Taxation Law Name of the University Authors

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.........................................................................................................................................2
Rule:...........................................................................................................................................2
Application:................................................................................................................................3
Conclusion:................................................................................................................................7
Answer to question 2:.................................................................................................................7
Issues:.........................................................................................................................................7
Rule:...........................................................................................................................................7
Application:................................................................................................................................8
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

2TAXATION LAW
Answer to question 1:
Issues:
Will the taxpayer be liable for assessment under “section 995-1 of the ITAA 1997”
for carrying on the business with the common view of earning profit? Is the taxpayer under
the partnership liable for net income or loss under section 90?
Rule:
According to the “section 90 of the ITAA 1997” the net income of the partnership
includes the assessable income less the permissible deductions (Barkoczy, 2014). “Section
92 of the ITAA 1997” states that the net income or the loss is distributed among the partners
that pay tax based on their distribution. According to the “section 995-1 (1)” partnership is
defined as carrying on of the business with the common view of earning profit.
Ordinary income does not has any definition under the taxation acts. The ordinary
income is included into the taxpayer’s assessable income under the “section 6-5 of the ITAA
1997” (Grange et al., 2014). As held in “Scott v FCT 14 ATD 286” income is viewed as the
word of art and what forms the receipts are comprehended inside it. Receipts must be treated
as income within the ordinary concepts and usage of mankind unless the statute indicate the
intention of treating the income not under the parlance of ordinary income.
There are two positive limbs under “section 8-1, ITAA 1997” that allows a taxpayer
from their taxable income to deduct any loss or outgoing up to the extent that it is occurred
while producing their taxable income or the outgoings is necessarily occurred in carrying on
the business for generating taxable earnings (Jover-Ledesma, 2014). Whereas the negative
limbs of “section 8-1 (2), ITAA 1997” does not allows a taxpayer from deducting any loss or

3TAXATION LAW
expenditures under this section. Accordingly, under “section 8-1 (2), ITAA 1997” any loss of
capital, domestic or private in nature are not permissible for income tax deduction.
In context of the “section 25-10 of the ITAA 1997”, repairs can be defined as work
done on the premises, plant, machinery or articles (Kenny et al., 2018). A repair simply
replaces the part of the something or corrects anything that is already existent and has
become worn out or dilapidated. According to “section 25-10” there are some kind of
maintenance that is known as repair such as painting of plant or business premises to correct
the existing deterioration and preventing further deterioration.
Unlike painting, the cost of replacing an item particularly locks and exhaust fans that
are permanent fixture installed in the premises used for producing income is considered is
held as deductible repairs under “section 25-10” (Sadiq et al., 2018). However, it constitutes
that the replacement of the worn out unit by the new unit of identical designs to simply
restore the efficiency of the function and does not constitute as the improvement.
The Australian taxation office states that a business is allowed to instantly write-off
the purchase value of the assets for depreciation given the cost of assets is below $20,000.
Application:
The instances gained from the case study of Olivia and Daniel suggest that they are
carrying on the business under partnership within the meaning of “section 995-1 (1) of the
ITAA 1997” with the common objective of earning profits (Taylor et al., 2018). To determine
the net income or loss of the partnership reference to section 90 has been made in the case
study of Olivia and Daniel. During the year ended 30th June 2017 the partnership reported the
receipts from the cash business sales and receipts from the debtors. With reference to the
judgement made in “Scott v FCT 14 ATD 286” the receipts of Daniel and Olivia under the
partnership are treated as business receipts. Citing “section 6-5 of the ITAA 1997” these