Course of Taxation Law 2022

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

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Table of Contents
Answer to question 1:.................................................................................................................2
Requirement A:......................................................................................................................2
Requirement B:......................................................................................................................2
Requirement C:......................................................................................................................2
Requirement D:......................................................................................................................3
Requirement E:.......................................................................................................................3
Requirement F:.......................................................................................................................3
Requirement G:..........................................................................................................................3
Requirement H:......................................................................................................................4
Requirement I:........................................................................................................................4
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................7
Answer to question 4:...............................................................................................................11
Answer to A:........................................................................................................................11
Answer to B:........................................................................................................................11
Answer to C:........................................................................................................................11
Answer to D:........................................................................................................................12
Answer to question 5:...............................................................................................................13
Answer A:............................................................................................................................13
Answer B:.............................................................................................................................13

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Answer to C:........................................................................................................................14
Answer to D:........................................................................................................................14
Answer to E:.........................................................................................................................15
References:...............................................................................................................................16

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Answer to question 1:
Requirement A:
The “Taxation Ruling of TR 2019/1” lay down the commissioner views on when the
company conducts its business inside the connotation of small business entity under the “sec-
25, ITRA 1986” as applied in 2015-16 and 2016-17 years of income and “sec-328-110,
ITAA 1997”1.
Requirement B:
Explanations relating to the deductions of gifts or contributions has been explained
under the “Division 30, ITAA 1997”2.
Requirement C:
The highest amount of tax rate which is applied on the resident income taxpayer in the
present tax year stands 45% for 2019-20.
Taxable Income Tax on Taxable Income
From $0 to $18,200 $0
From $18,201 to $37,000 19c for each $1 beyond $18,200
From $37,001 to $90,000 $3,572 + 32.5c for each beyond $1 over
37,000
From $90,001 to $180,000 $20,797 + 37c for each $1 beyond $90,000
From $180,001 and over $54,097 + 45c for each $1 beyond $180,000
1 Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in Australia." St Mark's
Review235 (2016): 94.
2 O’Connell, Ann. "Australia." Capital Gains Taxation. Edward Elgar Publishing, 2017.

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Requirement D:
No, motorcycle or car is not viewed as the exempted CGT asset, rather with respect to
legislative provision of “Sec-108-20, ITAA 1997” it is held as the private usage asset3.
Requirement E:
Loss or destruction of the CGT asset is explained under the CGT event C1. “Sec-104-
20, ITAA 1997” explains that the CGT event C1 occurs if the taxpayer that owns the asset is
destroyed or lost4. The time of event occurs when the taxpayer first receives the
compensation relating to the destruction or loss and if the taxpayer does not receive any
compensation when the loss is discovered or the destruction happened.
Requirement F:
For the Australian resident the present tax free threshold limit stands $18,200 for 2019-20.
Requirement G:
Considering the decision made in “Hayes v FCT (1956)” where the accountant had
got a substantial gift in the form of shares in the public company from the previous employer
who established the company5. The accountant rendered on a causal basis to the previous
employer unpaid advice and provided small unpaid services. A genuine friendship existed
among the taxpayer and his employer’s families. The court of law in its judgement held that
the gift cannot be treated as income because it was not associated any kind of revenue
3 Datt, Kalmen H., and Mark Keating. "The Commissioner’s obligation to make compensating adjustments for income
tax and GST in Australia and New Zealand." Australian Tax Forum. Vol. 33. No. 3. 2018.
4 Campbell, Sam. "Personal liability of a trustee to tax on trust income: Part 1." Taxation in Australia 53.5 (2018): 263.
5 Jones, Daryl. "Tax and accounting income-Worlds apart?." Taxation in Australia 52.1 (2017): 14.

