capital gains tax car or motorcycle Assignment 2022

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer A:..............................................................................................................................2
Answer B:...............................................................................................................................2
Answer C:...............................................................................................................................2
Answer D:..............................................................................................................................3
Answer E:...............................................................................................................................3
Answer F:...............................................................................................................................3
Answer G:..............................................................................................................................3
Answer H:..............................................................................................................................3
Answer I:................................................................................................................................4
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................6
References:...............................................................................................................................15

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Answer to question 1:
Answer A:
As states in “Taxation Ruling of TR 2009/1” it gives the view of official of tax about
when an organization do the business as per the term of SBE under “Sec-23 of the Income
Tax Rates Act 1986” that are relevant for the year 2015-16 and 2016-17 or within “sec-328-
110, ITAA 1997”1.
Answer B:
Gifts or payment for a fund is deductible from tax under the “Division 30, ITAA
1997”2.
Answer C:
The maximum sum of marginal tax which is consider in Australian Resident Stands
45%.
1 Thuronyi, Victor, and Kim Brooks. Comparative tax law. Kluwer Law International BV,
2016.
2 Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’
view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.

3TAXATION LAW
Answer D:
For purpose of capital gains tax car or motorcycle is not consider as tax. As an
alternative under“sec-108-20 of the ITAA 1997” it is consider as private use asset.
Answer E:
“CGT event C1” under “sec-104-20 of the ITAA 1997” when a taxpayer is taken a
CGT assets is destroyed or misplaced3. “CGT event C1” is applicable to a thing of CGT
assets when tax payer did not received any amount for damage or loss.
Answer F:
At present, tax is not applicable to individual person that are residing with the limit of
$18,200 (tax-free amount) income.
Answer G:
The high court in “Hayes v FCT (1956)”, states that when bookkeeper has received
sum of shares in the limited corporation which is set by the earlier proprietor. The work done
between the parties is term out for the friendship4. In such case court states that this will not
3 Pogge, Thomas, and Krishen Mehta, eds. Global tax fairness. Oxford University Press,
2016.
4 Buenker, John D. The Income Tax and the Progressive Era. Routledge, 2018.

4TAXATION LAW
be consider as income as there was no reason for the work to earn revenue it just held in the
circumstances of private relation in term of gift.
Answer H:
Below listed are the difference between ordinary and statutory income;
Ordinary Income Statutory Income
 Under the Tax Act there is no
definition for the ordinary income.
The mean is taken from case law and
based upon principles which
considered from decisions5.
 The standard Income is contained
within taxpayer’s chargeable income
under “sec 6-5, ITAA 1997”.
 As per the certain rules under Tax
Act the statutory income from the
part of the assesse earnings.
 There is different type of sums
which is not taken as chargeable
earnings and it is consider into
assessable earnings of assesse under
some provisions of act. These totals
refer under statutory income and it is
taken under “section 6-10, ITAA
1997” for assessment requirement.
Answer I:
Below stated is the difference between Medicare Levy and Medicare Levy Surcharge;
Medicare Levy Medicare Levy Surcharge
 In case of Medicare cost a large  For paying the public health system
5 Chirelstein, Marvin A., and Lawrence Zelenak. Federal income taxation. West Academic,
2018.

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number of Australian takes mediocre
levy as a medium.
 2% of Medicare levy rate is
applicable for tax payer in the
current tax year when its taxable
income is more than $27,069.
the federal government impose the
tax on the MLS.
 MLS tax is liable to a person who
have a taxable income more than
$90000 or by couple or family
whose income together is more than
$180,0006.
Answer to question 2:
The term “usual place of abode” must not be occupied as partaking identical sense as
expression “permanent place of abode”. On the basis of systematic and simple meaning, the
expression “usual” and “adobe” must be understood. The “usual place of adobe” is
dependent on related question. Commonly, it refer as normal place of resident or it’s mainly
used for individual person who is physical there in the country7. An individual “usual place
of abode” should be perpetual but it ought to define the nature of the lodging in contrast to
overnight or prearranged accommodation of a traveller.
If a assesse have “usual place of adobe” in Australia and no such regular home in
foreign but moves from one state to another or migrating on a regular basis within the
domestic territory or to some certain location in foreign, then it will not be considered to
6 Keightley, Mark P., and Molly F. Sherlock. "The Corporate Income Tax System: Overview
and Options for Reform." (2014).
7 Dagum, Camilo. "Income distribution models." Wiley StatsRef: Statistics Reference
Online (2014).

