1TAXATION LAW Table of Contents Answer to question 1:.................................................................................................................2 Answer to A:..............................................................................................................................2 Answer to B:..............................................................................................................................3 Answer to C:..............................................................................................................................4 Answer to D:..............................................................................................................................4 Answer to E:...............................................................................................................................5 Answer to question 2:.................................................................................................................6 Answer to Question 3:................................................................................................................7 Answer to question 4:...............................................................................................................10 Reference List:.........................................................................................................................13
2TAXATION LAW Answer to question 1: Answer to A: An individual is considered for taxation purpose based on the income that is generated from all the sources directly or indirectly during the year of income. As explained under “taxation ruling of TR 2002/14”the receipt of lump sum as the prepaid rent is considered for taxation purpose1. Referring to“Section 6-5 and 6-10 (3) of the ITAA 1997”an individual is assumed tohave received the income when the same is either distributed based on their behalf in accordance with their direction. The existing question is concerned with the taxpayer that held the flat and leases the same to the new tenant. The taxpayer received a prepaid lease agreement for a sum of $15,000. An explanation is provided under the“taxation ruling of TR 2002/14”where a taxpayer getting the large amount in consideration of the lump sum prepaid agreement in advanceisheldliablefortaxationpurpose2.Thejudgementmadein“Frezierv CommissionerofStampDuties(NSW)”thecommissioneroftaxationstateditsby judgement by stating that prepaid rent received in the form of lump sum is held for assessment purpose. The commissioner explained that prepaid lump sum is considered as the nature of home coming for the person receiving such amount. Therefore, the taxpayer in such situation is held liable for assessment. In accordance with the“section 6-5 of the ITAA 1997”the prepaid rent in the form of lump sum for lease agreement will be included for assessment as income in respect of ordinary concept3. 1Bankman, Joseph, et al.Federal Income Taxation. Wolters Kluwer Law & Business, 2017. 2McDaniel, Paul.Federal Income Taxation. Foundation Press, 2017. 3Woellner, R. H,Australian Taxation Law Select 2013(CCH Australia, 2013)
3TAXATION LAW Answer to B: The Australian Taxation Office provides that an individual receiving insurance payment will account as the personal item and the same does forms the part of tax return. An exception to this rule is that in an individual receiving insurance pay for the purpose of deriving taxable income then such payment is held for assessment4. Alternatively, on noticing that a person receives an insurance payment in the form of lump sum for covering the assets then such amount should be assigned to the assets for taxable purpose. The current situation of Cheryl explains that warehouse of the taxpayer was destroyed by fire and as a consequence received an insurance pay of $500,000 as the compensatory loss. The judgement made in“Allied Mills Industries Pty Ltd v FCT (1989)”explained that the taxation commissioner held the compensation receipt as based on the nature of the amount5. The federal court states that compensation payment is viewed as capital element only in circumstances where the substitution principle is implemented for a lost item. Alternatively, receiving a compensation payment for the loss of service is accounted as income because it constitutes a substitute of the lost element. Consequently, in the situation of Cheryl, receiving a compensation payment relating to insurance is considered as capital receipt because the lost warehouse is the capital item. Considering the verdict of federal court, Cheryl on receiving the compensation payment from insurance pay-out constitutes a capital receipt and excluded from the taxable income. 4Murphy, Kevin E., and Mark Higgins.Concepts in Federal Taxation 2017. Cengage Learning, 2016. 5Schmalbeck, Richard, Lawrence Zelenak, and Sarah B. Lawsky.Federal Income Taxation. Wolters Kluwer Law & Business, 2015.
