ITAA 1997 Section 6-5: A Detailed Analysis of Taxation and Income

This assignment addresses the taxation of various income sources under Section 6-5 of the ITAA 1997, focusing on whether receipts from different activities constitute ordinary income. It analyzes scenarios such as selling personal items, employment income, tips, online book sales, and royalty payments. The analysis incorporates case law, such as Calvert v Wainwright, to determine the taxability of voluntary payments like tips. The conclusion determines the tax liabilities for each income type, emphasizing that employment income, tips, library royalties, and copyright sales are taxable as ordinary income under Section 6-5 of the ITAA 1997. Desklib provides access to similar solved assignments and resources for students.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Issues:.........................................................................................................................................2
Laws and Discussions:...............................................................................................................2
Conclusion:................................................................................................................................3
References:.................................................................................................................................4

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Issues:
The existing issue is based on ascertaining whether the receipts made by the taxpayer
during the income year 2018-19 will be held as ordinary income within the meaning of
“section 6-5 of the ITAA 1997”.
Laws and Discussions:
Characterizing receipts in the form of ordinary income from business comprises of
two steps. Firstly, it includes ascertaining whether the taxpayer is performing the business.
Secondly, it includes ascertaining whether the receipts are treated as the normal proceeds of
the business activity. The selling of personal items by Heather on ebay does not amounts to
business because she has no intention of selling personal items online as a business and does
not sell any more items for a longer period of time.
A receipt obtained from the employment and providing personal services are
subjected to income tax for the employee. The receipt of salary from working as waitress at a
local restaurant constitutes income from employment and will be taxable as ordinary income
within the ordinary concept of “section 6-5”. The voluntary payments are subjected to
taxation. Similarly, in “Calvert v Wainwright (1947)” tips received by taxi driver was held as
income (Woellner et al. 2016). Tips received by Heather will be held as taxable income.
The receipt by Heather from the sale of online book constitutes she is carrying on the
business despite the fact that her sales began as a hobby. Heather must declare her online
business income because she makes a repeated sale over the extended time period. Moreover,
payments that is received for the use of right made to the person that has the licensed or sub-
licenced to deal with that right will be treated as royalty payments and will be taxable as
income (Barkoczy, 2016). The payment received by Heather from the libraries in Australia
amounts to royalties and attracts tax liability. Later Heather sold the copyright of her book to

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a large publishing company for a sum of $40,000. Being the writer of the book the selling of
copyright to the publisher and deriving receipts from the same constitutes ordinary income
under “section 6-5 of the ITAA 1997”.
Conclusion:
On a conclusive note, Heather will be held liable for her employment income, receipt
from tips as this was during the employment course. While the receipts from library and
selling of copyright constitutes taxable ordinary income under “section 6-5 of the ITAA
1997”.

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References:
Barkoczy, S. (2016). Foundations of taxation law 2016. OUP Catalogue.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation
Law 2016. OUP Catalogue.