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having a permanent place of residence. In this situation it will be viewed that the taxpayer or
the individual is not having any fixed home or their “permanent place of abode” is overseas.
On the contrary, the argument “permanent place of abode” states that assesse has
their self-dwelling at Australia. Therefore, in “subparagraph (a) (i)”, the understanding of
“resident” requires the officer of tax to be content that the assesse “permanent place of
abode” is in Australia8. The term “place of abode” defining a person having a house at night
with his family. The high court at “Levene v IRC (1928)” clarified that a person “place of
abode” establishes an abode or the physical environments wherever someone lives in.
In one more famous example of “FCT v Applegate (1979)” it was define that the
taxpayer had the Australian residence, journeyed to New Hebrides to start an office branch.
The official of tax said that the “permanent place of abode” for the assesse was outside the
Australia and was taken as non-resident for the following year.
In a different case of “FCT v Jenkins (1982)” the assesse have come back to
Australia afterwards 18 months due to poor wellbeing, who had before gone to New Hebrides
for 3 years and as a profession he was a bank officer. The law of court stated it that assesse
“permanent place of abode” is not existent in Australia all the year notwithstanding he did
not resided in New Hebrides physically. Both the held circumstances above states that
“permanent place of abode” cannot be sure of by implementing any hard and fast regulation.
Answer to question 3:
HECS-HELP: $850:
As defined by ATO, allowable tax deduction is allowed to assess for specific forms of
costs that is connected to self-education given that the incidentals have happened in following
8 Goldin, Jacob. "Optimal tax salience." Journal of Public Economics 131 (2015): 115-123.

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calculable incomes of assesse9. If an assesse sustains costs on educating himself and fulfils
the require standards then particular costs namely the scholar loan that is paid under the
HECS-HELP is not permissible from income tax deduction. In the same way, the
expenditures of $850 incurred for HECS-HELP is non-exempted expenditure10.
Travel-Work to university $110:
Therefore, self-education outflow that is generally incurred is usually construed as tax
deductible in those instances when the outgoings is incurred on sustaining or enhancing the
expertise of the taxpayer in the profession in which they are presently involved, specifically
where the expense is incurred towards the improvement of the future earnings potential of the
taxpayer.
As it was established in “Finn v FCT (1961)”the architect hired by the WA
Government was allowed acceptable deduction for the travelling costs incurred in his travel
to another state for a year to study architecture11. It was held by the honourable court that the
travel was inherently connected to the nature and was relevant to the employment of the
taxpayer.
As it can be clearly observed from the abovementioned case that travel from work to
university will be a acceptable income tax deduction in “section 8-1, ITAA 1997” as the
payments was related and appropriate to the employment of the taxpayer.
9 Triplett, Charles S. "Transfer Pricing." (2014).
10 Kennya, Paul. "Small business capital gains tax concessions: The case for reform." (2016).
11 Sadiq, Kerrie, and Stephen Marsden. "The small business CGT concessions: Evidence from
the perspective of the tax practitioner." Revenue Law Journal 24.1 (2015): 6743.

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Books $200:
The expenditure incurred on self-education such as computers, textbooks, stationary
which is linked to enhancing the forthcoming earnings and recognition in employment of the
taxpayer is allowed for income tax deduction inside “section 8-1, ITAA 1997”12. In “FCT v
Highfield (1982)” a dentist who was carrying his practice was allowed deduction for
expenses related payments and lodging for incurring self-education outlays.
As obvious from the abovementioned incident of the accountant the expenditure
incurred on books will be allowable expenditure for income tax deduction under “section 8-
1, ITAA 1997” since the outflows were linked to improvement of the forthcoming earnings
and appraisal of the taxpayer.
Childcare during her evening classes $80:
As per “section 8-1 (2) (b), ITAA 1997”expenditures that is personal in type is not
allowable for income tax deduction since it fails to satisfy the norms’ set under the “positive
limbs” and non-deductible under “negative limbs”. Noting the decision made in “FCT v
Lodge (1972)”the honourable court did not allow deduction to the taxpayer for incidentals
suffered on childcare to have her child minded when she is at work13. The honourable court
specified that outlays were not incidental to the earnings generated by the taxpayer.
12 Kenny, Paul. "Small business capital allowances." (2018).
13 Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.

