(solved) Taxation Law Principles

TAXATION LAW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Determination of treatment of annual payment of annuity.........................................................1
QUESTION 2...................................................................................................................................2
Calculation of taxable income of Corner Pharmacy...................................................................2
QUESTION 3...................................................................................................................................3
Principle established in IRC v Duke of Westminster [1936] AC 1: and its relevancy in
Australia .....................................................................................................................................3
QUESTION 4...................................................................................................................................5
Treatment for allocation of losses and determination of capital gain/loss..................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
An important source of revenue for government of a country is from taxation income.
Tax in a nation is charged on sales of goods and services, income earned by individual citizens
and international business and trade transactions. For charging tax on income of individuals in
Australia act had been enacted and as per the provisions of that act incomes added and
deductions are made to ascertain total taxable income. In the present report taxation of incomes
from lotteries, deductions from income for tax purposes etc. are discussed. Along with this
principle established under IRC v Duke of Westminster [1936] AC 1 and its relevance in present
era in Australia is presented.
QUESTION 1
Determination of treatment of annual payment of annuity
Issue: an individual citizen of Australia won $50000 per year for 20 years. in this case
lottery was conducted by Lotteries commission named as Set for Life. First $50000 was paid to
winner immediately after notifying him. The later amount was paid on first anniversary of first
payment. In case of death of winner, the outstanding amount will be paid to estate of deceased by
commission.
Rule: as per Australian taxation office, lottery income is defined under subheading of
prize and awards of heading other income. As per this provision any amount received in form of
lottery winnings from bank, society, credit union or other investment body must be declared by a
person in his annual income return (Cobiac and et.al., 2017). In this prize includes cash, low-
interest, interest free loans, holidays or cars.
In case winnings are from lottos,raffles and scratches, there is no requirement to declare
such amount in personal income of individual. Largest win from this type of lottery in Australia
is for, life ticket ($5) offering the highest prize of $75000 per year for 10 years
Section 160ZB - for the purpose of part 3 of this act, winnings form lotteries and
gambling or a game with a prize must be treated as assets but section 160ZB (2), states that
capital gain tax shall not accrue to a taxpayer on amount received from such winnings. As per
section 160ZB (3) provides that no capital losses are incurred for a transaction entered for
gambling, betting or lottery.
Capital gain taxes: in case any amount from lottery winning are invested in any property
or other things and then sold on a later date are liable for capital gain taxes. This means in case
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