Taxation Law: Case Study Assignment

Running head: TAXATION LAW
CASE STUDY ASSIGNMENT
Name of the Student
Name of the University
Author Note

1TAXATION LAW
Part 1:
Issue:
The issue that has to be determined in the instant case study is analysis of the tax
residency status of Arun Sharma and to determine he shall be regarded as a resident for the
taxation purpose in the financial year of 2018-2019 as the first issue.
Relevant Rules of Law:
Generally, four types of test are used to determine the residential status of any person.
The Resides test under Common law is an adequate method used primarily to determine
whether one is the resident of Australia for tax calculation purposes. Such person has to come
to Australia and must be belonging to a foreign country. An individual residing in Australia is
regarded as an Australian resident under the ordinary meaning of the word reside. Under
Taxation Ruling 98/17, taxation for a person having residence in Australia is dependant on
many factors that are contained in the said ruling (Barkoczy, 2016). These factors consist of
presence of the individual in Australia physically, existing economic, social as well as family
ties, frequency of the visits made, regularity of such visits, the reason and intention of staying
in Australia, ties of employment, permanent being in Australia and others (Henry, Plesko, &
Utke, 2018)
Application:
As per the facts of the given case, Arun Sharma is a student belonging to India
originally. He passed his graduation from University of Sydney in Accounting on 2017
ending. He married on 20th December of 2008 with another Indian lady who also did her
graduation in accounting from University of NSW. He works as a financial controller with
Bell Computers Pty Ltd having operations in fifteen different locations in and around Sydney.
All these facts contribute to the fulfilment of the factors given in TR 98/17. The reasons are

2TAXATION LAW
Arun is being living as well as working in Australia. He is having his wife here which
indicates that he has family plus social ties in Australia. He works for Bell Computers Pty
Limited with operations in fifteen different locations in and around Sydney which shows he
has employment tie here. Thus he proves to be an Australian resident for purpose of taxation
and is liable to pay income tax to ATO for earning income world wide (Barkoczy, 2016).
Conclusion:
Arun being an Australian resident for purpose of taxation is liable to pay income tax
to ATO for earning income world wide.
Net Payable Tax by Arun:
Arun receives gross salary for his employment in Bell Computers Pty Limited. This
can be construed as a type of income earned as ordinary source of income being employee.
As per section 6.5 of Income Tax Assessment Act 1997 (ITAA 97), income incurred from
ordinary source is to be regarded as ordinary income. Hence gross salary 85000 dollars is an
assessable income.
Arun also got 2910 dollars for making use of his cars for work purpose. It amounts to
the car benefit incurred by him. It forms an assessable income as per section 15.2 since it is
an allowance which cannot be regarded as a fringe benefit. Thus this amount of 2190 dollars
will not be considered under FBTAA 1986 (Braverman, Marsden & Sadiq, 2015).
Being the best employee of the year, he received a Sony TV of value 6000 dollars
from his employer. This cannot be regarded as an assessable income as it is a gift and has no
connection with the income making act as per Scott v. Federal Commissioner of Taxation
[1966] HCA 48 (1966) 117 CLR 514. If anything is received by the employee not related to
employment or any service given, it is regarded as the Wind fall gain and not as an ordinary
income.

3TAXATION LAW
The managing director of Bell computers attended his 10th marriage anniversary party
on 20th December of 2018 and gifted him 2000 Dollars cash along with a gift box. This is also
regarded as the Wind fall gain as it has no connection to his employment and not an ordinary
income as per the case of Scott v. Federal Commissioner of Taxation. Moreover the token
honorarium he received for the year by the Indian Business Council will be again considered
as the Wind fall gain as it has no connection to his employment and not an ordinary income
as per the case of Scott v. Federal Commissioner of Taxation. This is also not assessable like
the wedding anniversary gift.
The expense of 12750 dollars cannot be regarded as deductible as per sections 8.1(1)
and 8.1(2) as the travelling cost are regarded as private expense and hence not deductible.
The investment made by him for 850000 dollars for buying a property is a Cost Base
Element 1 as per section 110.25(2) because such property as per section 108.1 is a Capital
Asset. Stamp duty of 33740, loan application fees of 2500 and cost for solicitor of 3000 are
all to be regarded as Element 2 as per section 110.25(3) and all these are not deductible
expenses.
All other expenses are deductible expenses as producing income as per sections 8.1(1)
and 8.1(2) which state that expenses gained for producing the assessable income are
deductible expenses when they are not capital in nature and for private use.
2500 dollars paid for getting advice by Arun is deductible as per section 40.88 which
allows the deduction of expenses caused for gaining assessable income by way of creation of
a business. 12000$ received from ABC Petrol is Income from business. It forms an income
earned from an ordinary source of income like employer. Hence it is an ordinary income as
per section 6.5 of ITAA 1997. It is however half assessable as it is of a partnership business.