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Likewise, in the existing circumstance the expenditure for childcare amounting to $80
suffered by the taxpayer for appearing live classes in the evening was not allowable under
“section 8-1 (2)(b), ITAA 1997” as the payments were not incidental to the earnings
potential of the taxpayer.
Repair to her fridge at home $250:
No deduction allowed to an individual taxpayer under “section 8-1 (2)(b), ITAA
1997” up the degree that the payments are of personal type. The high court of law in
“Lunney v FCT (1958)” said that it was essential to decide that loss or expenditure is an
imperative requirement in the obtaining of chargeable earnings14. Similarly repairs to fridge at
home for $250 is not a permissible payments for income tax deduction under “section 8-1 (2)
(b), ITAA 1997” since the expenses are private in type and is not an essential requirement in
obtaining of chargeable income.
Black trousers and shirts needed to be work at office: $145:
The price paid in buying regular objects of clothes like shirts and suits are not allowed
for income tax deduction under “section 8-1, ITAA 1997”. The honourable court of law in
“Mansfield v FCT (1996)” said that ordinarily the general expenditures expensed on normal
objects of clothing’s would not be allowed as deductible, regardless of the point that those
type of clothing apparels might be mandatorily maintained in the profession of the taxpayer.
As clear from the above case that the expenditures incurred on black trousers and
shirts essential to be worn during the office hours as the dress code is not acceptable for
deduction under “section 8-1, ITAA 1997”15. Such outlays are not acceptable for deduction
14 Brownlee, W. Elliot. Federal Taxation in Australia. Cambridge University Press, 2016.

10TAXATION LAW
notwithstanding of the fact that those expenses might be necessary to ensure that a
presentable appearance is compulsory to be maintained in the office.
Legal expenses incurred in writing up a new employment with a new employer $300:
Expenditures that are incurred in attainment a new occupation is not considered as
related to creating chargeable earnings. As it was held in “Maddalena v FCT (1971)” the
payments incurred in finding new work was non-deductible as it is happened point too soon16.
Likewise, the legal expenses incurred for writing up new service with the new employer is
not an allowable spending since it has been incurred at stage very soon.
Answer to question 4:
Answer to A:
A “CGT event F1” takes whenever a taxpayer allowes a lease to some other party or
prolongs or renews a lease, which was before kept by him. The discount of 50% CGT is not
acceptable under the “CGT event F1”occurred. The moment John leased gave his land one
lease based on the premium of $7000 for a period of seven years a “CGT event F1”arose.
However, John is not permitted obtain a discount of 50% CGT from the CGT event.
15 Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not
knowing your deduction from your offset." Austl. Tax F. 31 (2016): 321.
16 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).

11TAXATION LAW
Answer to B:
Answer to C:
The main house of dwelling of a taxpayer is not liable for any CGT. However, the
taxpayer is not allowed for claiming full exception on his or her main house of dwelling from
CGT if they use the entire or any lot of the dwelling for any income generating activity, be it
business or profession17. It also includes any portion of the house specifically set apart for
generation of revenues and till the period the property remains engaged in generating income.
Similarly, Li used 20% of her main dwelling or the total floor area to carry her physiotherapy
business. The formula for calculating chargeable portion of capital gain is as follows:
Capital gain x percentage of floor area = Assessable portion
17 Ingles, David. "Should capital income be taxed? And if so, how?." And If So, How (2015).

