Taxation Law | Assignment 2

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

TAXATION LAW1
Income and Expense Information:
As given in the “sec 6-5 ITAA 1997” interest earned or received will be considered as
taxable income. Throughout 2019 Eric earned a bank interest from ANZ which he held
jointly with his wife (Graetz, 2015). The interest that is earned by Eric is included in the
assessment as taxable earnings within “sec 6-5 ITAA 1997”. As given in “sec 25-5 ITAA
1997” a taxpayer is only permitted to claim deduction for specific costs that are occurred for
managing tax affairs. Payments were made by Eric for preparing tax return to an agent of
$400. Therefore under, “sec 25-5 ITAA 1997” Eric is permitted to obtain an allowable
deduction.
Part A: Income from Employment:
On receiving any receipts from employment or based on the provision of rendering
any service then it will be considered as income from personal exertion for the recipient.
Having any sort of nexus or relations with the income originating as a result of personal
service of the taxpayer then it will be considered as taxable ordinary income. As noted in
“sec 6 ITAA 1936” nexus can be established for items such as salary and wages,
commissions, bonuses, fees charged for taking any service or any type of ancillary payments
is regarded as the ordinary “incident of employment” (Samansky & Smith, 2017). The
decision cited in the case of “Brent v FCT (1971)” explained that nexus is normally not
impacted by lump-sum or for any one-off receipts regarding performance of any specific
work.
As evident in case of Eric, he is found to be working in Blue Merlin Pty Ltd where he
received a gross wages of $7,800. Additionally, Eric during the year received shift allowance
of $2,000. By referring to “sec 6 ITAA 1936” the gross wages which is received by Eric must
be treated as income derived from personal exertion (McClure et al., 2017). The employment

TAXATION LAW2
wages that is earned is included in the tax return of Eric as income under “sec 6-5 ITAA
1997”. Referring to Brent v FCT (1971)” the sum will be held as payment in Eric hands
since it holds necessary relation with the receipts and the income producing acts.
More importantly under the “sec 15-2 of the ITAA 1997” allowances that an
employee receives cannot be viewed as taxable fringe benefit (Fullarton, 2017). Instead it is
considered as taxable earnings for employee. The shift allowance received by Eric will be
taxable as statutory earnings for Eric within “sec 15-2 ITAA 1997”.
During the year the employer of Eric provided him with car. According to the
“division 2 of the FBTAA 1986” car fringe benefit happens when the car is given to
employee by employer for their private use. Under the “division 2 of the FBTAA 1986” the
car received by Eric will be considered as chargeable fringe benefit. Accordingly under the
“sec 23L ITAA 1936”, there is a direct relation among the employment of Eric with the
benefit that is received by him. Citing the case of “FCT v J&G Knowles”, the car received is
carrying relation with the benefit and employment of Eric (McLaren, 2019). The Car should
be treated as fringe benefit whereas for the employer, it will be required to pay fringe benefit
tax associated to the value of benefit rendered.
According to the “sec 8-1 (1), ITAA 1997” an individual taxpayer is allowed to claim
deduction relating to any outgoing or loss from the taxable earnings till the extent that the
outgoing has occurred in generating assessable income or carrying any type of business
activities (Raftery, 2019). In the present situation Eric has reported that he incurred expenses
on telephone and stationary for work purpose. With regard to “sec 8-1 (1)”, Eric is allowed to
claim a tax deduction since the outgoing were incurred by in producing assessable income.