Taxation Question Answer 2022

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

TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................5
Answer to question 4:.................................................................................................................7
References:.................................................................................................................................9

TAXATION LAW2
Answer to question 1:
Income that a taxpayer has earned from individual exertion under “sec 6 (1), ITA Act
1936” denotes the amount that is dependent on the quality in the hands of receiver and not
the character of expenses by the other person. As held “McNeil v FCT (2007)” if the
payment has the satisfactory relation with the income producing activity of the receiver it will
be held taxable for the receiver1. While “sec 6-5 (1)” explains that a person’s taxable earnings
comprises of the income on the basis of the ordinary conceptions. This includes the
individual exertion income, business income, earnings from deriving scheme and income
earned from property2.
1 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business Taxation
2 McNeil v Federal Commissioner of Taxation (2007)

TAXATION LAW3
The salary received by piper from part-time employment in BU is a personal exertion
income under “sec 6 (1), ITA Act 1936”. Denoting “McNeil v FCT (2007)” the salary will
be chargeable as ordinary earnings within “sec 6-5 (1)”.
Payment that a taxpayer has receive from previous employer or service providers is
not usually treated having income nature when it is given out of personal relationship
between the receiver and the payee3. In “Scott v FCT (1966)” gift of shares given to
accountant by the previous employer was not an assessable income. The Woolworths gift
voucher received for free advice does not amounts to assessable income for piper4. Referring
to “Scott v FCT (1966)” the gift voucher does not has any commercial relation and therefore
non-taxable under “sec 6-5, ITAA 97”.
Usually no deduction is allowed for entertainment expenses under “sec 32-10, ITAA
1997” that involves food, drink or recreation5. The expense of $360 reported by Piper on soft
drink and meal is an entertainment expenses and not deductible under “sec 32-10, ITAA
1997”. Expenses on ordinary article of clothes is termed as personal expenses and non-
deductible under “sec.8-1, ITAA 1997”. The decision in “FCT v Mansfield (1996)” noted
that outgoings on ordinary clothing items is denied deductibility irrespective of whether it is
important in a particular job or profession6. Piper will be denied deduction under “sec.8-1,
ITAA 1997” for spending $5000 on clothes for maintaining a professional job appearance as
it is not related to production of income.
Receipts derived from any business activity is characterised as ordinary business
income under “sec 6-5, ITAA 1997”. Whereas receipts from non-business acts such as from
hobby or recreational activities is a non-taxable income. Regular indicators of business
includes nature of activity and the degree of capital or level of turnover. In “JR Walker v
FCT (1985)” small activities may hold the nature of business if there is any adequate
character7. During the year Piper made income from occasional cooking of meal to her
neighbours. She received around $25 per meal and there were four different occasions where
3 Kenny, Paul, Michael Blissenden and Sylvia Villios, Australian Tax 2018
4 Scott v Federal Commissioner of Taxation (1966)
5 Krever, Richard E, Australian Taxation Law Cases 2015 (Thomson Reuters, 2015)
6 Federal Commissioner of Taxation v Mansfield (1996)