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= $7, 00,000 - $4, 00,000 = $3, 00,000(net capital gain)
= $3, 00,000 x 20% = $60,000
Hence, the possessions was under the control of Li for more than 12 months, she is
permissible to avail the 50% CGT discount for the computation of her capital gains. Also, the
rule of “home first used to produce income” is also applicable in the Li’s case since she used
her main house of dwelling for income generation from the beginning18.
Answer to D:
The cost base of the CGT asset usually means the assets cost at the time of its
purchase. Besides, it also take in few other outlays that are linked to the asset from its
purchase, holding and sale19. On the other hand, when the CGT event transpires to any CGT
asset and capital gain has accrued to the taxpayer, then the reduced cost base of the asset has
to be determined to find out if there is any capital loss. It must be denoted by the taxpayer
that they can make use of the capital loss to decrease capital gains but no other incomes.
Answer to question 5:
Answer A:
Stating “section 6-5, ITAA 1997” an income nature of article is determined when a
taxpayer earns it. The existence of unlawfulness, dishonesty or any other aspect does not
18 Campbell, Sam. "Personal liability of a trustee to tax on trust income: Part 1." Taxation in
Australia 53.5 (2018): 263.
19 Burns, Andrew. "Mid market focus: Tax considerations when doing business
offshore." Taxation in Australia 51.10 (2017): 535.

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hamper its origin. Clearly, income from illegal such as drug dealing or theft would be
observed as chargeable earnings under the general sense of “section 6-5, ITAA 1997”20.
Answer B:
The taxpayer has earned bank interest in this period. The interest has been taken as
episodic receipt from the revenue stream that is understood as the assessable earnings as per
the conception of “section 6-5, ITAA 1997”. As the received rent is treated as earnings from
rental property it is measured as income as per “section 6-5, ITAA 1997”. The taxpayer has
reported an income from crown casino of $10,000.Accordingly. Windfall gains holds the
nature of an income character. Hence, the income is treated as windfall gain and considered
non-taxable.
Answer to C:
As per “section 6, ITAA 1936” earnings produced from the private effort involves
wages, salaries, allowances, bonuses etc. that is earned by a person as an employee from his
establishment is treated as an ordinary earnings under “section 6-5, ITAA 1997”21.Similarly,
20 Burns, Andrew. "Mid market focus: Tax considerations when doing business
offshore." Taxation in Australia 51.10 (2017): 535.
21 Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy
in Australia." St Mark's Review235 (2016): 94.

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the sum of $500 which is received by the wage earner from employer is treated as income
from private exertion and hence it will chargeable under the sense of “section 6-5, ITAA
1997”.
Answer to D:
Answer to E:

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References:
Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.
Brownlee, W. Elliot. Federal Taxation in Australia. Cambridge University Press, 2016.
Buenker, John D. The Income Tax and the Progressive Era. Routledge, 2018.
Burns, Andrew. "Mid market focus: Tax considerations when doing business
offshore." Taxation in Australia 51.10 (2017): 535.
Campbell, Sam. "Personal liability of a trustee to tax on trust income: Part 1." Taxation in
Australia 53.5 (2018): 263.
Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not
knowing your deduction from your offset." Austl. Tax F. 31 (2016): 321.
Chirelstein, Marvin A., and Lawrence Zelenak. Federal income taxation. West Academic,
2018.
Dagum, Camilo. "Income distribution models." Wiley StatsRef: Statistics Reference
Online (2014).
Goldin, Jacob. "Optimal tax salience." Journal of Public Economics 131 (2015): 115-123.
Ingles, David. "Should capital income be taxed? And if so, how?." And If So, How (2015).
Keightley, Mark P., and Molly F. Sherlock. "The Corporate Income Tax System: Overview
and Options for Reform." (2014).
Kenny, Paul. "Small business capital allowances." (2018).
Kennya, Paul. "Small business capital gains tax concessions: The case for reform." (2016).

16TAXATION LAW
Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.
Pogge, Thomas, and Krishen Mehta, eds. Global tax fairness. Oxford University Press, 2016.
Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’
view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.
Sadiq, Kerrie, and Stephen Marsden. "The small business CGT concessions: Evidence from
the perspective of the tax practitioner." Revenue Law Journal 24.1 (2015): 6743.
Thuronyi, Victor, and Kim Brooks. Comparative tax law. Kluwer Law International BV,
2016.
Triplett, Charles S. "Transfer Pricing." (2014).
Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).