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
4TAXATION LAW Answer to C: A claim for allowable deduction can be bought forward by the taxpayer for expenses that are incurred in managing their tax matters. The Australian Taxation Office explains that an individual is allowed to claim deductions for the cost that are incurred in preparing and lodging the tax return6. The question introduces that Boris has occurred expenses of $500 on lodging a tax return. Referring to section 8-1 of the ITAA 1997 a person is allowed to claim specificallowabledeductionforexpensesoccurredingeneratingassessableproceeds. Adheringwith therulesof AustralianTaxationOfficeBoriscanbring the claimof permissible deductions relating to expenses incurred in lodging tax return. The Australian Taxation Office provides that a person can object to the ATO decision. An individual taxpayer can disagree with the manner based on which the ATO interprets the law. As evident Boris disagreed with the amended assessment7. Furthermore, Boris incurs cost on raising those objections. Therefore, with reference to section 8-5 of the ITAA 1997 Boris can claim the deductions for those expenses as specific deductions. Answer to D: There are two positive limbs of section 8-1 of the ITAA 1997. A person is allowed to claim deductions for general deduction under section 8-1 from their taxable income for any form of outgoing or the extent that it is occurred in generating taxable income8. The 6Schenk, Deborah H.Federal Taxation of S Corporations. Law Journal Press, 2017. 7Burke, Karen.Federal income taxation of partners and partnerships in a nutshell. West Academic, 2016. 8Woellner, R. H et al,Australian Taxation Law 2014
6TAXATION LAW Answer to question 2: The question introduces the issue whether Usman for the assessment year of 2016-17 will be considered as the Australian resident for taxation purpose. The“taxation ruling of 98/17”is associated to the understanding of the ordinary concept of the term “Resident”11. The taxation ruling of“taxation ruling of 98/17”is generally made applicable on individuals that comes to Australia in the form of migrants. This includes students for study purpose, visitors on holiday and workers under overseas work contracts. The judgement made in “Miller v Federal Commissioner of Taxation (1946)”where a person is residential matter is based on the question of fact for the taxation purpose. The judgement made by the court in the above stated case is based on assessing the reason for a person stay in Australia. Referring to the case of Usman he holds a French passport during his stay from the period of 2012-2016. The passport allowed Usman to stay and work in Australia. According to the “taxation ruling of 98/17” the period of physically being in Australia helps in explainingthebehaviourrelatingtoenduranceoramatterofhabit12.Thefederal commissioner elaborated his view in“Joachim v FCT (2002)”where a duration of six months is viewed as a matter of significant time while concluding the that the behaviour presented a span of continuity stay in Australia. The viewpoint of the commissioner states that the period of physical existence accompanied by the intention of staying in Australia coincide on several occasion. Once it is understood that the person has established a residence even though willingly this would be 11Hayward, Richard, ed.Valuation: principles into practice. Taylor & Francis, 2014. 12Cao, Robin, Larelle June Chapple, and Kerrie Sadiq. "Taxation determinations as de facto regulation: private equity exits in Australia."Australian Tax Review43.2 (2014): 118-141.
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
7TAXATION LAW mean that an individual would cease to be an Australian resident simply for the reason that the person was non-existent in Australia13. As per the“taxation ruling of 98/17”whether the person has preserved the continuity with the place where he or she resides with the purpose of returning and the expression that place of residence continuously his or her home. Evidently, in the Situation of Usman a period of continuousness was noticed which demonstrates that significant amount of time has elapsed here in Australia. Evidently an individual visit to Australia accompanied with the object of living in Australia for the period of six months and then extending the stay to greater than six months then the person would be held as the Australian resident from the time they come to Australia. consequently, denoting the circumstances of Usman provides that his stay in Australia reflected the period of continuity until the year 2016-1714. Therefore, Usman is considered as the Australian resident under“subsection 6 (1) of the ITAA 1936”and is held as liable for taxation. Answer to Question 3: Adhering with the“Section 118-192 of the ITAA 1997”there are certain special rules that are helpful in determining the consequences of capital gains and loss associated to the main residence employed to generate taxable income15. Furthermore, the“Subdivision 118 B”enables a person to claim a partial exemption for the dwelling where a portion of that 13Woellner, Robin, et al. "Australian Taxation Law 2016."OUP Catalogue(2016). 14Barkoczy, Stephen. "Foundations of taxation law 2016."OUP Catalogue(2016). 15Braithwaite, Valerie, ed.Taxing democracy: Understanding tax avoidance and evasion. Routledge, 2017.
