Taxation Law of Australia

This document provides a comprehensive study material on Taxation Law of Australia. It covers various topics such as effective life of assets for depreciation, tax offsets, top tax rate for Australian residents, exemptions for capital gains, and more. The document also includes case studies and examples to illustrate the concepts. Suitable for students studying taxation laws in Australia.

Running head: TAXATION LAW OF AUSTRALIA
Taxation Law of Australia
Name of Student:
Name of University:
Author’s Note:

1TAXATION LAW OF AUSTRALIA
Table of Contents
Question 1:.......................................................................................................................................3
Answer to Part a:.........................................................................................................................3
Answer to Part b:.........................................................................................................................3
Answer to Part c:.........................................................................................................................3
Answer to Part d:.........................................................................................................................3
Answer to Part e:.........................................................................................................................4
Answer to Part f:.........................................................................................................................4
Answer to Part g:.........................................................................................................................4
Answer to Part h:.........................................................................................................................5
Answer to Part i:..........................................................................................................................6
Question 2:.......................................................................................................................................6
Answer to Part a:.........................................................................................................................6
Answer to Part b:.........................................................................................................................7
Answer to Part c:.........................................................................................................................7
Answer to Part d:.........................................................................................................................8
Answer to Part e:.........................................................................................................................8
Question 3:.......................................................................................................................................9
Answer to Part a:.........................................................................................................................9

2TAXATION LAW OF AUSTRALIA
Answer to Part b:.......................................................................................................................10
Answer to Part c:.......................................................................................................................10
Answer to Part d:.......................................................................................................................11
Question 4:.....................................................................................................................................12
Answer to Part a:.......................................................................................................................12
Answer to Part b:.......................................................................................................................12
Answer to Part c:.......................................................................................................................13
Answer to Part d:.......................................................................................................................13
Answer to Part e:.......................................................................................................................14
Question 5:.....................................................................................................................................14
Issues:........................................................................................................................................14
Laws:.........................................................................................................................................14
Application:...............................................................................................................................15
Conclusion:....................................................................................................................................17

3TAXATION LAW OF AUSTRALIA
Question 1:
Answer to Part a:
As per stated in “Taxation Ruling of TR 2018/4” Tax Commission has provided the
clarification in order to determine the effective life of assets for the purpose of depreciation
according to the “Section 40 (100) of ITAA 1997”.
Answer to Part b:
According to “Division 13 of ITAA 1997” could be obtained from the details of available tax
offsets1.
Answer to Part c:
During the 2018/19 tax year the Australian resident taxpayer is applicable for the top tax rate,
which amount to $54,907 with 45 cents for each $1 and above $180,000 for income which is
similar to $180,001 and above.
Answer to Part d:
Australian tax system has provided some exemption for the Australian taxpayer which
includes minimization, deferral or disregard of capital gains and loss. According to the provision
of “Section 118 (10-1) of ITAA 1997”, collectible assets or similar to its kind worth $500 or
below are exempted from CGT.
1 Robert N, Gordon, "REIT and MLP Taxation Under the New Tax Law." Journal of Taxation of
Investments 35.4 (2018).

4TAXATION LAW OF AUSTRALIA
Answer to Part e:
According to “CGT event B1 Section 104 (15) of ITAA 1997”, deals with the use and
enjoyment before the title being passed. This situation arises when an individual enters into any
kind of contract with any organisation in which the individual gained the right to use or do
enjoyment of CGT assets, which belonged to the individual passed to the organisation to whom
the contract is made. The assets title must be transferred in the name of organisation from the
individual on or before the contract ends.
Answer to Part f:
The formula contains Income Tax = (Taxable Income * Rate) – Tax Offsets
The above mentioned formula is associated with the “Section 4-10 (3) of ITAA 1997.
Answer to Part g:
According to the case of “FC of T v Day 2008 ATC 20-064,” which occurred in High
Court, legal expenses incurred by the taxpayer in order to create chargeable earnings and
simultaneously in net conditions highlighted in “Paragraph 8-1(1)(a) of ITAA 1997”. The case
discussed above the case carries immense importance in terms tax deduction associated with the
legal expenses of a public servant who pays charges in order to meet day-to-day expense2.
Taxpayer enjoys the legal expenses deduction according to the provision mentioned under
“Section 8-1 of ITAA 1997” incurred in the year 2002 which will help the taxpayer to defend
himself which is imposed by the employer on the taxpayer.
2 Alfred, Tran, "Can taxable income be estimated from financial reports of listed companies in
Australia." Austl. Tax F. 30 (2015): 569.

