Tax Liability of Numerous Receipts

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

TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:............................................................................................................................5
Answer to question 2:.................................................................................................................5
Answer A:..............................................................................................................................5
Answer B:...............................................................................................................................6
Answer C:...............................................................................................................................6
Answer D:..............................................................................................................................7
Answer E:...............................................................................................................................8
References:.................................................................................................................................9

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Answer to question 1:
Issues:
The case study will be taking into the account the tax liability of numerous receipts
that is received by the taxpayer derived in the course of employment.
Rule:
The taxable income of the taxpayer involves the assessable income following the
deductions. As given in the “sec 6-5 (1)” the assessable earnings includes the income in
agreement with the “ordinary concepts”. The general characteristics of income states that it
must be income and should convertible into money (James, Sawyer and Wallschutzky 2015).
Certain unanticipated or voluntary payment that a taxpayer receives in the form of incidence
of employment it is regarded as ordinary income. As noted in “Calvert v Wainwright (1947)”
tips that is received by the taxi driver taxable as ordinary income under “sec 6-5 (1) ITA Act
1997”.
Where an employee gets any receipts that is related to employment and from
rendering any personal service then it is subjected to tax for the recipient or may amount to
fringe benefit for the employer. A relation or nexus with the receipts originating from the
taxpayer’s personal service amounts to ordinary income (Dixon and Nassios 2016). Nexus is
commonly established on the items of personal service such as salary and wages. The
taxation commissioner in “Moorhouse v Dooland (1955)” stated that amounts which a
taxpayer gets directly or indirectly from the personal service of taxpayer is regarded as
ordinary earnings.
Gifts that a person gets for their personal qualities cannot be regarded as ordinary
income and it is not included into the taxable income of the receiver (Evans, Minas and Lim
2015). Accordingly in “Scott v FCT (1966)” a solicited gift cannot be viewed as ordinary

TAXATION LAW3
income only for the reason that it was prompted by appreciation for certain services, since
other factors should also be considered.
As stated under “sec 136 (1) FBTAA” a fringe benefit is viewed as benefit that is
given to an employee by an employer during any time or in relation to the tax year. Fringe
benefits normally includes any type of rights, interest in the real or personal property,
privilege services or facilities. The benefits commonly involves the non-salary benefits given
in relation to employment of employee. Under the “sec 66 (1)” the FBT is to be paid by
employer based on the grossed up assessable value of benefit (Kudrna 2015). The relation
among the employment and the benefit might be either direct or indirect. The law court in
“FCT v J&G Knowles (2000)” explained that there should be a reasonable and discernable
and rational connection amongst the benefit and the service.
Cash gifts that is received by a person is not held as ordinary income rather it amounts
to capital receipts. As noted in “Hayes v FCT (1956)” whether there is any kind of personal
relationship amongst the donor and the recipient, the presence of any pre-existing personal
relation would result the voluntary payment to be less likely an ordinary earnings (Graetz and
Warren 2016). Commonly, money given as gift from a member of family due to personal
reason and the gift is not related to any income generating activity then such amount is not
assessable and not needed to be reported in the tax return.
Application:
The case study provides that Emmi is studying accounting and works in part-time
basis in Crown Melbourne Restaurant. She reports the receipts of tips that amounted to $335
from her customers. The tips received by Emmi amounts to unanticipated or voluntary
payment that received in the form of “incidence of employment”. Citing “Calvert v