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producing activity and the personal relationship among them constituted the event of gift.
Even though the donor might intend of making gift their motive is hardly decisive.
Requirement H:
Ordinary income and statutory income differences are as follows;
Ordinary Income Statutory Income
 Ordinary Income is generally treated
as the income apart from the long-
term capital gains6.
 Ordinary Income usually comprises
of the wages, salaries, compensation,
or net earnings derived from the sole
proprietorship, partnership or LLC.
 Statutory Income represents those
incomes that are not treated as the
ordinary income and the taxpayers
include the same in the assessable
income due to the specific rule of the
taxation law.
 The examples of statutory income
include the net capital gains.
Requirement I:
Medicare Levy and Medicare Levy Surcharge differences are explained below;
Medicare Levy Medicare Levy Surcharge
a. The Medicare Levy helps in
sustaining the public health care
system.
b. The Medicare levy is imposed at a
a. Medicare Levy Surcharge is extra
tax which is applied on the higher
income earners that does not has the
hospital cover7.
6 Jones, Daryl. "Mid market focus: Income or capital?: Taxpayer draws a blank." Taxation in Australia 51.7 (2017):
357.

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rate of 2% of an individual taxable
income and mainly comes from
large number of taxpayers.
c. Majority of the Australians pay the
Medicare Levy irrespective of
whether they have the private health
insurance policy.
b. The Medicare Levy Surcharge
ranges from 1% to 1.5% of their
assessable income depending on the
income.
c. Medicare Levy Surcharge assists in
funding the Medicare services
however it lowers the load on the
public system by promoting people
to take the private health insurance.
Answer to question 2:
The expression “usual place of abode” should not be viewed as having similar
meaning as the term “permanent place of abode”. The expression usual and abode should be
understood on the basis of their normal expressions8. The questions relating to “usual place
of abode” is reliant on the matter of fact. Generally, this expression is treated as the
customary abode or it is commonly used when an individual is generally present in that state.
A person must have the fixed place of abode however they must exhibit the qualities of
residence to live on contrary to an overnight stay, weekly or periodic housing of a traveller. It
means a fixed relation with the assured places of residence rather than those where an
individual has usually been inhabitant or those that has their “usual place of abode” in
Australia.
7 Krever, Richard, and Kerrie Sadiq. "Non-residents and capital gains tax in Australia." Canadian Tax Journal/Revue
fiscale canadienne 67.1 (2019).
8 Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not knowing your deduction from
your offset." Austl. Tax F. 31 (2016): 321.

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If a person having the “usual place of abode” in Australia and do not have any kind
of fixed or usual place of abode in the foreign country but moves from one country to another
or continuously shifts inside the nation or has any kind of relation with the certain place in
overseas, then it would be viewed as transitory or temporary in nature9. A person would be
treated as having adopted another residence of their choice or “permanent place of abode”
outside Australia.
Meanwhile, the expression “permanent place of abode” signifies that a person has
their home in Australia. Denoting “subparagraph (a)(i)” the description of “resident”
requires the taxation office to be satisfied that an individual’s “permanent place of abode” is
not outside Australia10. The expression “place of abode” signifies that the taxpayer has a
home where he or she lives with their family and sleeps at night. The judgement made in
“Levene v IRC (1928)” denoted that a taxpayer’s “place of abode” constitutes an
individual’s residence or the physical environment where he or she lives.
The judgement made in “FCT v Applegate (1979)” stated that the taxpayer had the
residence in Australia, went to New Hebrides in Villa to set up an office for his company11.
The federal court in its verdict held that the permanent place of abode of taxpayer was out of
Australia and was considered as the non-resident of Australia in the relevant income year. In
9 Evans, Chris, John Minas, and Youngdeok Lim. "Taxing personal capital gains in Australia: An alternative way
forward." Austl. Tax F. 30 (2015): 735.
10 Minas, John, Youngdeok Lim, and Chris Evans. "The impact of tax rate changes on capital gains realisations:
evidence from Australia." Australian Tax Forum. Vol. 33. No. 4. 2018.
11 Brydges, Neil, and Kelvin Yuen. "A matter of trusts: Trusts, income tax, CGT and foreign residents." Taxation in
Australia53.2 (2018): 80.

