Taxation Law Question Answer 2022

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

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Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:............................................................................................................................4
Answer to question 2:.................................................................................................................4
Answer to question 3:.................................................................................................................6
Answer to Part A:...................................................................................................................6
Part B:.....................................................................................................................................6
Answer to question 4:.................................................................................................................6
Answer to question 5:.................................................................................................................7
Article 1: Call to scrap not reform the tax on luxury car:......................................................7
Relevant facts in the article:...................................................................................................7
Concise explanation of tax concepts:.....................................................................................7
Connection between concepts discussed and good tax policy indicators:.............................8
Article 2: Policy nudge could swap stamp duty for land tax:................................................8
Relevant facts in the article:...................................................................................................8
Concise explanation of tax concepts:.....................................................................................8
Connection between concepts discussed and good tax policy indicators:.............................8
References:.................................................................................................................................9

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Answer to question 1:
Issues:
Will the taxpayer be treated as Australian dweller under the provision of
“6(1), ITAA 1936”?
Rule:
As per
“section 6 (1), ITAA 1936” an individual who lives in Australia and covers
those people that has their home in Australia except when the tax official is satisfied that a
person’s fixed house is out of Australia (Kenny et al., 2018). There are four test that are
applied on the individuals namely;
1. Resides Test in Australia
2. Person’s Domicile in Australia
3. 183-Day Test
4. Commonwealth Superannuation Test
Resides Test:
This test defines the person’s behaviour at the time of living in Australia. This consist
of the intention of taxpayer to live in Australia. It also includes business or occupation ties
and social or living preparations (Krever, 2014). In
“Joachim v FCT (2002)” the taxpayer
was held as Australian resident since the taxpayer kept his family home in Australia and often
retuned home during his employment contracts.
Domicile Test:
A person under this test is Australian occupant if one has abode in Australia,
excluding the officer understands that the person has the fixed place of residence out of
Australia. As said in
“FCT v Applegate (1979)” the law court explained that fixed does not
implies everlasting and the objectivity is assessed every year (Morgan et al., 2013).

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183-Days Test:
A taxpayer is treated as Australian occupant if they have really been present in
Australia either regularly or in breaks for more than six months except when the
commissioner understands that the person has set up his usual place in overseas.
Superannuation Test:
Where a taxpayer is the member of commonwealth superannuation fund, then they
will be treated Australian dweller for tax purpose.
Application:
Taite arrived in Australia on 1st August 2017 and during his visit he did not stayed in
one place. The following test are applied to determine Taite residency status;
Resides Test:
Taite has the residential home in Europe and his family lives there. He intended to
return to Europe following his short stay in Australia and these factors cannot be considered
significant. Mentioning the case of
“Joachim v FCT (2002)” Taite did not show any
intention of living in Australia. Therefore, Taite is not a occupant under this test.
Domicile Test:
Trait has not conclusively explained conclusively that his choice of home is in
Australia. Referring to
“FCT v Applegate (1979)” the circumstances gathered portray that
he has the permanent residence in Europe (Nethercott, 2018). He did not establish any home
in Australia and his stay did not reflect any permanency with a certain place in Australia. So
he is not a resident under this test.

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183-Days Test:
Trait under this cannot be treated as Australia resident because his actual place of
residence is out of Australia in Europe and he does not proposes to take up the residency in
Australia. So he is not the Australian occupant under this test.
Commonwealth Superannuation Test:
This is not applicable on Taite as he is not the member of superannuation fund.
Conclusion:
Conclusively, Taite cannot be treated as Australian resident under the provision of
“6
(1), ITAA 1936” as he did not any above test since his stay is temporary in nature.
Answer to question 2:
The main provision which gives the taxpayer with the deduction for an outgoing that
are general deduction provision of
“section 8-1, ITAA 1997”. A deduction is allowed is to
taxpayer under
“section 8-1, ITAA 1997” from his or her taxable earnings if the outgoings
are occurred in deriving the assessable income (Sadiq, 2018). While specific deduction
originates under
“section 8-5, ITAA 1997” when a specific provision of the income tax
legislation allows the taxpayer with the deduction. While under
“section 25-5” deduction is
not available in certain situations such as for capital expenditure. Additionally,
“section 8-1
(2)” explains that deduction is not provided under general limbs for expenditures that are
capital or capital in nature.
During the year Derek installed a new internal wall during August 2017. He also
repainted the current walls and laid down new carpet all through the year. Referring to
“section 25-10(3), ITAA 1997” the installation of new internal wall, repainting of current
wall and laying down of carpet is not permitted for deduction since it is a capital expenditure

