47-68.
4 James, S., Sawyer, A., & Wallschutzky, I. (2015). Tax simplification: A review of initiatives in Australia, New
Zealand and the United Kingdom. eJournal of Tax Research, 13(1), 280.

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that needs to be determined is the residential status of the individual leaving Australia for the tax
purpose5. In case an individual continues to maintain the domicile is Australia then the individual
would be regarded as the resident. That means an individual obtaining domicile of his own
choice or through the operation of law is regarded as the non-resident.
In the present case, Can Robyn maintains her bank account in Australia and continues to
receive her income from employment on that account. The mortgage for the flat is paid from the
income received on that bank account. Therefore, it can be said that in case of Can Robyn in
spite of obtaining working visa for substantial period it can be considered as adequate for
considering her a non-resident for the purpose of tax6.
Conclusion
The salary received in the Australian bank will be regarded from the university of
Calcutta will be treated as foreign employment income. The income earned by an Australian
resident from an overseas employment is termed as foreign employment income. In Australia, an
individual is generally taxed on the income that is derived every quarter from every corner of the
world. In this case, Can Robyn has received has salary in her Australian bank account. The
income that is received in Australian bank account from source outside Australia will treated as
assessable income. It should be noted that even though the payment has been received in
Australia and not the person working overseas it should be considered as foreign employment
income. Therefore, based on the F.C. of T. v. Jenkins 82 ATC 4098 it can be concluded that the
5 Lal, A., Mantilla-Herrera, A. M., Veerman, L., Backholer, K., Sacks, G., Moodie, M., ... & Peeters, A. (2017).
Modelled health benefits of a sugar-sweetened beverage tax across different socioeconomic groups in Australia: A
cost-effectiveness and equity analysis. PLoS Medicine, 14(6), e1002326.
6 Forsyth, Peter, Larry Dwyer, Ray Spurr, and Tien Pham. "The impacts of Australia's departure tax: Tourism versus
the economy?." Tourism Management 40 (2014): 126-136.

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foreign employment income that is received from India is taxable and so it should be included in
the assessable income.
Answer to Question 2
Issues:
The present issue is based on defining the taxable income of the taxpayer which has the personal
business of Golf Teacher.
Laws:
 Subsection 25 (1)
 Subsection 6-5 (2) and (3) of the Income Tax Assessment Act 1997
 Henderson v. FC of T (1970)
 Barratt v. FC of T 92 ATC
 Taxation Rulings TR 93/11
Application:
According to the subsection 6-5 (2) and (3) of the Income Tax Assessment Act 1997, it
is compulsory that each of the taxpayer should take account of their taxable income in the gross
income which they generate7. As mentioned in subsection 6-5 (2) and (3) any income that is
7 Cheshire, Lynda, Jo-Anne Everingham, and Geoffrey Lawrence. "Governing the impacts of mining and the
impacts of mining governance: Challenges for rural and regional local governments in Australia." Journal of Rural

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earned during a year but it is received in some other or in another year turns out to be the matter
of the taxpayer. It is very important and vital to determine by applying appropriate method the
amount of earnings that is generated in an income year for the taxpayer. It is clearly mentioned in
taxation rulings of TR 93/11 that it is essential for each person in order to ascertain the
assessable income to apply either their receipt process of tax accounting or their earning
process8.
As per TR 93/11 receipt of income fee under subsection 25 (1) will be treated as incomes
in compliance with the regular perceptions of the ITAA 1936 for professional whose earning or
income is treated for the purpose of assessment under accumulation basis or accrual basis9. It is
obvious from the situation where Paul received a fee earning from the private lesson of golf from
his client. Thus the query relating to the treatment of professional fee is introduced under
subsection 25 (1) of the ITAA. From the present study of Paul with reference to the contract
entered into by Paul, the following case must be determined. It is also established that following
the five years of golf lesson imparted, Paul had received a fee from one of his client named
Doreen. As a result of which a recoverable debt was established where it is not required by the
professional person to take on any prior action to the debt becoming entitled for payment. If the
time to compensate is being approved then the fee shall be recoverable in the applicable sense.
As it is detained in the case of Henderson v. FC of T (1970) earning which is assessable
on accumulation or accrual basis, those are derived under subsection 25(1) if the ITAA on
Studies36 (2014): 330-339.
8 Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax avoidance structures: Evidence
from Australian firms." Journal of International Accounting, Auditing and Taxation 22, no. 1 (2013): 12-25.
9 Richardson, Grant, Grantley Taylor, and Roman Lanis. "The impact of board of director oversight characteristics
on corporate tax aggressiveness: An empirical analysis." Journal of Accounting and Public Policy 32, no. 3 (2013):
68-88.