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another example of “FCT v Jenkins (1982)” the taxpayer was the bank officer who related to
New Hebrides for a period of three years and eventually came back only after 18 months
because of the poor-health12. The decision made by Queensland supreme court stated that the
“permanent place of abode” of the taxpayer was out of Australia all through the period of his
overseas stay despite the fact he did not at any material time developed an intention of
remaining for indefinitely in New Hebrides. The cases of “Applegate” and “Jenkins” stated
that a taxpayer’s “permanent place of abode” could not be ascertained by imposing any
immediate rules.
The aforementioned discussion explains that a person should not be satisfied if their
“usual place of abode” is outside Australia. Meanwhile the first statutory test needs an
individual to remain satisfied if their “permanent place of abode” is out of Australia13.
Answer to question 3:
HECS-HELP: $850:
The ATO states that it is permissible for a taxpayer to get deduction relating to
specific expenses linked to self-education given the education undertaken is appropriate in
deriving assessable earnings. An income deduction relating to self-education expenditure is
allowed for deduction if the expenses are undertaken in upgrading qualification for current
employment14. However, the ATO states that it does not provide deduction for expenses paid
12 Evans, Chris, John Minas, and Youngdeok Lim. "Taxing personal capital gains in Australia: An alternative way
forward." Austl. Tax F. 30 (2015): 735.
13 Feld, Lars P., et al. "Taxing away M&A: The effect of corporate capital gains taxes on acquisition activity." (2016).
14 Jacob, Martin. "Tax regimes and capital gains realizations." European Accounting Review 27.1 (2018): 1-21.

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under the HECS-HELP. Hence, the expenditure of $850 occurred in relation to HECS-HELP
is non-permissible deduction for the taxpayer.
Travel – work to university $110:
According to the ATO, for work-related self-education, an individual tax payer is
allowed to claim deduction for the cost of travel where the course requires to be away from
home on temporary basis for one or more nights. A taxpayer can also claim deduction for the
cost incurred in daily travel from their work to the place of education and back. The travel
expenses incurred from work to university is a permissible deduction under the legislative
provision of “section 8-1, ITAA 1997”.
Books $200:
A taxpayer is permitted to obtain deduction for self-education expenses where it is
incurred in upholding or increasing the taxpayer’s skills that are employed in their present
profession or where the outgoings are occurred by taxpayers with the view of improving
income. The decision made in “FCT v Finn (1961)” allowed an architect to obtain income
tax deduction for overseas travelling expenses incurred in studying architecture because the
outgoings were occurred for career growth and greater pay15. Similarly, outgoings occurred
by accountant for books here is an allowable deduction under the provision of “section 8-1,
ITAA 1997” because the expenses were occurred in enhancing the future revenue producing
prospects.
Childcare during her evening classes $80:
Outgoings that are occurred for “domestic or private” purpose may not be allowed for
income tax deduction because it fails to meet the positive limbs and it is non-deductible under
15 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).

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the second negative limb of “section 8-1 (2)(b), ITAA 1997”. The law court in “Lodge v
FCT (1972)” stated that no deduction was allowed for child care expenses occurred by clerk
to have her child minded while she was at work. The expenses were neither relevant nor
incidental in the derivation of assessable earnings.
The child care expenses of $80 incurred for attending the evening classes is non-
deductible under “section 8-1 (2)(b), ITAA 1997” because the expenses is not relevant in
earning taxable earnings.
Repair to fridge at home $250:
As per the “section 8-1 (2)(b), ITAA 1997” no deduction is permitted for private or
domestic expenses. The judgement made in “FCT v Fullerton (1991)” outgoings occurred
by taxpayers in relocating his household to new house in another city because of shift in job
was not permitted for deduction since the expenses were related to family or domestic
arrangement16. The outgoings in the form of repairs to fridge at home for a sum of $250 is a
private or domestic outgoings and it is non-deductible under “section 8-1 (2)(b), ITAA
1997”.
Black trousers and shirt required to be worn at office $145:
As per the “section 8-1, ITAA 1997” cost incurred in purchasing the ordinary articles
of apparel will not be permitted as deduction. The judgement of court in “Mansfield v FCT
(1996)” noted that outgoings incurred on the ordinary clothing is non-deductible
notwithstanding of the fact that the outgoings were incurred in maintaining an appropriate
appearance at a work place. Similarly an expense of $145 occurred for black trousers and
16 Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).