5TAXATION LAW OF AUSTRALIA
Answer to Part h:
The tax burden and the marginal tax rate analyzed by the average tax rate which
evaluates the impact of tax on incentive earnings, savings, investment or spending. Total tax
divided by the overall income is mentioned by the average tax rate. The marginal tax rate deals
with the incremental tax incurred on increased income.

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Answer to Part i:
The expenditure tax imposed on the purchase of the goods and services is known as
Consumption Tax. The taxation system of Australia includes the tax imposed by the individual
are on the basis of consumption rather than the amount contributed by them to the economy3.
Question 2:
Answer to Part a:
According to the Australian Taxation Office (ATO) at the time of producing accessible
income the taxpayer of Australia are allowed to enjoy the deduction, which is made by the
taxpayer in relation to interest on borrowings. As per stated in “Section 8 (1) of ITAA 1997”, the
interest on loan which is made for business purpose are taken in the form of allowable
deduction4.
According to the case of “Amalgamated Zinc Limited v FC of T (1935)”, in order to settle
the wages of the staffs Brent has incurred interest on loan. The Brent took this decision because
the interest on loan will be considered as taxable earning which could be generated or gained.
According to the positive part mentioned in the “Section 8 (1) of ITAA 1997”, there will
allowable deduction for taking interest on loan by Brent.
3 P. T, Wanless, Taxation in centrally planned economies. Routledge, 2018.
4 Roger H, Gordon, "The Rise of the Value-Added Tax. Cambridge Tax Law series." (2016):
243-246.

7TAXATION LAW OF AUSTRALIA
Answer to Part b:
Sometimes it is important to assign expenses or losses, which are partially deductible. As per
the case of “Ronpiban Tin FL v FC of T (1949)”, in accordance with the commissioner
ascertain the part of expenses incurred to create accessible income. As the expenses is made on
work and private purposes only the deduction will be made on work purpose of the taxpayer5.
Julie has incurred $500 on mobile phones in which 60% of the phone call made for work
purpose and other 40% used for private purpose. According to the case of “Ronpiban Tin FL v
FC of T (1949)”, deduction claimed by Julie is on 60% because it is used by Julie for work
purpose this done in accordance to the “Section 8 (1) of ITAA 1997”. On the other hand other
40% is not deductible because it is used by the Julie for the private purpose, this is done in
accordance with the “Section 8-1 (2) of ITAA 1997”, which is also the negative limbs of this
Section.
Answer to Part c:
According to the “Section 8 (1) of ITAA 1997”, the child care expense is not allowed for
deduction. According to the case of “Ledge v FC of T (1972)”, the taxpayer was not allowed for
any deduction in the case of childcare expense during the time when the taxpayer is going for
work. This is taken because the expenses are not incidental or in any target to produce income.
Sally has incurred babysitting expenses for the childcare. This expense is non-deductible
because it is used for personal benefits and not for producing any kind of income. This type of
income failed to meet the positive or negative part of the “Section 8-1 (2)(b) of ITAA 1997”.
5 Janet, Grange, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation

