Taxation Law: Assessable Income, Accrual Basis, Tax Avoidance, Joint Ownership

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Answer to question 3:.................................................................................................................5
Answer to question 4:.................................................................................................................7
References:...............................................................................................................................11

2TAXATION LAW
Answer to question 1:
Issue:
Will the assessable income of the taxpayer would include the annual payments that is
received form the lotteries each year?
Rule:
The taxable income comprises of the income in accordance with the ordinary concepts
which is known as the ordinary income. For the federal commissioner of taxation to
determine the tax of the taxpayer it is vital to recognize the relevant taxpaying entity. The
impression of income is referred as the fundamental in determining whether the receipt would
be treated as the taxable income (Buenker 2018). Under the “section 6-5, ITAA 1997” the
Australian resident taxable income comprises of the ordinary income that is obtained from all
the sources whether the income is derived indirectly or directly from every sources.
Under the “ITA Act 1997 section 6-5 (4)” the doctrine of constructive receipt is
defined as soon as the individual is taken to have received the amount as and when it is
implemented or dealt in the manner when a taxpayer provides direction on their behalf
(Pomerleau 2016). As per the role of the tax legislation it is necessary to include in the
taxable income of the taxpayer the amount that necessarily meets the eligibility criteria of
case laws principles. The amount will be treated as the taxable income under “ITAA 1997 of
section 6-5”.
As per the “section 6-5, ITA Act 1997” the taxable income of the taxpayer includes
the ordinary income. On the basis of the special provision of the Act, there are certain taxable
income of the taxpayer that does not include the ordinary income. “Section 6-5, ITAA 1997”
places emphasis on the general concepts of the ordinary income that are subjected to income

3TAXATION LAW
tax and the same is added into the taxable income (Black 2018). There are certain
prerequisites of ordinary income that needs to be fulfilled. The ordinary income should be
cash or gains to the taxpayer that receives it. Provided that the prerequisites of the ordinary
income are met, then the gains will be an ordinary income if income is regular or periodical
receipts or has the concept of flow. The concept of periodical receipts has been defined in the
federal court example of “Dixon v FCT (1952)”. The periodical payments carry the nature of
income stream (Grubert and Altshuler 2016). This represents the money that is payable
periodically or at least annually to the taxpayer. In another example of the court in “Blake v
FC of T (1984)” held that gains that are having the characteristics of regular or periodic will
be held as ordinary income rather than those which is paid in lump sum.
Applications:
The principal issue in this case is understanding whether the annual payment of
lottery receipts every year will be an income under ordinary concepts of “section 6-5”. The
occurrences from the case unfolded where the winner of lottery is rewarded with a sum of
$50,000. Additionally, the winner would be receiving the sum of $50,000 for every year
regularly for a period of 20 years. further events that unfolded from the case states that if the
winner dies, the commission of lottery may pay the outstanding amount to the estate of
deceased nominated by the winner.
The issue in the question clearly defines that the annual payment will be treated as
income because the amount necessarily meets the eligibility criteria of “section 6-5” of the
ordinary concepts. Referring to “Dixon v FCT (1952)” the annual payment can be easily
classified as the income since it holds the characteristics of periodicity, recurrence and
regularity (Yagan 2015). The issue of annual payment in the question fulfils the perquisites of