Taxation laws : Solved Assignment PDF

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
Issue:......................................................................................................................................2
Laws:......................................................................................................................................2
Application:............................................................................................................................2
Conclusion:............................................................................................................................4
Answer to question 2:.................................................................................................................5
Issue:......................................................................................................................................5
Laws:......................................................................................................................................5
Applications:..........................................................................................................................5
Conclusion:............................................................................................................................7
Answer to question 3:.................................................................................................................7
Issue:......................................................................................................................................7
Laws:......................................................................................................................................7
Application:............................................................................................................................7
Conclusion:............................................................................................................................9
Reference List:.........................................................................................................................10

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Answer to question 1:
Issue:
Is the taxpayer will be liable for assessment relating to the sum received from the
publisher for the publisher for the reward for service as income under the ordinary concept of
section 6-5 of the ITAA 1997?
Laws:
a. “Section 6-5 of the Income Tax Assessment Act 1997”
b. “Scott v Commissioner of Taxation (1935)”
c. “Brent v Federal Commissioner of Taxation (1971) ATC 4195”
d. “Federal Commissioner of Taxation v Holmes (1995) ATC 4476”
Application:
According to the section 6 of the Income Tax Assessment Act 1936 income obtained
from the personal exertion comprises of the amounts in the form of wages, salaries,
commissions, fees, gratuities, pension, bonus or proceeds obtained from the business carried
on by the taxpayer. According to the “section 6-5 of the Income Tax Assessment Act 1997”
defines the expression of the term ordinary income as the income that is obtained from the
most of the sources (Barkoczy, 2014). The court of law in the case of “Scott v Commissioner
of Taxation (1935)” explained that the judicial concept of the expression ordinary income as
the income that are determined based ordinary concepts or the use of mankind (Brokelind,
2014).
As understood in the present circumstances of Jenny an amount of $1 million was
offered by Jack a publisher who was interested in publishing the life story of Herny, the
deceased husband of Jenny. The publisher approached her with an advance of $500,000 so
that he can conduct an interview with Jenny.

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According to the definition stated under the “section 6-5 of the ITAA 1997” an item
that possess the nature of income and same is derived when it comes home to the taxpayer.
The “section 6-5 of the ITAA 1997” explains that an item possessing the character of income
which has been derived will be held as income up to the amount of its realisable value
(Coleman & Sadiq 2013). The character of the income should be derived in all the
circumstances based on its derivation by the taxpayer.
The court of law in the event of “Brent v Federal Commissioner of Taxation (1971)
ATC 4195” provided its judgement by explaining that the payment that is received by the
wife of the train robber was granted with the exclusive right of narrating the story of her
husband to publish the life story would be held as taxable income (Grange et al., 2014). The
taxpayer lend her name to the story that was written by the journalist and the receipt of
amount from such exclusive right constitute income under section 6-5 of the ITAA 1997 that
attracted tax liability.
Simultaneously in the case of “Federal Commissioner of Taxation v Holmes (1995)
ATC 4476” the court of law held that the receipts relating to the salvage reward payment to
the marine engineer was regarded as reward for service and the same was included in the
taxable income (James, 2014).
Receipts that are associated to sponsorship money from the commercial firms and
receipts associated to the appearance fees relating to attendance in function might provide an
example of receipts related to services but are not held as employment (Kenny, 2013).
Likewise in the situation of Jenny the receipts obtained for narrating the story of her husband
during interview is held as reward for services but does not constitute employment. The
receipt by Jenny for making herself available for interview would be liable for assessment. In

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accordance with the section 6-5 of the ITAA 1997, the amount of $500,000 will be held
taxable as income from ordinary sources relating to “Reward for Service”.
According to the “Taxation Ruling of TR 2005/01” an individual is assessed for
carrying on the business of professional artist (Krever, 2013). Considering the distinguishing
character of profession of arts, the ruling explains the principles that are applied in
determining whether an individual is conducting the business of professional artist.
The current question of Jenny is held relevant if Jenny had written the story by herself
and the same would have held as business of professional artist and sum received from such
business is considered taxable based on the ordinary concepts of “section 6-5 of the ITAA
1997”. The primary reason for considering the income taxable because the amount would
have been derived by Jenny in compliance with the ordinary business course (Morgan et al.,
2013). For instance, individual that engage in the business of professional arts are usually
driven by the objective of creativity along with the aspiration of influencing the public
opinion. Therefore, if the book was written by Jenny herself the book would have been
considered as the work of professional art with the earnings generated from the sale of book
will be considered for taxation in compliance with income from ordinary concepts under
“section 6-5 of the ITAA 1997”.
Conclusion:
On a conclusive the receipt by Jenny for making herself available for interview for
narrating the story of her husband constitute reward for service and the same will be held for
assessment under “section 6-5 of the ITAA 1997”. Alternatively if, Jenny would have written
the book herself and the income obtained from such sale of book would have been held as the
work of professional art that attracts tax liability.

