Taxation Law | Questions and Answers

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

TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................6
Answer A:..............................................................................................................................6
Answer B:...............................................................................................................................6
Answer C:...............................................................................................................................7
Answer D:..............................................................................................................................8
Answer to E:...........................................................................................................................8
References:...............................................................................................................................10

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Answer to question 1:
Issues:
Is the taxpayer in the current situation will be considered taxable for the numerous
receipt that is made during the year from the part-time employment?
Rule:
The ordinary income is regarded as the notable part of assessable earnings. An
individual taxpayer’s assessable income contain income that are in agreement with the
ordinary concepts. Under “sec 6-5 ITAA 1997” this is known as ordinary income. Where a
taxpayer gets unanticipated or voluntary payments which is recovered as the part of reward of
service amounts to income under ordinary concepts because the benefits represents the
incidence of employment (Sharkey 2016). As noted in “Calvert v Wainwright (1947)” tips
that are given to a third party as gift and signifies a voluntary payment because they are made
to an individual for their services rendered establishes a nexus among the services provided.
Tips are usually regarded as an ordinary income.
As there is no particular definition of the word “income” under the legislation, the
provision of “sec 6 (1) ITAA 1936” defines income from personal exertion as something that
is received in the form of salary, wages, bonus, commission, etc. by an individual taxpayer
for rendering any personal services (Pert et al. 2017). The law court in “Brown v FCT
(2002)” explains that receipts which is associated to carrying out of service is treated as
product or incidence of employment or reward for activity. Such receipts amounts to taxable
ordinary income.
Personal gifts are normally treated as taxable earnings under “sec 6-5 ITAA 1997”.
Where the personal gifts, opposite to other type of voluntary payments that are related to

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employment or services provided, are not viewed as taxable ordinary income. In the case of
“Scott v FCT (1966)” the solicitor was paid a huge amount of (10,000 pound) simply
because the solicitor acted for the widowed wife in regard of this estate and as the gesture of
friendship (Lam and Whitney 2016). The federal court held the amount non-taxable under
“sec 25 (1) of ITAA 1936”.
Under “sec 66 (1) FBTAA 1986”, FBT is normally imposed on the employer. The
taxes are normally imposed on the basis of fringe benefits and not on the receiver of benefit.
Under “sec 136 (1) FBTAA 1986” fringe benefit refers to rights, privilege, services of
facility that is given for carrying out work in respect of employment (Sadiq 2016). While
“sec 137 FBTAA 1986” assures that FBT is applicable when there is evident employment
relationship however the employee is provided with non-cash benefits rather than salary or
wages. Under “sec 23L” the employer is held liable for tax on the worth of fringe benefit
provided to employee. In “Essenboourne Pty Ltd v FCT (2002)” the benefit should be
related to employee only.
As stated by ATO cash gifts given during birthday present or special occasion are not
held as taxable income for the recipient. For example, present given from father to son is
considered as non-taxable income. As noted in “Hayes v FCT (1956)” gift of parcel of shares
in conjunction with payments do not have the taxable income character.
Application:
The current case study involves Emmi who is studying accounting in Holmes Institute
and works for part-time basis in Crown Melbourne restaurant. In the present income year
Emmi got $335 cash as tips from its customers. The cash tips of $335 should be viewed as
voluntary payments which is recovered as the part of reward for service. The cash amount is
an income under ordinary concepts because the benefits represents an incidence of Emmi’s