8TAXATION LAW main residence is employed in producing income. Denoting the circumstances of Norman, he is surrounded with the consequences of capital gains tax for his main residence and also based on ascertaining whether Norman would be able to claim partial or complete main residence exemption. A person is permitted to claim the partial main residence exemption for the reason that it helps reducing the burden of capital gains tax or loss. Usually, a pre-CGT asset obtained prior to 20thSeptember is held for main residential exemption from the capital gains tax. Nevertheless, there are some of the capital gains tax that are not regarded for capital gains tax is stated below; a.Dwelling used as Main residence b.Motor Vehicle c.Collectibles bought for $500 or more than $500. d.A CGT asset that is bought entirely to generate the exempted income or the non- taxable income or non-exempted income. e.A person that receives valour awards. For a taxpayer to be considered as eligible for exemption of main residence it is necessary to possess a dwelling as main residence. Nevertheless, on perceiving that a person has two residences simultaneously it vital to ascertain whether the main residence is employed for residence purpose or for gaining producing taxable income16. To be considered for main residence exemption it is necessary for the taxpayer to determine whether there is a subject of fact and question. As evident in the current situation of Norman by profession who 16Davis, Angela K., et al. "Do socially responsible firms pay more taxes?."The accounting review91.1 (2015): 47-68.
9TAXATION LAW is a hair dresser has bought the main residence at a cost of $700,000. The main residence incurred the expenses on stamp for a cost of $70,000. An additional improvement that was made by the taxpayer to the residence was $100,000 so that the property is held suitable for the business of hairdressing. As understood from the question an important element is to establish as to what extent the residence question for the main residence exemption with reduced instances of capital gains tax. The taxation commissioner in its judgement held that no form of direct course in determining whether the residence qualifies for the main residence. According to the “section 118-150”a dwelling is considered eligible for main residence exemption provided that the residence purchases and later the residence is renovated before acquiring the property provides some indication. Taking into the account the situation of Norman an expense of $100,000 was reported before making the property suitable for hair dressing business. considering the declaration of the Australian Taxation Office a taxpayer would be able to gain main residence exemption from their capital gains tax17. Alternatively, a person is allowed to claim partial main residence exemption if any part of the dwelling or main residence is employed for generating taxable income. Referring to the situation of Norman he has six rooms at his main residence and used two of the rooms for the business purpose18. Adhering to“Subdivision 118 B” Norman will be able to allowed for partial main residence from the capital gains for the reason that a part of his residence was used for business purpose to produce income. 17Saad,Natrah."Taxknowledge,taxcomplexityandtaxcompliance:Taxpayers’ view."Procedia-Social and Behavioral Sciences109 (2014): 1069-1075. 18Coleman, Cynthia and Kerrie Sadiq,Principles Of Taxation Law 2013
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
10TAXATION LAW Answer to question 4: As defined under the“taxation ruling of 92/2”expenses that are occurred in the process of research and development for the scientific purpose19. The taxation ruling of TR 92/2 provides that expenses on scientific research are allowed for deductions under section 73A (1) if the expenses is not considered allowable under any other section. The current situation of Avon provides that the expenses that are incurred in the course of scientific research and development is considered for allowable deductions20. Evidences obtained from the case study suggest that the taxpayer occurred expenditure relating to the research and development stood $500,000. However, the expenditure that was occurred was in the course of business enhancement and was from the approved research and development institutes. With reference to section 73 A of the