Exploring Different Aspects of Taxation in Australia

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Taxation

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Table of Contents
Introduction......................................................................................................................................3
Q.1. Annual payment income..........................................................................................................4
Q.2.Calculation of pharmacy’s taxable income...............................................................................4
Q.3. Principle in IRC v Duke of Westminster [1936] AC 1............................................................6
Q.4. Allocation of loss on rental property for tax purpose..............................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The main purpose of this report is to explore the different aspects in the law of taxation in
context of the Australian legal consideration. This report also focused on the determination of
annual income in case of lottery or jackpot winning. The legal aspects of tax exemption in
calculation of annual income are also assessed as per the given cases of situation arises. This
report also includes the several types of issues related to the law of taxation as it demonstrate the
accrual basis income and cost of sales with respect to the deductions for the taxation objectives.
In addition to this, the principles in the case of IRC v Duke of Westminster [1936] AC 1 are also
discussed in relevant manner. The loss allocation in the tax purpose is also assessed in case of
selling the property at loss.

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Q.1. Annual payment income
The annual income for the people is determined as the gross income which is earned in a
specified time annual period of accounting. As per the given scenario, a client as winner wins the
amount of $50,000 for a year and he will get the amount for 20 years from the lotteries
commission. The income from the lottery will be earned by the client on annual basis. In relation
to this case, Australian government has established the rules and policies in the taxation
management of federal government (Bankman et al., 2017). As per the rules of taxation, the
lottery winner earns the amount by lottery but he is liable to pay to capital gain tax on his annual
income.
Apart from this, the Australian laws state that if a person has won any amount in a lottery or a
prize draw operated by any organization, that person is legally required to include this amount in
his annual income under head 'other income', and to pay tax on the received price. This price
does not necessarily include cash amount but can also be interest free or low interest loans, cars
or holidays. However, if any amount is won in ordinary lotteries like raffles, the winner is not
allowed to declare that amount as his /her annual income. In addition to this, if a winner
disposes or transfers the amount won from the lottery, it would also be regarded as capital gain
and would be stated on his/her tax return (Blunden, 2016). In this context, since the winner is
earning $50,000 every year for 20 years, this would be considered as 'deemed income' in the
eyes of Australian tax laws.
Q.2.Calculation of pharmacy’s taxable income
The basic concepts of taxation state that the incomes and expenditures on accrual basis are
accounted by an individual only at the time of their occurrence, and not at the time of cash