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Answer to question 2:
Issue:
Is the taxpayer allowed to claim deductions for the expenses incurred related to child
care under “section 8-1 of the ITAA 1997”?
Laws:
a. “Section 8-1 of the ITAA 1997”
b. “Lunney v Federal Commissioner of Taxation (1958) CLR 478”
c. “Section 8-1 (2) of the of ITAA 1997”
d. “Lodge v Federal Commissioner of Taxation (1972) ATC 4174”
Applications:
According to “section 8-1 of the ITAA 1997”an individual is entitled to claim
deductions from their taxable income any sort of loss r expenditure till the extent that it such
expenses are occurred at the time of producing the taxable income (Sadiq et al., 2014).
“Section 8-1 of the ITAA 1997” allows a person to deduct from their taxable income outings
or loss to the extent that such outgoings is necessarily occurred in carrying of the business
with the objective of gaining the taxable income. As held in the “Lunney v Federal
Commissioner of Taxation (1958) CLR 478” the essential characteristics of outgoings must
be determined as the necessary prerequisite in the derivation of taxation income (Woellner et
al., 2014).
The current situation of Sally who is a single parent employed in the accounting
incurred expenditure on the child care so that she could attend her employment.
The negative limbs the section 8-1 (2) of the of ITAA 1997 explains that an individual
is not permitted to claim deductions relating to any outgoings till the extent that the
expenditure is held as capital or possessing the character of capital in nature (Woellner,

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2013). Additionally, “section 8-1 (2) of the of ITAA 1997” prohibits a person from deducting
any expenses from their assessable income if the same is occurred as the outgoing in the
nature of private or domestic or occurred in generating non-taxable non-exempted income.
For an expenditure to be allowed as deductions there should be sufficient amount of
connection among the losses or outgoings or either of the positive limbs.
According to “section 8-1 (2) (b) of the ITAA 1997” a person is prohibited from
claiming any los relating to the private or domestic in nature (Pinto, 2013). The primary
reason for not allowing the expenditure to be held as allowable deductions because these
expenditure does not meet the criteria of either of the positive limbs or the same is held as
non-deductible in the second negative limb.
The expenditure incurred by Sally relating to child day care constitute entirely a
private and domestic nature. The expenditure would not held as deductible because the day
care expenditure does not meet the criteria of either of the positive limbs or the same is held
as non-deductible in the second negative limb. Likewise considering the verdict of high court
of Australian in the “Lodge v Federal Commissioner of Taxation (1972) ATC 4174” the
taxpayer was denied an allowable deductions from the assessable income relating to the
childcare expenditure to have the child minded in order to attend her day work (Basu, 2016).
The court of law in its verdict explained that the expenditure incurred by the taxpayer is held
as neither relevant nor held as incidental in the activities through which the taxpayer gained
the taxable income.
Evidently in the case of Sally the expenditure incurred by her for child day care is
non-allowable expenditure from the assessable income since the expenditure incurred by the
taxpayer is neither significant nor held as related to the activities gaining taxable income.

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Conclusion:
The expenditure of child day care holds the nature of private or domestic expenditure
and the same will be prohibited from deductions under “section 8-1 of the ITAA 1997” in the
case of Sally from gaining her taxable income.
Answer to question 3:
Issue:
Is the activities of planting wildflower amounts to carrying on of a business by
taxpayer under section 995-1 of the ITAA 1997?
Laws:
a. “Taxation ruling of TR 97/11”
b. “Subsection 995-1 (1) of the ITAA 1997
c. “Evans v Federal Commissioner of Taxation (1953) AITR 548”
d. “Ferguson v Federal Commissioner of Taxation (1979) ATC 4261”
e. “Section 6-5 of the ITAA 1997”.
Application:
According to the “taxation ruling of TR 97/11” a guidance has been provided to
determine whether an individual is carrying on the business of primary production. As per
“subsection 995-1 (1) of the ITAA 1997” a primary producer refers to the primary business
production as executing the trade of cultivation or plantation of plant under any form of
physical environment (Tan et al., 2016). Whilst each and every circumstances might offer its
certain facts but the question of determining is generally regarded as outcome or the process
of taking account of all necessary signs. According to paragraph 25 of TR 97/11 an
explanation of necessary factors have been provided in ascertaining the facts surrounding
venture. This consist of whether the activity undertaken has relevant commercial purpose or