8TAXATION LAW OF AUSTRALIA
Answer to Part d:
The application is possible for both expenses and losses bared by the taxpayer in accordance
with the “Section 8 (1) of ITAA 1997”. From the case of “Charles Moore & Co (WA) Private
Limited v FC of T (1956)”, it is evident that the court gave permission on the taxpayer for
providing deduction if it is occurred during theft of the earnings during going to the bank6.
As per stated that “Section 8 (1) of ITAA 1997” for Jerry it is evident to claim deduction for
the goods stolen which was done by the long-term staff. The loss was incurred by Jerry during
the time of conduction of business operations because the goods were supposed to generate
earnings for Jerry7.
Answer to Part e:
According to the “Section 8 (1) of ITAA 1997”, the expenses incurred or losses incurred
during the time of revenue generation are treated as they did not happened during the course of
activity and general deduction is allowed. According to the case of “Maddalena v FCT (1971)”,
in getting new job the expenses made are not falls under the taxable income because it is not
generating any kind of income and also the expenses before getting the job so it is not deductible
in accordance with the “Section 8 (1) of ITAA 1997”8.
6 Geralyn, Jover-Ledesma, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
7 Helena, Yuan, "Mid market focus: The sharing economy and taxation." Taxation in
Australia 51.6 (2016): 293.
8 Dale, Pinto, and Michelle Evans. "Returning income taxation revenue to the states: back to the
future." (2018).

9TAXATION LAW OF AUSTRALIA
The expenses made during the contest of general election of the local government do not
fetch any kind of income and moreover it is made before the income is generated and thus it does
not falls under the purview of deduction in accordance with the provision mentioned in the
“Section 8 (1) of ITAA 1997”9.
Question 3:
Answer to Part a:
According to “CGT event F2”, is applicable for the individual taxpayer in renewing or
granting or generating long-term lease. The elemental landowner or the taxpayer that grant with
sub-lease are applicable for “CGT event F2”. Andy who is a landowner and the individual has
granted lease term for five years to Brian at $5000 premium. From the above mentioned example
it is evident that “CGT event F2” has taken place. In the case of Andy it is not possible for Andy
to enjoy the CGT discount of 50% because the case has direct relevance of “CGT event F210”.
Answer to Part b:
As per Australian Taxation Office, there is a possibility of occurrence of “CGT event F2”
which includes the new owner gets the use of land. From the above mentioned perspective it is
evident that the rise of land and enjoyment happens during the time of land ownership which
acquired by the new owner of the land and the date at which the new owner has acquired the land
are applicable for rent and taxes. Instead of $40,000, Farm Limited has alternative to go for
9 Paul, Kenny, Australian Tax 2013 (LexisNexis Butterworths, 2013)
10 Marcel, Olbert, and Christoph Spengel. "International taxation in the digital economy:
challenge accepted." World tax journal9.1 (2017): 3-46.

10TAXATION LAW OF AUSTRALIA
buying 100-acre firm for $800,000. This will lead to the cause of “CGT event B1” for John. In
the case of John, it is possible to implicate CGT discount of 50% on the transaction made by
John.
Answer to Part c:
As per Australian Taxation Office, if the taxpayer is not residing for the ownership period
and at the same time the place is used to produce income then a certain exemption is allowed for
taxpayer. Olivia and Jamie have purchased a property and they have rented for the two years.
After, the property is used for income purpose and then it is utilized for residence purpose before
sale in 2018. Due to above mentioned situations Olivia and Jamie is are entitled for partial
exemption of the property after it is being sold in 201811. Therefore, Olivia and Jamie is liable to
enjoy the CGT 50 % discount so that there net capital gains could ascertain effectively12.
Answer to Part d:
11 Kerrie, Sadiq, Principles Of Taxation Law 2014
12 Richard E, Krever, Australian Taxation Law Cases 2014