ITAA 1936 an organization is eligible for claiming permissible deductions for the expenditure that is occurred for undertaking the scientific research and development21. An important consideration for the section 73 A of the ITAA 1936 is to qualify for the allowable deductions the expenses that are occurred is for the cause of assessable income. As an alternative if an organization occurs an expenses on research and development for gaining or producing the taxable income then in such situation the expenses is not allowed for allowable deductions. Furthermore,subsection 1 of the section 73A of the ITAA 1936 19Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew,2014 Principles Of Business Taxation 20James, Malcolm,Taxation Of Small Businesses 2014/15 21Jover-Ledesma, Geralyn,Principles Of Business Taxation 2015(Cch Incorporated, 2014)
11TAXATION LAW provides an explanation that the eligibility criteria for getting the allowable deductions is to occur expenses from the scientifically approved research institute22. As held in the situation of the Avon Pty Ltd, the company occurred a research and development expenditure as the payment to Queensland University which is scientifically approved research institute with the business improvement activities. Therefore, Avon in this situation would be eligible for claiming allowable deductions based on the research and development activities. An important consideration of the“section 73A of ITAA, 1936”and“taxation ruling of TR 92/2”provides that a business would be able to gain income tax incentive on the circumstanecs when the expenses occurred is with authorized research centre23. However, section 73A of ITAA, 1936of the“taxation ruling of TR 92/2”explains that to claim a tax incentive the business should satisfy the deduction criteria. Evident in the circumstances of Avon Pty the expenditure on the research and development is from the scientifically approved institute which meets the eligibility norms ofsection 73A of ITAA, 193624. In addition to this, the company would be able to gain the advantage of income tax incentive from the taxable earnings for the expenses on scientific research and development. 22Kenny, Paul,Australian Tax 2013(LexisNexis Butterworths, 2013) 23Krever, Richard E,Australian Taxation Law Cases 2013(Thomson Reuters, 2013) 24Sadiq, Kerrie et al,Principles Of Taxation Law 2014
12TAXATION LAW Reference List: Bankman, Joseph, et al.Federal Income Taxation. Wolters Kluwer Law & Business, 2017. Barkoczy, Stephen. "Foundations of taxation law 2016."OUP Catalogue(2016). Basu, Subhajit.Global perspectives on e-commerce taxation law. Routledge, 2016. Braithwaite, Valerie, ed.Taxing democracy: Understanding tax avoidance and evasion. Routledge, 2017. Burke, Karen.Federal income taxation of partners and partnerships in a nutshell. West Academic, 2016. Cao, Robin, Larelle June Chapple, and Kerrie Sadiq. "Taxation determinations as de facto regulation: private equity exits in Australia."Australian Tax Review43.2 (2014): 118-141. Coleman, Cynthia and Kerrie Sadiq,Principles Of Taxation Law 2013 Davis, Angela K., et al. "Do socially responsible firms pay more taxes?."The accounting review91.1 (2015): 47-68. Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew,2014 Principles Of Business Taxation Hayward, Richard, ed.Valuation: principles into practice. Taylor & Francis, 2014. James, Malcolm,Taxation Of Small Businesses 2014/15 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 2013(Thomson Reuters, 2013) McDaniel, Paul.Federal Income Taxation. Foundation Press, 2017.
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
13TAXATION LAW Miller,Angharad,andLynneOats.Principlesofinternationaltaxation.Bloomsbury Publishing, 2016. Murphy,KevinE.,andMarkHiggins.ConceptsinFederalTaxation2017.Cengage Learning, 2016. Saad,Natrah."Taxknowledge,taxcomplexityandtaxcompliance:Taxpayers’ view."Procedia-Social and Behavioral Sciences109 (2014): 1069-1075. Sadiq, Kerrie et al,Principles Of Taxation Law 2014 Schenk, Deborah H.Federal Taxation of S Corporations. Law Journal Press, 2017. Schmalbeck, Richard, Lawrence Zelenak, and Sarah B. Lawsky.Federal Income Taxation. Wolters Kluwer Law & Business, 2015. Woellner, R. H et al,Australian Taxation Law 2014 Woellner, R. H,Australian Taxation Law Select 2013(CCH Australia, 2013) Woellner, Robin, et al. "Australian Taxation Law 2016."OUP Catalogue(2016).