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possess the element of business. Furthermore, it also consists of whether activities of
taxpayer possess the intention of profit making from the venture.
The present situation of Joseph he is viewing future retirement and purchase a land.
Joseph begins the plantation of wildflowers that was intended for harvest and selling the
same. According to “paragraph 14 of the TR 98/17” it is not obligatory for the taxpayer to
obtain most of their business income from primary production (Cao et al., 2015). The
taxpayer may be working in some other profession or business. Nevertheless the significant
aspect is that the actions of primary production is held as carrying of a business. As held in
“Evans v Federal Commissioner of Taxation (1953) AITR 548” the judgement of the court
stated that whether the business activities carried no by the taxpayer is dependent on
impression gained and whether the activities amounts to commercial sense.
As held in “Ferguson v Federal Commissioner of Taxation (1979) ATC 4261” the
commissioner verdict stated that the character of activity or the purpose of taxpayer together
with the mode of functional operations turns out to be a vital factor in ascertaining whether
the primary production business is being performed by the taxpayer (Robin & Barkoczy
2018). The objective of deriving profit along with arrangement of activities in a business way
helps in providing sign that a profit making venture is being performed by Joseph in the
present question. On most occasion it is found that the taxpayers generate earnings from
employment and or through other sources, enter into the business of primary production.
Likewise in the present state of Joseph there is a presence of significant commercial
objective. The activities of Joseph undertaken is held as wide enough to assure that venture
yields profit. There was an obvious presence of profit making intention despite it would take
a five year time. The objective of making profit for Joseph was understood on reasonable
grounds (Pinto, 2013). Planting of wild flowers were in adherence with actions of business

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and the profits derived from such activities is held liable for assessment under ordinary
business course of “section 6-5 of the ITAA 1997”. Additionally, deductions can be claimed
by Joseph under section 8-1 of the ITAA for incurring expenses on interest on loan, cost of
fertilizers and the cost of acquiring native seedlings.
Conclusion:
On a conclusive note, the activities undertaken of planting of wildflowers and selling
the same by Joseph amounts to carrying on of a business. Profits derived from such activities
attracts tax liability.

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Reference List:
Barkoczy, S. (2014). Foundations of taxation law.
Basu, S., (2016). Global perspectives on e-commerce taxation law. Routledge.
Brokelind, C. (2014). Principles of law: function, status and impact in EU tax law.
Amsterdam: IBFD.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. & Wende,
S., (2015). Understanding the economy-wide efficiency and incidence of major
Australian taxes. Canberra: Treasury working paper, 2001.
Coleman, C. & Sadiq, K. (2013). Principles of taxation law.
Grange, J., Jover-Ledesma, G. & Maydew, G. (2014). principles of business taxation.
James, M. (2014). Taxation of small businesses.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2013). Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
Morgan, A., Mortimer, C. & Pinto, D. (2013). A practical introduction to Australian taxation
law. North Ryde [N.S.W.]: CCH Australia.
Pinto, D., (2013). State taxes. In Australian Taxation Law (pp. 1763-1762). CCH Australia
Limited.
Robin & Barkoczy Woellner (stephen & murphy, shirley et al.), (2018). Australian taxation
law 2018. Oxford University Press.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W. & Ting, A.
(2014). Principles of taxation law.

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Tan, L.M., Braithwaite, V. & Reinhart, M., (2016). Why do small business taxpayers stay
with their practitioners? Trust, competence and aggressive advice. International Small
Business Journal, 34(3), pp.329-344.
Woellner, R. (2013). Australian taxation law select 2013. North Ryde, N.S.W.: CCH
Australia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. & Pinto, D. (2014). Australian taxation
law.