Taxation Law: Determination of Tax Outcomes for Personal Services and Interest Income

This article discusses the tax outcomes for personal services and interest income under the ITA Act 1997. It covers the laws, applications, and conclusions for each scenario. The article also includes computations for capital gains tax and taxable fringe benefits.

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

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Answer to question 3:.................................................................................................................4
Answer to question 4:.................................................................................................................5
Answer to 4A:............................................................................................................................5
Answer 4 B:................................................................................................................................6
Answer 4 C:................................................................................................................................7
Reference List:...........................................................................................................................8

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Answer to question 1:
Issue:
The issue is associated to the determination of the tax outcomes relating to the
services that are performed by the taxpayer for writing a book and selling the rights to the
media newspaper.
Laws:
 “Section 6-1 of the ITA Act 1997”
 “Section 6-5 of the ITAA 1997”
 “Brent v FCT (1971)”
 “Housden (Inspector of Taxes v Marshall (1958)”
 “Hussy v Hobbs (1943)”
Applications:
The case of Hilary clearly explains that she was very famous mountain climber
however she on one event a newspaper named daily terror approached to narrate the story of
her life by writing a book. Hilary performed the services of writing the book and later sold
the rights to newspaper named daily terror and received an amount of $10,000. With regard
to “section 6-1 of the ITA Act 1997” private exertion refers to the income that is received
from the personal services such as wages, salaries, fees or receipts from the business (Oishi,
Kushlev and Schimmack 2018).
“Section 6-5 of the ITAA 1997” explains that ordinary income refers to most of the
income that comes in based on the ordinary concepts (Bankman et al. 2017). “Denoting the
decision of “Brent v FCT (1971)” where the taxpayer was held taxable for narrating her life

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story (Brabazon 2015). The payment was ordinary receipts based on ordinary concepts of
“section 6-5 of the Act”.
Citing the above case reference for Hilary the amount of $10,000 is a taxable income
based on concepts of ordinary income stated in “section 6-5 of the act”. The income would
classified as the personal exertion income.
Hilary had some photographs that was taken during the mountain climbing and also
had the manuscript of the book. She decided to sale them to library. This fetch her $5000 and
$2000 each. It was noted in “Housden (Inspector of Taxes v Marshall (1958)” where the
verdict of the court stated that the taxpayer would be taxable since he made the experience of
Jockey available by selling the photographs and newspaper cuttings (Murphy and Higgins
2016). Preceding the explanation of above case the same can be applied for Hilary that
photographs and manuscripts that were sold will be taxable under ordinary concept of
“section 6-5 of the Act”.
If Hilary chooses to write the book for herself and sell into the market, the money that
she would receive from such will be said as royalty income. The court explanation in “Hussy
v Hobbs (1943)” the taxpayer being a criminal sold his autobiographies for publications in
article of newspaper and the money received from such publications was taxable (Peiros and
Smyth 2017). Preceding the above explanation the sale of books by Hilary is a taxable
income based on ordinary concept of “section 6-5 of the Act”.
Conclusion:
All the sum of $10,000, $5,000 and $2,000 which is earned by Hilary should be
viewed as personal exertion income which is taxable under “section 6-5 of the Act”.

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Answer to question 2:
Particular Amount ($) Amount ($)
Base value of the car 50000
Statutory rate 20%
Car Available for Private use (Days) 183
Number of days in the FBT year 365
Gross Taxable Value of the Car Fringe benefit (A) 5041.09
Employee contribution (B) 1000
Taxable value of the benefits (A) - (B) 4041.09
Computation of Taxable Fringe benefits
Statutory Method
Answer to question 3:
Issue:
The issue is whether the interest received from loans are constitute taxable income
under ordinary concepts of “section 6-5 of the ITA Act 1997”.
Laws:
 “Hochstrasser v Mayes (1960)”
 “McNeil v FCT (2007)”
 “Section 6-5 of the ITAA 1997”
Applications:
The parents made the interest free loan to some for short term purpose. Though the
loan was supposed to be paid by son within five years but the parents received the loan
amount within two years and also received an interest amount owing such loan.
The common rule of “section 6-5 of the ITAA 1997” explains that an item of income
that possess the nature of income then it should be ascertained till the extent to which the

