Small Scale Business Entity And Taxation Law

Running head: TAXATION LAW
TAXATION LAW
Name of the Student:
Name of the University:
Author Note:

TAXATION LAW1
ANSWER 1:
a) Under the Taxation Ruling TR 2019/11 the topic that has been provided is the situation
and time when the company will be carrying out a business like a small scale business
entity provided under section 23 in the Income Tax Rates Act2.
b) Division 303 laid in the Income Tax Assessment Act provides the legislation that is
concerned with the deductions of any contribution or gift.
c) The top rate of taxation that is levied on an individual being a residential taxpayer for the
taxation year 2019-20204 is 54097 $ subject to an additional 45 % of any amount that will
be in excess of 180 000 $.
d) A perusal of section 118.5 contained in Income Tax Assessment Act5 reveals that both car
and motorcycle are exempted from capital gains tax.
e) If an asset which was previously owned by an individual taxpayer was damaged, lost or
destroyed then such asset will be dealt in as per section 104.20 contained in ITAA6 CGA
event-C1. However such must be of capital nature.
f) The present threshold free from taxation in case of any resident individual for his
assessable income amounts to an income incurred by him provided such income is less
than 18200 dollars.
g) The High Court while deciding the case of Hayes v FCT 7 involving assessable income
held that an amount received by a tax payer for any services rendered by him in the past
1 TR 2019/1.
2 Income Tax Rates Act 1986 s 23.
3 Income Tax Assessment Act 1997 Div 30.
4 www.ato.gov.au, "Individual Income Tax Rates", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/Rates/Individual-income-tax-rates/>.
5 Income Tax Assessment Act 1997 s118.5.
6 Ibid s 104.20.
7 Hayes v FCT (1956) 96 CLR 47.

TAXATION LAW2
will be considered to be CGT gain. Further, in this regard it can be stated that any sum of
money received being an employee from his employer against the service rendered by
him to such employer will be regarded as the capital gain of the employee’s assessable
income. Every income received by applying personal exertion is to be considered as the
ordinary income pertaining to such individual but the receipt from a previous employer
which has already accrued but not given to employee will amount to capital asset as the
same will be received by the employee as a huge sum of money subsequently from the
accrual of it.
h) The differences between the ordinary income with the statutory income are to be
discussed here. A tax payer in his individual capacity usually can earn two kinds of
income as per the classification of the taxable income given under the provisions of the
taxation law. These two types are called the ordinary and statutory incomes. Ordinary
income denotes the incomes that are earned by such taxpayer from any type of source in a
financial year. The ordinary income includes one’s salary as an employee or any kind of
payment earned against any personal services provided. On the other hand, any income
other than statutory income amounts to a statutory income which is incorporated under
the assessable income as per the rules of law. Examples of Statutory income are
dividends, CGT gains, redundancy payments as well as allowances. In order to assess the
ordinary income, no strict rule is to be followed but this is not true for statutory income
which can be subjected to taxation when it is backed up by any statutory provision. There
is no need of any express mention in any tax related statute for considering an ordinary
income as the assessable income but statutory mention is compulsory for a statutory
income to be considered as the assessable income8.
8 Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.

TAXATION LAW3
i) The differences between the Medicare levy and the Medicare levy surcharge are
discussed here in this answer. Some of the tax payers are required to pay extra taxes on
the payable income tax. Such extra taxes are called as the Medicare levy and the
Medicare levy surcharge. These two Medicare levy and the Medicare levy surcharge
implies two extra taxation rates applicable to the tax payers. These two Medicare levy
and the Medicare levy surcharge are imposed as per the provisions enumerated in the
Medicare Levy Act9 and the ITAA10. The Medicare levy surcharge was introduced with the
aim of encouraging the taxpayers of earning high income to pay for insurance health
thereby diminishing the Medicare burden to some extent. The Medicare Levy Surcharge
is applied to the tax payers devoid of any private type of health insurance. The Medicare
Levy can be imposed on both total income as well as Fringe Benefits of the tax payer.
The rates of Medicare levy and Medicare levy surcharge usually vary between 1 percent,
1.25 percent and 1.5 percent11.
Answer 2:
In order to assess the residency requirement if an individual taxpayer, three types of tests
are used that are laid down in section 6.1 contained in the Income Tax Assessment Act 12. These
are the domicile test, residing test and the super admission test. Beside these, the 183 days test is
also used to assess the individual’s taxability either living or connected to Australia. In these
tests, mainly two types of concepts or principles prevail in the said section. The concerned
principles are called as the ‘permanent place of abode’ and the ‘usual place of abode’. Although
9 Medicare Levy Act 1986.
10 Income Tax Assessment Act (Cth) 1936.
11 Krassnitze, L., & Willis, E. (2016). The public health sector and medicare. Understanding the Australian health
care system, 3.
12 Income Tax Assessment Act (Cth) 1936 s 6.1.