Taxation | Assignment | New

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

1TAXATION
1)
Issue
Which of the income are required to be included within the tax return pertaining to Anna for the
year ending on 30th June 2019. Whether any of the expenses incurred by Anna is allowable as deduction
in the same year.
Rule
Any receipt received by a taxpayer, which can be treated as an income even in the absence of any
statutory provision recognising the same as income would be rendered as ordinary income as provided in
ITAA97, s 6-5.
As per the legal principles enumerated in the decision of Dean & Anor v FC of T 97 ATC 4762,
income accrued from personal exertion would be required to be treated as an ordinary income and any e
receipt incurred as a remuneration for employment would be included in the same.
PAYG withheld are required to be adjusted with the net tax liability and needs to be treated as a
credit for the taxpayer as provided in ITAA97, s 18-15.
Interest from bank is required to be treated as and ordinary income as for the legal principle
enumerated in Riches v Westminster Bank Ltd [1947] AC 390.
Amount received by way of dividend is required to be included in the taxable income in case of
resident individuals as provided in ITAA36, s 44.
Income from exploitation of land is required to be treated as an ordinary taxable income as per
the legal rule established in the case of Adelaide Fruit and Produce Exchange Co Ltd v DFC of T (1932)
2 ATD 1.

2TAXATION
Expense that are accrued to a person by virtue of his income earning process or is a consequence
of the same would be allowed as a deduction as per ITAA97, s 8.1
Any expense that has been incurred for a public or private purpose would not be allowed as a
deduction. This can be supported with the case of Lodge v Federal Commissioner of Taxation [1972]
HCA 49.
Travelling from work to other place relating to work is required to be treated as an deductible
expense as per the case of Taylor v Provan [1975] AC 194. Travel from home to work is not deductible in
its general senses, but the same is to be treated as deductible in special circumstances where there is an
on-call duty as per the case of FC of T v Collings 76 ATC 4254.
Expense for a suit or any other items of conventional nature are not to be included allowed as a
deduction under ITAA97, s 8.1. This can further be supported with the case of Mansfield v FC of T 96
ATC 4001.
Depreciation of an asset using the Prime Cost Method = Cost x (Days held / 365) x (100% /
Effective life in years)
Expenses incurred for home office will not be allowed as a deduction under ITAA97, s 8.1 as can
be supported by the case of Handley v FC of T 81 ATC 4165.
Application
Receipts
Wages (income from personal exertion, ordinary income). $160,000
As any receipt received by a taxpayer, which can be treated as an income even in the absence of
any statutory provision recognising the same as income would be rendered as ordinary income as
provided in ITAA97, s 6-5. As per the legal principles enumerated in the decision of Dean & Anor v FC

3TAXATION
of T 97 ATC 4762, income accrued from personal exertion would be required to be treated as an ordinary
income and any e receipt incurred as a remuneration for employment would be included in the same.
PAYG withheld amounting to $47,000 are required to be adjusted with the net tax liability and
needs to be treated as a credit for Anna. This is because PAYG withheld are required to be adjusted with
the net tax liability and needs to be treated as a credit for the taxpayer as provided in ITAA97, s 18-15.
Interest from Bank (50% needs to be taken as it is a joint account with Alan) resulting to $1,400.
This is because Interest from bank is required to be treated as and ordinary income as for the legal
principle enumerated in Riches v Westminster Bank Ltd [1947] AC 390.
Franked dividend from QBE Insurance:
Taxable amount = 4200 * (30/70)
= $ 1800
Dividend from AMP
Franked = 1400 * (30/70)
= $ 600
Unfranked = 700
This is because Amount received by way of dividend is required to be included in the taxable
income in case of resident individuals as provided in ITAA36, s 44.
Fees from overseas client received during holidays (taxable) = $ 3500
Fees for advising a neighbor (taxable) = $ 500
Price for writing the article to local newspaper (taxable) = $ 5,000

4TAXATION
Expenses
Cost of Anna’s ticket = not deductible
Accommodation and incidentals were paid off by cash received from client in Hong Kong 3,500
= not deductible.
Travel between home and office for week-end work 150 = deductible
Travel to Client Meeting at Client’s office (not reimbursed by employer) 75 = deductible
Heavy Jacket to be worn for client meetings only, during winter 1,200 = not deductible
Home Laundry of her Logo shirt mixed with other clothes twice a week 50 weeks = not
deductible
Dry Cleaning of Suites 1,650 being a Solicitor, it is compulsory for Anna to wear suit to office
every day = not deductible.
Laptop bought (100% work related) on 1/7/2018 4,500 = deductible
Depreciated over 2 years Using (Straight line method) = deductible
Amount to be deducted = Cost x (Days held / 365) x (100% / Effective life in years) =
4500*1*100%/4 = $1125
Repairs to Laptop (dropped Accidentally on 8/10/2018) 450 = deductible
Monitor for Laptop (Bought on 1/11/2018) 310 = deductible
Bar Association annual subscription 1,300 = deductible
Professional Indemnity Insurance (Paid Monthly) 1,800 = deductible
Book “Concise Australian Commercial Law” 140 = deductible
Book “How to make profits in a falling share market” 225 = not deductible