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amount is released (Richards 2014). In “Hochstrasser v Mayes (1960)” To possess the
character of income the item should be a gain for taxpayers. In “McNeil v FCT (2007)” the
character of income should be judged in circumstances of derivation for the taxpayers. The
receipt of interest by the parents is having an income character and constitute gain (Norbury
2016). The interest amount that is received is an ordinary income as per the common rule of
“section 6-5 of the ITAA 1997” and attracts tax liability for the parents.
Conclusion:
The interest income had the character of income for parents that derived it. The
interest would be assessable based on common rule of “section 6-5 of the ITAA 1997”.
Answer to question 4:
Answer to 4A:
“Section 104-5” is based on determining the CGT event. Moreover “section 110-25”
takes into the account the incidental costs in the property cost base. The acquisition of vacant
land by Scott was pre-CGT asset since it was bought before the CGT event (Boccabella
2015). But the construction was made on 1st October which is a post CGT event. The sale of
property by Scott gave rise to CGT event A1 and the computation of CGT is stated below;

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Particulars Amount ($)
Purchase Price 90,000.00
Month & Year of Purchase Sep-86
Salling Price 8,00,000.00
Month & Year of Sale Jun-18
Capital Gain 8,00,000.00
Tax with Indexation 1,60,000.00
Purchase Price 90,000
Cost of Construction 60,000
Total Cost of Land 1,50,000
Disposal Proceeds 8,00,000
Net Capital gains 6,50,000
Calculations of Capital Gains Tax
For the Year ended 30th June
Answer 4 B:
If Scott choses to sell the property to daughter for $200,000 he would made gain of
$50,000. To support this statement the calculation is given below;
Particulars Amount ($)
Purchase Price 90,000.00
Month & Year of Purchase Sep-86
Salling Price 2,00,000.00
Month & Year of Sale Jun-18
Capital Gain 2,00,000.00
Tax with Indexation 60,000.00
Purchase Price 90000
Cost of Construction 60000
Total Cost of Land 150000
Disposal Proceeds 200000
Net Capital gains 50000
Calculations of Capital Gains Tax
For the Year ended 30th June

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Answer 4 C:
If the property ownership belonged to company rather than individual then the
amortization and tax outgoings is ought to be deducted;
Particulars Amount ($)
Month & Year of Purchase Sep-86
Sale Price 8,00,000.00
Month & Year of Sale Jun-18
Capital Gain 8,00,000.00
Purchase Price 90000
Construction cost 60000
Total cost of land 150000
Disposal Proceeds 800000
Net Capital gains 650000
Less: 50% CGT Discount 325000
Taxable Capital Gains 325000
Assessable as company 325000
Calculations of Capital Gains Tax
For the Year ended 30th June

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Reference List:
Bankman, J., Shaviro, D.N., Stark, K.J. and Kleinbard, E.D., 2017. Federal Income Taxation.
Wolters Kluwer Law & Business.
Boccabella, D., 2015. Reconciling the overlap of charging provisions in regard to non-cash
benefits from employment, personal exertion and business. J. Austl. Tax'n, 17, p.85.
Brabazon, M., 2015. Australian International Taxation of Attributed Trust Gains.
Murphy, K.E. and Higgins, M., 2016. Concepts in Federal Taxation 2017. Cengage
Learning.
Norbury, M., 2016. Tax cases: Dividend access shares and the small business CGT
concessions. Taxation in Australia, 50(7), p.410.
Oishi, S., Kushlev, K. and Schimmack, U., 2018. Progressive taxation, income inequality,
and happiness. American Psychologist, 73(2), p.157.
Peiros, K. and Smyth, C., 2017. Successful succession: Tax treatment of executor's
commission. Taxation in Australia, 51(7), p.394.
Richards, R., 2014. Taxation: Employee share schemes. Law Society Journal: the official
journal of the Law Society of New South Wales, 52(3), p.40.