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creation of a recoverable debt. Alongside this, either on receiving the fee, income in advance by
a professional person and by creating some arrangement among the client and the professional
the fee income that is produced in the income year become associated partially or fully for which
the professional person completes the work10. As it is obvious from the present situation that it
can be determined that the fee income which Paul had derived is considered as the portion of his
computable income and which shall be taken into consideration while ascertaining the tax
liability.
The current study of Paul states that Doreen’s receipt of fee income would be considered
as the portion of assessable income. The amount of fee that Paul received would be treated as
income in the year of revenue and such kind of incomes would be treated as assessable income
due to the reason that the receipt of fee would be treated as recoverable debt for the lesson that is
provided to his client11. While Paul’s assessable income is ascertained, receipt of $6,000 and
$28,000 would be considered as taxable income out of the golf lesson taught. As believed in the
Barratt v. FC of T 92 ATC the Australian federal court had taken into consideration the statutory
impairment during commencement of the proceedings of recoverable bad debt. However this
does not delay the time of deriving the fee income under subsection 25 (1) by the professional
individual whose income is intended to be treated for the purpose of tax under the basis of
accumulation or accrual12.
Conclusion:
10 England, Phillipa. "Between Regulation and Markets: Ironies and Anomalies in the Regulatory Governance of
Biodiversity Conservation in Australia." 1 Australian Journal of Environmental Law (2016): 44.
11 Kucukvar, Murat, Gokhan Egilmez, and Omer Tatari. "Sustainability assessment of US final consumption and
investments: triple-bottom-line input–output analysis." Journal of cleaner production 81 (2014): 234-243.
12 Picciotto, Sol. "Indeterminacy, complexity, technocracy and the reform of international corporate taxation." Social
& Legal Studies 24, no. 2 (2015): 165-184.

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In order to settle with the current study, Paul’s following situation has reflected the
outcomes or magnitudes of income tax which is derived during the progress of the business. The
income of Paul from his golf lesson will be considered as assessable income with reference to
sub-section 25 (1) of the Income Tax Assessment Act 1936 it will also be taken into
consideration in the assessable income.

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Reference
Braithwaite, Valerie, ed. Taxing democracy: Understanding tax avoidance and evasion.
Routledge, 2017.
Cheshire, Lynda, Jo-Anne Everingham, and Geoffrey Lawrence. "Governing the impacts of
mining and the impacts of mining governance: Challenges for rural and regional local
governments in Australia." Journal of Rural Studies36 (2014): 330-339.
Davis, Angela K., David A. Guenther, Linda K. Krull, and Brian M. Williams. "Do socially
responsible firms pay more taxes?." The Accounting Review 91, no. 1 (2015): 47-68.
England, Phillipa. "Between Regulation and Markets: Ironies and Anomalies in the Regulatory
Governance of Biodiversity Conservation in Australia." 1 Australian Journal of Environmental
Law (2016): 44.
Forsyth, Peter, Larry Dwyer, Ray Spurr, and Tien Pham. "The impacts of Australia's departure
tax: Tourism versus the economy?." Tourism Management 40 (2014): 126-136.
James, S., Sawyer, A., & Wallschutzky, I. (2015). Tax simplification: A review of initiatives in
Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1), 280.
Kucukvar, Murat, Gokhan Egilmez, and Omer Tatari. "Sustainability assessment of US final
consumption and investments: triple-bottom-line input–output analysis." Journal of cleaner
production 81 (2014): 234-243.
Lal, A., Mantilla-Herrera, A. M., Veerman, L., Backholer, K., Sacks, G., Moodie, M., ... &
Peeters, A. (2017). Modelled health benefits of a sugar-sweetened beverage tax across different

10TAX
socioeconomic groups in Australia: A cost-effectiveness and equity analysis. PLoS
Medicine, 14(6), e1002326.
Picciotto, Sol. "Indeterminacy, complexity, technocracy and the reform of international corporate
taxation." Social & Legal Studies 24, no. 2 (2015): 165-184.
Richardson, Grant, Grantley Taylor, and Roman Lanis. "The impact of board of director
oversight characteristics on corporate tax aggressiveness: An empirical analysis." Journal of
Accounting and Public Policy 32, no. 3 (2013): 68-88.
Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’ view." Procedia-
Social and Behavioral Sciences 109 (2014): 1069-1075.
Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax avoidance
structures: Evidence from Australian firms." Journal of International Accounting, Auditing and
Taxation 22, no. 1 (2013): 12-25.