Taxation Law - Income and Expense Information| Case

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Income and Expense Information:.............................................................................................2
Part A: Income from Employment:............................................................................................2
Part B: Income from business:...................................................................................................4
Part C: Income from Rental Property:.......................................................................................7
Dependent tax Offset:................................................................................................................9
References:...............................................................................................................................11

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Income and Expense Information:
As per “sec 6-5 ITAA 1997” the ordinary income is an income that is in agreement
with the ordinary concepts. Interest is held as ordinary income and included in taxable
income. Eric has a joint term deposit account with his wife Linda in ANZ bank and earns an
income of $500 (Burman et al., 2016). The interest is an ordinary income under “sec 6-5
ITAA 1997” and included in taxable income of Eric.
Specific deduction is given in “sec 25-5 ITAA 1997” for outgoings incurred in
managing tax affairs. Eric has paid $400 to a tax agent for preparing his tax return. Therefore
it is allowable specific deduction under “sec 25-5 ITAA 1997”.
Part A: Income from Employment:
When a taxpayer gets a receipt from the employment and from delivering any sort of
personal services then it may be considered as the subject of tax for the employee or may be
held as fringe benefit tax for the employer. The receipt should be having nexus with the
personal service to constitute ordinary income. The example of “Dean v FCT (1997)” says
that retention payment given to employee for being employed was held as income in nature
(LeFevre, 2016). Similarly, Eric has received $7,800 as gross wages by working as employee
for Blue Merlin. The gross wages is a personal service income. Noting “Dean v FCT (1997)”
is a subject of tax for Eric and it is included for assessment as ordinary income under “sec 6-5
ITA Act 97”.
Employees generally faces problem in understanding as what constitute allowance or
reimbursement. Allowances are salary and wages and it is simply excluded from being
considered as fringe benefit. It is treated taxable in the employees hand under the statutory
provision of “sec 15-2 ITAA 1997”. On the other hand, reimbursement is not a wages or
salary. The finding of court in Roads and Traffic Authority of “NSW v FCT (1993)” says

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that a reimbursement is payment given for the actual outgoings that is occurred
(Braunerhjelm & Eklund, 2014).
Eric has got a shift allowance of $2,000. Within the provision of under the statutory
provision of “sec 15-2 ITAA 1997” the amount is treated taxable in the Eric’s hand. Whereas
the reimbursement of $800 is not a taxable salary or wage income for Eric. Noting “NSW v
FCT (1993)” reimbursement is payment given to Eric for the actual outgoings that is
occurred.
Under the “sec 7 (1) FBTAA 1986” when the employee is given a car for their private
usage by employee then it is a car fringe benefit. Similarly, a car is received by Eric during
the year by his employer (Arnold et al., 2019). The car is used for private purpose of Eric and
constitute a non-assessable fringe benefit under “sec 7 (1) FBTAA 1986”. The employer of
Eric is required to pay FBT since the benefit was given to Eric in relation to his direct
employer with the employment.
The provision of “sec 8-1 ITAA 1997” is applied on all the taxpayers for the loss or
expenditures occurred in deriving the chargeable earnings. Eric has work related deduction
amounting to $300 for work purpose. The expenses are allowable as deduction under the
general provision of “sec 8-1 ITAA 1997”.