Concept of Income from Exertion
Added on 2021-05-30
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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
TAXATION LAW2Table of ContentsTopic: With the introduction of Personal Service Income Regime, is the concept of “incomefrom exertion” now redundant?.................................................................................................3Introduction:...............................................................................................................................3Operation of the New Personal Service Income:.......................................................................4Personal Services Income:.........................................................................................................4Guidance of Commissioner in personal service income:...........................................................5Recognizing other contributions to the income:........................................................................6Post application review:.............................................................................................................7Recognizing other contributions to the income:........................................................................9Conclusion:..............................................................................................................................11Reference List:.........................................................................................................................12
TAXATION LAW3Topic: With the introduction of Personal Service Income Regime, is the concept of“income from exertion” now redundant?Introduction: In Australia, the regime relating to the tax of personal service income has agonizedfrom being difficult, non-clear and undefined which ultimately results in inadequatecompliance with the rules. Personal service income can be defined as the reward for theresults of an individual personal efforts (Travers 2014). Before the introduction of thepersonal service income regime the system of taxation was effected by several inequalities. Itwas very much possible for an individual taxpayer to lower their liability of taxation byisolating their personal service income to the related companies or the lawful entity and byclaiming incorrect deductions. According to the review it was important opinion that theincome generated from the personal exertion of a person cannot be withdrawn. Before introducing the rule of personal service income the main concern thatoriginated from the use of interposed entity namely the company, partnership or the trust togenerate the personal service income. This comprised of the capability of the taxpayer indeducting the wide range of deductions (Aldridge et al. 2015). The major concerns alsoincluded the ability of taxpayer in using the entity as the interposed entity in order to cap offthe rate of taxation and defer the generation of income by the company till the time when theassociated individuals have reduced taxation rate. Such attributes bought forward theconcerns that there is a need to reduce the significant amount of attack that is made on theincome base. The capability of the taxpayers in alienating the earnings reflected the necessityof removing the aspects of the horizontal inequality in the taxation system.
TAXATION LAW4Operation of the New Personal Service Income: According to the legislation of the personal service income it evidently makes it clearthat an individual that falls inside the personal service income rules shall be restricted todeductions that are available to a person (Frey and Osborne 2017). Concerning the alienationof earnings the explanatory memorandum states that beside the current general anti-avoidance rules of “Part IVA of the ITAA 1936” there is no form of particular rules thatwould address the adverse revenue implications that may happen upon the occurrence ofalienation. In the explanation memorandum provided by the court of law the anti-alienationmeasures of the new rules where the personal service income is credited to the person that aregenerating income would be able to cut down the need of applying the part IVA. According to Becker, Reimer and Rust (2015) this appears to suggest that the newpersonal service income measures are adequately considered as the comprehensive tocontract the alienation of the earnings and the dependence on the part IV would besignificantly lowered with the introduction of the personal service income rules. Animportant consideration of the statement is that personal service income where not applicablethen Part IV A can be considered. Personal Services Income: To fall inside the “Part 2-42 of the ITAA 1997”, personal service income should bederived. According to the definition provided under the section 84-5 it defines the personalservice income as the income which is gained largely as the reward for the personal efforts orthe skills that are employed by an individual. Income that is generated by the company fromthe skills or private efforts of a person would be classified as the personal service income. Inrespect of this definition the income that is ancillary to an organization supply goods orproviding the right of using the property or income that is largely generated by the asset thatis held by the entity is not classified as the personal service income (Johnson et al. 2015).
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