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Taxation law : Sample Assignment

   

Added on  2021-05-31

13 Pages3445 Words33 Views
Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID

TAXATION LAW1Table of ContentsIssue:..........................................................................................................................................2Laws:..........................................................................................................................................2Application:................................................................................................................................2Conclusion:................................................................................................................................9Reference List:.........................................................................................................................10

TAXATION LAW2Issue: The issue here revolves around ascertaining the consequences of tax for both ABCSports Pty Ltd and John. The issue here would take into the deductibility or the assessabilityof the recipts and expenses caused during the ordinary business course or during theemployment course. Laws: a.“Federal Commissioner of Taxation v Wiener (1978)”b.“Californian Oil Products Ltd v Federal Commissioner of Taxation (1934)”c.“Scott v Commissioner of Taxation (1935)”d.“Sun Newspaper Ltd v Federal Commissioner of Taxation (1938)”e.“Higgs v Oliver” f.“J & G Knowles v Federal Commissioner of Taxation (2000)”g.“Marana Holdings Pty Ltd v Commissioner of Taxation (2004)”h.“Toyama Pty Ltd v Landmark Building Developments Pty Ltd”Application: As stated under the “subsection 6-5 (2) of the ITAA 1997” any sum that is receivedby taxpayer represents income under ordinary meaning if the sum is obtained from direct orindirect sources in the income year (Chardon, Brimble and Freudenberg 2017). Any sumreceived in respect of termination of contract or an agreement formed in the ordinary businesscourse is usually regarded as income if the sum that is substituted would have been anincome. Alternatively, termination of an agreement leads to an effect on business frameworkor results in a loss of substantial business part then the receipt of such termination payment isregarded as capital receipt.

TAXATION LAW3The current case study of ABC Sports Pty Ltd states that the receipts of compensationfor the termination of contract that comprised of 40% of the sporting goods supplies isregarded as the taxable income. The situation of ABC Sports Pty Ltd explains that themanagement was able to locate another supplier and presumably the termination of contractdid not result in significant business loss of impact on profitability of the firm. The cessationof agreement is assumed to have not resulted in substantial effect on ABC Sports Pty Ltdprofitability though it impacted the sales revenue marginally. The contract amid the ABC Sports Pty Ltd and supplier did not constitute the entirebusiness which was carried on by ABC Sports Pty Ltd. Referring to the judgement stated in“Californian Oil Products Ltd v Federal Commissioner of Taxation (1934)”following thenumber of arrangements an agreement was formed between the taxpayer and the agent for thesale of petroleum products (Schenk 2017). Following the mutual consent, the agreement wasterminated and in return a compensation payment was received by the taxpayer. The sum was not calculated by referring to the lost earnings even though the sum wasto paid in instalments. The high court of Australia held that sum received was capital andnon-assessable. Similarly, in the situation of ABC Sports Pty Ltd it is understood thatcompensation receipts under “section 20-20 (2)”was regarded as the recoupment of loss(Epstein 2017). Hence, the compensation of $200,000 will be held as assessable income interms of ordinary concepts under “section 6-5 of the ITAA 1997”. As stated under “section 8-1 of the ITAA 1997” a person is entitled to claim allowabledeductions for work related expenses from their taxable income incurred in producing orgaining the assessable income (Samansky and Smith 2017). A deduction is allowed to thetaxpayer given the expenses is necessarily incurred in carrying on of a business for producingassessable income.

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