Taxation Law: Lottery Winnings, Pharmaceutical Benefits Scheme, Tax Avoidance, Co-Ownership of Rental Property

HA3042 Taxation Law
T2 2018 Individual Assignment

Table of Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................4
Question 3..................................................................................................................................6
Question 4..................................................................................................................................7
References................................................................................................................................10

QUESTION 1
In this case, a lottery has been sponsored by SET for Life which is particularly a Lotteries
Commission; the same sponsored lottery has been given away when any of the people scratch
totals of three panels of the set for life would be winning $5000 for all year for 20 years.
Furthermore, in case the person dies, the due amount will be payable to the estate of the
deceased (Australian Taxation Office, 2018).
If an individual wins anything from lottery or draw sponsored by the credit union, banking
institutions, building society or any other investors, then the individual is required to release
on their tax return the value of any derived prizes. Prizes might be inclusive of low-interest,
free of interest loans, cash, car or holidays. The best aspect is that within Australia, lottery
winnings are not imposed on individual income tax. On the other hand, one is not required to
make prize declaration won in common lottery like raffles, or lotto draws (Australian
Taxation Office, 2018). If an individual gains monetary benefits from a lottery winning, then
it will be subjected to tax as per the head Income. Further, the income will be imposed to tax
at 30% flat rate, this after cess add will be amounted to 30.9%.
It is not considered if or if not the winner’s income is under tax or not, the distributor of the
prize is responsible for making tax deduction during payment. Furthermore, the benefit
gained from fundamental exemption as well as the income tax slab rate is non-applicable to
this concerned income. Further, the whole derived amount will be taxable at the 30.9% flat
rate (Braithwaite, 2017).
Lottery winning or other types of prizes are often assets for the intent of Part IIIA. On the
other hand, it is provided by subsection 160ZB(2) that a capital gain should not be considered
to have accrued to the person paying tax by the rationale of that they have gained such form
of winnings. However, subsection 160ZB (3) states that a taxpayer is not required to incur a
capital loss, because of any conducted act or transaction entered by the taxpayer in the
manner of doing participation in a lottery or any prizes. Raffle prizes are out of consideration
under the subsections 160ZB(2) and 160ZB(3).
On the basis of cited provisions, it can be articulated that the lottery winning is out of
consideration in terms of annual payment income. According to the provisions related to the
taxation law of Australia, income shall not be declared till the time it is held by the banking
institution or any other financial institution, due to the reason of lottery prizes which are won
in Australia are stated as free of tax in lump sums amount. Related to this, same provision are
applicable in the New Zealand, in which the receivable amount from lottery winning is not
taxable as their major gaining source is lottery wins. Thus, the total amount of receivable of

$50000 is not considered as an element of the yearly income of the taxpayer as these are not
covered under earnings (Nichita, 2015). However, when a deceased’s estate is imposed to
the winnings in the situation of winner’s death, then the tax on capital gain appeals, but also
the same income will not be entitled as annual payment income.
QUESTION 2
By considering the cited vase scenario, Corner Pharmacy is providing chemists with services;
the corporation held no tender of credit sales; on the other hand, the payment is acceptable by
main credit cards. The business sells off the shelf and by taking the similar proprietor fills
conditions into account for cash and for the payments paid as per the Pharmaceutical Benefits
Scheme [PBS]. The inherent issue in the case is the tax of the Corner Pharmacy according to
the taxability provisions under the Australian taxation office alongside Pharmaceutical
Benefits Scheme.
The Pharmaceutical Benefits Scheme (PBS) is said to be a program run by the Australian
Government that is engaged in offering subsidised prescription drugs to Australian residents
and to some of the foreigners under the Reciprocal Health Care Agreement. The PBS scheme
of Australian Government offers relevant, time-based and reasonable accessibility to a broad
variety of medicines to all the individual living in Australia (Australian Government, 2018).
The claim of items related to PBS/RPBS viable and correct prescription data to be considered
into the PDS (Parker, 2018). Further, this assures supportive payment from the side of the
department, as well as it guarantees that accurate information is entered for the all the
involved persons who are a prescriber, patient and pharmacy. To this note, Pharmacists is
required to make sure that there is accuracy in dispensing, stating the intentions of the
prescriber while adhering with the Commonwealth legislation and State or Territory laws.
Table 1: Statement showing taxable income of Corner Pharmacy
Particular Amount
Sales from ordinary business (WN 1) $450,000.00
Less: Cost of goods sold (WN 2) ($313,636.00)
Less: Salaries expenses(WN 3) ($60,000.00)
Less: Rent expenses(WN 3) ($50,000.00)
Add: Billing under Pharmaceutical Benefits Scheme(WN 4) $200,000.00
Assessable Income $226,364.00
Less : Non-Taxable Income ($200,000.00)