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shirt to wear at office is non-permissible deduction “section 8-1, ITAA 1997” since it forms
an ordinary item of apparel.
Legal expenses for writing up a new employment with a new employer $300:
Outgoings that are preliminary in the revenue generating activities are not viewed as
incurred at the time of generating taxable earnings. Such outlays are not allowed for general
deduction under “section 8-1, ITAA 1997”. The federal court in “Maddalena v FCT (1971)”
stated that expenses incurred in getting new employment was not in the course of generating
assessable income17. Likewise, legal outgoings incurred in writing up new employment to the
new employer is not allowed for general deduction under the “section 8-1, ITAA 1997”
because the expenses occurred at a point too soon.
Answer to question 4:
Answer to A:
A CGT event F1 comes into the existence where an individual has been granted with
a lease or if they extend or renews the lease which was previously owned by the taxpayer.
The taxpayers should denote that no deduction is permitted to the taxpayers when CGT event
F1 happens18. When a lease for seven years was granted by John to David at a premium of
$7,000 a CGT event F1 occurred. Nevertheless, John would not be able to claim any kind of
CGT discount in this situation.
17 Sadiq, Kerrie. Australian Taxation Law Cases 2019. Thomson Reuters, 2019.
18 Butler, Daniel. "Who can provide taxation advice?." Taxation in Australia 53.7 (2019): 381.

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Answer to B:
Answer to C:
As explained by ATO the main residence of the taxpayers does not attracts any kind
of capital gains tax liability. However, the taxpayers are not provided with full exemption
from their main residence if any portion of the property has been used by taxpayers for
producing income or carrying any business activities19. This usually covers portion of floor
area in a house that is set apart for producing business income and timespan till the house has
been used for generating earnings. The case study provides that Li used 20% of her house
floor area to run a physiotherapy business. The taxable portion of capital gain is computed
below;
Capital gain x Percentage of floor area = Assessable portion
= $700,000 – $400,000 = $300,000 (net capital gain)
= 300,000 x 20% = $60,000
19 Murray, Ian, et al. "Understanding Taxation Law 2019." (2018).

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As understood that house has been under Li’s ownership for greater than 12 months,
therefore, she can access the CGT discount method for calculating her capital gains.
Furthermore, the general rule of “home first used to produce income” is also met by Li since
the business activity commenced from the date Li bought the house.
Answer to D:
When the CGT event occurs to a CGT asset and no capital gain has been made by the
taxpayer, then the taxpayers requires the reduced cost base of the asset to determine whether
they have made any capital loss. It is worth mentioning that the taxpayers can use the capital
loss to reduce the capital gains only and they are not permitted to use it for lowering other
income20.
Cost base on the other represents the cost of the asset that is purchased along with the
other costs related with the purchase, holding and sale of asset. The cost base of the asset
generally made of five elements which includes the amount paid to purchase the asset,
incidental cost of purchasing the asset, cost of ownership of the asset, capital cost incurred in
preserving the assets value and capital cost occurred in defending the title of the CGT asset.
Answer to question 5:
Answer A:
As defined in “section 6-5, ITAA 1997” an item holding the character of income is
derived when the item comes home to the taxpayer. The presence of any immorality,
illegality or any form of other factors does not prevent its derivation21. Evidently, in the
20 Morgan, Annette, Colleen Mortimer, and Dale Pinto. A practical introduction to Australian taxation law 2018.
Oxford University Press, 2018.
21 Morgan, Annette, and Donovan Castelyn. "Taxation Education in Secondary Schools." J. Australasian Tax Tchrs.
Ass'n 13 (2018): 307.