11TAXATION LAW OF AUSTRALIA
According to the above table it can be seen that the shares of BHP can be sold and receive
the capital gains of $6,600 can be generated and on the other hand the shares of Wesfarmers are
sold and the capital loss of $15,500. From the deduction, process the capital loss of taxable
income however, on the other hand the capital gain made during the future period will be offset
under the taxable income13. It is possible for Chris to balance the capital gains made from the
share of BHP against the capital loss of incurred from the shares of Wesfarmers. Hence,
altogether Chris has caused net capital loss of $8,840 will be brought forward in next year.
Question 4:
Answer to Part a:
In case of simple prize winnings it is not possible for taxpayers for assessment. On the other
hand the prize winning money can be treated as accessible income if there is any sufficient
relationship with income generation of taxpayer. According to the case of FCT v Kelly (1985)”,
the football player who was awarded by the Channel 7 for the best player and fairest player will
be treated as ordinary income because it will be related with income of the player as the prize
money gained after utilising the skills of the player. Hence, it falls under the employment of the
player14.
13 Michael, Lang, et al., eds. Introduction to European tax law on direct taxation. Linde Verlag
GmbH, 2018.
14 Andrew, Shaw, "Tax files: Why small really is better: Accessing the lower corporate tax rate
for small business entities." Bulletin (Law Society of South Australia) 39.10 (2017): 39.

12TAXATION LAW OF AUSTRALIA
According to the provision mentioned in the “Section 6 (5) of ITAA 1997”, the receipt of
prize money of $2000 of the taxpayer for becoming the best year advertisement falls under the
ordinary income. This amount will be taxed because it is associated with the work of the
taxpayer15.
Answer to Part b:
As per stated in the “Section 6 (1) of ITAA 1936”, wages, allowance, remunerations,
earnings, gratitude’s and the income earned by rendering the services for other employer and for
conducting any kind of business activities16. In this case, the employee has received $500 from
the employer for travelling to the workplace from Sydney. The $500 amount, which was
received by the employee from the employer, will be treated as income because it includes
employment working as a staff for the business.
Answer to Part c:
If the gain made by any individual will be treated as simple gift which do not have the nature
of income. According to the case of “FCT v Scott (1966)”, the client has obtained gift of £10,000
from his wife from the personal estate, which will not be considered as income. In the same way
a iPhone received as a gift by the client may not have the nature of income.
15 Angharad, Miller, and Lynne Oats. Principles of international taxation. Bloomsbury
Publishing, 2016.
16 Janet E, Milne, and Mikael Skou Andersen, eds. Handbook of research on environmental
taxation. Edward Elgar Publishing, 2014.

13TAXATION LAW OF AUSTRALIA
Answer to Part d:
According to the “Paragraph 118-37 (1) (b) of ITAA 1997” which says that the amount
associated with damages or compensation for illness or injuries of an individual can be disregard
for the purpose of capital gains. An Australian taxpayer had meet with a car accident and
received $10,000 as damages owing for the accident. This amount will not be qualified as
income as it is exempted from tax17.
Answer to Part e:
Any kind of income, which is to be received or deemed to be received in future can be falls
under the taxable earnings is considered remote and forming a connection with income year18. A
taxpayer has purchased share amounting to $5 and whose current market price is $7.50 per share.
The rise in share price can be termed as income for the taxpayer but the amount has not received
by the taxpayer yet, which makes it to be not taxable in accordance with the “Section 6 (5) of
ITAA 1997”19.
17 Shari, Motro, The Income Tax Map: A Bird's-eye View of Federal Income Taxation for Law
Students." (2016): 1.
18 Matteo, Morini, and Simone Pellegrino. "Personal income tax reforms: A genetic algorithm
approach." European Journal of Operational Research 264.3 (2018): 994-1004.
19 Annette, Morgan, and Donovan Castelyn. "Taxation Education in Secondary Schools." J.
Australasian Tax Tchrs. Ass'n 13 (2018): 307.