5TAXATION
New chair for Anna’s home office 175 = not deductible
Paid to fix her garage door at home 400 = not deductible
Child care Expenses while working 9,000 = not deductible
Bank charges (on her savings account where wages are credited) 120 = deductible
Bank charges on Home Loan (Investment Property) 96 = deductible
Investment Property
Receipts
Rental Income from Property (950*30) (taxable) = $28500 this is because income from
exploitation of land is required to be treated as an ordinary taxable income as per the legal rule
established in the case of Adelaide Fruit and Produce Exchange Co Ltd v DFC of T (1932) 2 ATD 1.
Expenses
Deductible interest = 960000 * 4.5% = $ 43200
Stamp duty of $38,690 = deductible
Solicitors fee of $1,500 = deductible
Loan processing fee of $750 = deductible
Repair of Air conditioner $ 900 = deductible
The expense towards the stove is not deductible.
Council Rate 1,376 = deductible
Strata 3,298 = deductible
Repairs due to tenant damage (March 2019) 1,670 = deductible

6TAXATION
Special levy of $4,000 = deductible
Real estate agent charged a commission of 7%
Conclusion
Taxable Income pertaining to Anna for the year ending 30th June 2019
Item Amount ($) Amount ($)
Incomes $202000
Wages $160,000
Interest from Bank $1400
Franked dividend from QBE
Insurance
$1800
Dividend from AMP (franked) $600
Dividend from AMP
(unfranked)
$700
Fees from overseas client
received during holidays
$ 3500
Fees for advising a neighbor $ 500
Price for writing the article to
local newspaper
$ 5,000
Rental Income from Property $28500
Deductions $122106
Travel between home and
office for week-end work
$150
Laptop bought $4500
Depreciation $1125
Repairs to Laptop (dropped
Accidentally on 8/10/2018)
$450
Monitor for Laptop (Bought
on 1/11/2018)
$310
Bar Association annual
subscription
$1300
Professional Indemnity
Insurance (Paid Monthly)
1,800 *12
$21600
Book “Concise Australian
Commercial Law”
$140
Bank charges (on her savings
account where wages are
credited)
$120

7TAXATION
Bank charges on Home Loan
(Investment Property)
$960
Deductible interest $ 43200
Stamp duty $38,690
Solicitors fee $1,500
Loan processing fee $750
Repair of Air conditioner $900
Council Rate $1,376
Repairs due to tenant damage $1670
Strata $3,298
Special levy $4000
Real estate agent charged a
commission of 7% of 950
$67
Taxable income $79894
Tax liability = 3572 + 32.5% * (79894 – 37000) = $17513
[$ 3,572 plus 32.5% for each $ 1 over $ 37,000]
Medicare Levy = 79894 *2% = $1598
Medicare Levy Surcharge = not applicable
Issue
Whether any tax implication would accrue from the property and cash inherited by Anna from her
uncle. Whether any tax implication would accrue from any future trends or interest she will receive from
the property.
Rule
The gains and losses that has been made by the beneficiary by virtue of the devolution of the
property of a deceased by inheritance or will is not to be included in the computation of CGT. But at the
time of devolution the asset is said to be acquired by the beneficiary and the date of acquisition is said to
be the date of death as in ITAA97, s 128.15. The acquisition of the property is to be treated as CGT event
A1 as provided under ITAA97, 104.10. This is because it depicts a change of ownership.

8TAXATION
Again, future income from the property would be treated as an ordinary income as the same
would be available from the exploitation of the property as has been held in the case of Adelaide Fruit and
Produce Exchange Co Ltd v DFC of T (1932) 2 ATD 1.
Application
Hence, the property that would be received by Anna as an inheritance from her uncle would be
required to be treated as a CGT event A1 and the same would be disregarded. However, all the future
income are required to be treated as an ordinary income.
Conclusion
The inheriting of the property would be a CGT event A1. The cash receipt would be disregarded.
The future income would be assessable.
3)
Whether the tax situation pertaining to Anna can be improved in anyway without any additional
expenses being incurred and by rearranging the income she has already incurred. She could have reduced
her tax liability by rearranging the expenses. She could have not taken her family on a holiday while
visiting the client overseas. This would have given her the opportunity to claim accommodation as well as
other expenses overseas as deductible.

9TAXATION
Reference
Adelaide Fruit and Produce Exchange Co Ltd v DFC of T (1932) 2 ATD 1
Dean & Anor v FC of T 97 ATC 4762
FC of T v Collings 76 ATC 4254
Handley v FC of T 81 ATC 4165
Lodge v Federal Commissioner of Taxation [1972] HCA 49
Mansfield v FC of T 96 ATC 4001
Riches v Westminster Bank Ltd [1947] AC 390
Taylor v Provan [1975] AC 194
The Income Tax Assessment Act 1936(Cth)
The Income Tax Assessment Act 1997(Cth)