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(Sadiq et al., 2018). Derek also installed a computer upgradation and replaced the unbroken
front glass window with the safety glass. In
“Western Suburbs Cinemas v FCT (1952)” the
company rather replaced the ceiling with new and better design material (Sadiq & Coleman,
2013). The law court held that the expenses was an improvement to the fixed capital asset
and its cost was capital in nature. Similarly, replacing the unbroken front glass window with
safety glass is a non-deductible capital cost. While upgrading the computer with new
software amounts to improvement of capital in nature and non-deduction is allowed
“section
25-10(3), ITAA 1997”. While under the
“section 25-10, 1997” a depreciation for decline-in
value of all the assets can be claimed by Derek.
Furthermore, Derek also occurred borrowing cost expenses to finance 10-year loan.
As the borrowing cost is greater than $100, the deduction will be spread over the term of loan
for Derek. While he also occurred cost on stamp duty and legal cost for preparing lease. The
expenses will be allowed as general deduction under
“section 8-1, ITAA 1997”.

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Answer to question 3:
Answer to Part A:
Part B:
Answer to question 4:
As a general rule majority of the income which is earned by the taxpayer is regarded
as ordinary income under
“section 6-5, ITAA 1997”. The gross salary derived by Frankie is

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held as ordinary income under
“section 6-5, ITAA 1997”. A simple windfall gains cannot be
treated as having the character of income. Frankie also reported receipts of $1,200,000 and
amateur prize from baseball team of $500. The amount represents windfall gain and it is not
an income. Dividends are considered taxable under
“section 44 (1), ITAA 1936”. The
dividend received by Frankie from shares are considered as statutory income while the
franking credit attached with the dividends is taxable as statutory income under
“section
207-20(1), ITAA 1997”.
Frankie also reported income from sole trader business. The court in
“Henderson v
FCT (1970)” held that only one method is appropriate for any one of income (Woellner et
al., 2018). Cash basis is appropriate for business income that is derived from provision of
knowledge while for trading or manufacturing business the accrual basis is generally
considered appropriate. For Frankie the cash basis method has been followed.
Answer to question 5:
Article 1: Call to scrap not reform the tax on luxury car:
Relevant facts in the article:
The Morrison government is currently facing renewal calls of abolishing the tax hit on
the luxury cars since it employs its effort to expand the refunds for the tourism business and
farmers.
Concise explanation of tax concepts:
The treasury is planning to extend the scheme for refund for the primary producers
and the operators of tourism business in order to save $10,000 in purchase of luxury car
(Australian Financial Review, 2019). The policy would only be applicable on all wheel drive
vehicles that are purchased following July 1 by the GST registered operators.

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Connection between concepts discussed and good tax policy indicators:
The plan should be considered as good tax policy because it would reduce the tax
revenue by around $11 million for the estimated period and the tax receipts for luxury car
would fall by 7.9%.
Article 2: Policy nudge could swap stamp duty for land tax:
Relevant facts in the article:
A proposal has been made to abolish the stamp duty by making use of credit for
recent property purchasers and bringing forward the land tax through the small tax holiday
period.
Concise explanation of tax concepts:
The change may be bought forward through a set of policy incentives and it may be
worth of $170 billion to the economy (Australian Financial Review, 2019). Replacing the
stamp duty with the land tax is a sensible reformation.
Connection between concepts discussed and good tax policy indicators:
This transition would have a limited option of opting-out by the new purchasers and
simultaneously the loss of revenue can be temporarily funded by the higher amount of land
tax rate.

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References:
Australian Financial Review. (2019). Call to scrap not reform the luxury car tax. Retrieved 7
August 2019, from https://www.afr.com/policy/tax-and-super/call-to-scrap-not-
reform-the-luxury-car-tax-20190805-p52dzk
Australian Financial Review. (2019). Policy nudges could swap stamp duty for land tax.
Retrieved 7 August 2019, from https://www.afr.com/policy/tax-and-super/policy-
nudges-could-swap-stamp-duty-for-land-tax-20190801-p52cze
Kenny, P., Blissenden, M., & Villios, S. (2018). Australian Tax.
Krever, R. (2014). Australian taxation law cases.
Morgan, A., Mortimer, C., & Pinto, D. (2013). A practical introduction to Australian
taxation law. North Ryde [N.S.W.]: CCH Australia.
Nethercott, L. (2018). Australian Taxation Study Manual 2018. Other: Oxford University
Press.
Sadiq, K. (2018). Australian taxation law cases 2018. Pyrmont, NSW: Thomson Reuters.
Sadiq, K., & Coleman, C. (2013). Principles of taxation law 2013. Sydney, N.S.W.: Lawbook
Co./Thomson Reuters.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., & Obst, W. et al. (2018).
Principles of taxation law.
Woellner, R., Barkoczy, S., & Murphy, S. (2018). Australian Taxation Law 2018 ebook 28e.
Melbourne: OUPANZ.

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