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present situation, income derived from the illegal means would be treated as taxable earnings
since the income has been derived.
Answer B:
Bank interest of $500 earned by taxpayer constitute an income stream or periodic
receipt that is treated as assessable income based on ordinary meaning of “section 6-5, ITAA
1997”. Meanwhile, the receipt of rent from the property is viewed as income and forms the
part of assessable based on ordinary conception of “section 6-5, ITAA 1997”. It is worth
mentioning that simple windfall gain do not have the income character. Evidently, winning
amount of $10,000 from the crown casino constitute a windfall gain and therefore it is non-
taxable.
Answer to C:
Income from personal exertion under “section 6, ITAA 1936” denotes receipts of
salaries, allowances, wages, gratuities, etc. received by working as an employee in relation to
employment will be treated as income under the ordinary denotation of “section 6-5, ITAA
1997”22. Likewise, the receipt of $500 by an employee amounts to income from personal
exertion and it is taxable under “section 6-5, ITAA 1997”.
22 Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing, 2016.

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Answer to D:
Answer to E:

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References:
Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).
Brydges, Neil, and Kelvin Yuen. "A matter of trusts: Trusts, income tax, CGT and foreign
residents." Taxation in Australia53.2 (2018): 80.
Butler, Daniel. "Who can provide taxation advice?." Taxation in Australia 53.7 (2019): 381.
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.
Datt, Kalmen H., and Mark Keating. "The Commissioner’s obligation to make compensating
adjustments for income tax and GST in Australia and New Zealand." Australian Tax Forum.
Vol. 33. No. 3. 2018.
Evans, Chris, John Minas, and Youngdeok Lim. "Taxing personal capital gains in Australia:
An alternative way forward." Austl. Tax F. 30 (2015): 735.
Evans, Chris, John Minas, and Youngdeok Lim. "Taxing personal capital gains in Australia:
An alternative way forward." Austl. Tax F. 30 (2015): 735.
Feld, Lars P., et al. "Taxing away M&A: The effect of corporate capital gains taxes on
acquisition activity." (2016).
Jacob, Martin. "Tax regimes and capital gains realizations." European Accounting
Review 27.1 (2018): 1-21.
Jones, Daryl. "Mid market focus: Income or capital?: Taxpayer draws a blank." Taxation in
Australia 51.7 (2017): 357.

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Jones, Daryl. "Tax and accounting income-Worlds apart?." Taxation in Australia 52.1
(2017): 14.
Krever, Richard, and Kerrie Sadiq. "Non-residents and capital gains tax in
Australia." Canadian Tax Journal/Revue fiscale canadienne 67.1 (2019).
Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.
Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury
Publishing, 2016.
Minas, John, Youngdeok Lim, and Chris Evans. "The impact of tax rate changes on capital
gains realisations: evidence from Australia." Australian Tax Forum. Vol. 33. No. 4. 2018.
Morgan, Annette, and Donovan Castelyn. "Taxation Education in Secondary Schools." J.
Australasian Tax Tchrs. Ass'n 13 (2018): 307.
Morgan, Annette, Colleen Mortimer, and Dale Pinto. A practical introduction to Australian
taxation law 2018. Oxford University Press, 2018.
Murray, Ian, et al. "Understanding Taxation Law 2019." (2018).
O’Connell, Ann. "Australia." Capital Gains Taxation. Edward Elgar Publishing, 2017.
Sadiq, Kerrie. Australian Taxation Law Cases 2019. Thomson Reuters, 2019.
Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).

18TAXATION LAW