14TAXATION LAW OF AUSTRALIA
Question 5:
Issues:
According to the “Section 6 (1) of ITAA 1936” the immigrants who are entering Australia
for studying should be treated as Australian resident or not.
Laws:
As per stated that “Section 6 (1) of ITAA 1936”, an individual can be stated as Australian
resident in account for having homes in Australia keeping aside the Taxation Commission when
the individual looks out the actual place for taxpayer to reside outside Australia as it is desired
for an individual. The four test are being conducted to check the residency of an individual.
These four concept includes ordinary concept, 183 days test, residence test and test of
superannuation. If an individual fulfils any of this criteria mentioned in this four kind of tests
then the individual will be considered as Australian resident.
An individual is treated as resident of Australia irrespective of citizenship, location of
permanent resident or nationality if the individual passes out the resident test. When domicile
test is being tested then the individual will be considered as resident of Australia unless and until
the individual is proving his residing place outside Australia permanently. In the case of
“Appelgate v FCT (1979)”, the taxpayer found to be domicile outside Australia. This permanent
residence part of domicile test needs to be check every year20.
20 Annette, Morgan, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)

15TAXATION LAW OF AUSTRALIA
As per the 183 days test an individual staying in Australia for more than six months in
Australia will be termed as Australian resident unless and until it is found that the individual
residing outside Australia and the individual has no intention to become the citizen of Australia.
Application:
Nisu came to Australia from Nepal on 30th December, 2018 for higher studies with the
intention to stay in Australia for three years. However, Nisu has to return because of certain
uncanny circumstances. In terms of ordinary resident test Nisu is not, the resident of Australia as
Nisu has not resided in Australia for a considerable amount of time. In terms of domicile test
Nisu is not falls under the category of residence, as Nisu does not have any kind of permanent
residence in Australia.
However, in case of 183-day test Nisu can be called as the resident of Australia as she stayed
in Australia for six months in a singlr income year. According to “Section 6 (1) of ITAA 1936”,
Nisu is a resident of Australia.

16TAXATION LAW OF AUSTRALIA
Conclusion:
In accordance with the “Section 6 (1) of ITAA 1936”, Nisu can be treated as Australian
resident as she qualifies in the 183-day test for residency.

17TAXATION LAW OF AUSTRALIA
References:
Gordon, Robert N. "REIT and MLP Taxation Under the New Tax Law." Journal of Taxation of
Investments 35.4 (2018).
Gordon, Roger H. "The Rise of the Value-Added Tax. Cambridge Tax Law series." (2016): 243-
246.
Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation
Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
Kenny, Paul, Australian Tax 2013 (LexisNexis Butterworths, 2013)
Krever, Richard E, Australian Taxation Law Cases 2014
Lang, Michael, et al., eds. Introduction to European tax law on direct taxation. Linde Verlag
GmbH, 2018.
Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing,
2016.
Milne, Janet E., and Mikael Skou Andersen, eds. Handbook of research on environmental
taxation. Edward Elgar Publishing, 2014.
Morgan, Annette, and Donovan Castelyn. "Taxation Education in Secondary Schools." J.
Australasian Tax Tchrs. Ass'n 13 (2018): 307.
Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)

18TAXATION LAW OF AUSTRALIA
Morini, Matteo, and Simone Pellegrino. "Personal income tax reforms: A genetic algorithm
approach." European Journal of Operational Research 264.3 (2018): 994-1004.
Motro, Shari. "The Income Tax Map: A Bird's-eye View of Federal Income Taxation for Law
Students." (2016): 1.
Olbert, Marcel, and ChristophSpengel. "International taxation in the digital economy: challenge
accepted." World tax journal9.1 (2017): 3-46.
Pinto, Dale, and Michelle Evans. "Returning income taxation revenue to the states: back to the
future." (2018).
Sadiq, Kerrie, Principles Of Taxation Law 2014
Shaw, Andrew. "Tax files: Why small really is better: Accessing the lower corporate tax rate for
small business entities." Bulletin (Law Society of South Australia) 39.10 (2017): 39.
Tran, Alfred. "Can taxable income be estimated from financial reports of listed companies in
Australia." Austl. Tax F. 30 (2015): 569.
Wanless, P. T. Taxation in centrally planned economies. Routledge, 2018.
Yuan, Helena. "Mid market focus: The sharing economy and taxation." Taxation in
Australia 51.6 (2016): 293.