Assignment on Taxation Law 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
Answer to question 2:.................................................................................................................6
Answer to question 3:.................................................................................................................9
Answer to question 4:...............................................................................................................12
References:...............................................................................................................................17

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Answer to question 1:
There are large amounts that is received by an organization would be considered as
the assessable income. Assessable income represents any sum which is received would be
treated as ordinary income given the income is earned from providing personal services,
income from the property and earnings from carrying on of the trading activities1. The
assessable income includes the amount that is specified under the income tax law as the
income. However, the assessable income does not include the amount that is stated in the
income tax law as the exempted income or the non-assessable, non-exempt income.
Assessable income comprises of receipts from the trading with the non-members and income
from the sources comprises of sources that are outside the organization.
The assessable income comprises of the ordinary income and statutory income. The
term ordinary income does not have any definition under the tax Acts. The meaning of this
concept is obtained from the case law and it is based on the principles that emerges from the
decisions2. The role of tax legislation is to take into the account the sum of ordinary income
as the taxable given the sum satisfies the criteria that is determined by the application of case
law principles. The sum would be considered in the ordinary income under the “section 6-5
of the ITAA”.
Ordinary income has been explained under “section 6-5 of the ITAA 1997”. As per
the “section 6-5”, usually most of the earnings that is earned by the taxpayer is held as
ordinary income3. The judicial concept of income as per the ordinary concepts is explained
1 Fleurbaey, Marc, and François Maniquet. Optimal taxation theory and principles of fairness. No.
2015005. Université catholique de Louvain, Center for Operations Research and Econometrics
(CORE), 2015.
2 Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing,
2016.
3 Christie, Michael. "Principles of Taxation Law 2015." (2015): 814-816.

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through a case law approach. In “Scott v CT (1935)” the court held that earnings should not
be observed as the word of art and necessitates implementation of the required principles to
determine the treatment of receipts as income with respect to the ordinary concepts.
The ordinary income is included into the taxpayer’s taxable income under “section 6-
5 of the ITAA 1997”. The statutory income comprises of the assessable income because of
the actions of specific legislation that are contained in the acts. It becomes obligatory for the
“Federal Commissioner of Taxation” to represent how the legislation is applied to classify
the amount as the statutory income4. Frequently, the amount of statutory income fails to meet
the concept of ordinary income and hence it would not be treated for taxation purpose
without any particular legislation. Once the legislation has been implemented and ascertained
the sum to include into the statutory income, the sum calculated under the legislation is
included in the assessable income under the “section 6-10”.
Statutory income is income stated as the assessable income under the numerous
provisions stated in the tax assessment acts. Statutory income is taken into account before the
implementation of ordinary income as the amount that must be assessed under the specific
provision of “section 6-25 (2)”. The items of statutory income consist of income as per the
ordinary concepts that is referred as ordinary income5. As the term ordinary income is
particularly not defined by the legislation in the Act, taxpayers usually remains dependent on
the court and case law approach to explain its meaning.
4 Kiprotich, B. A. "Principles of Taxation." governance (2016).
5 Burton, Mark. "A Review of Judicial References to the Dictum of Jordan CJ, Expressed in Scott v.
Commissioner of Taxation, in Elaborating the Meaning of Income for the Purposes of the Australian
Income Tax." J. Austl. Tax'n 19 (2017): 50.

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The reconciliation rule defined under “section 6-25 (2)” explains that provided the
sum is both the ordinary and statutory income, the statutory rules of income succeeds except
there is any opposing intention prevails6. In spite of the broad intention stated under “section
15-2” there has been only a restricted role since it is applicable to a sum that are ordinary
income or the fringe benefit. Similarly, the employee share benefits is not held for taxation as
the ordinary income instead a separate statutory regime is available. On the other hand, the
numerous lump sum payments which is received by the employee for the termination of
employment particularly the redundancy payment are not treated as statutory income.
There are two situations when income is exempted from the tax assessment. First, this
includes the situation when the sum of statutory or ordinary income is obtained by the entity
that are exempted under “section 11-5 of the ITAA 1997”7. Secondly, the sum of listed
exempted income that is received by the entity is taxed under “section 11-15 of the ITAA
1997”. The concept of exempted income is defined under the “section 6-20 of the ITAA
1997”. The division 11, consists of “subsection 11-1A -11-15” comprises of lists of
exempted income that is received by the entity is assessed for taxation purpose under
“section 11-15 of the ITAA 1997”8.
As per the “section 11-15” it lists down the forms of income that are exempted from
taxation. Under “subparagraph of 23(g)(v)” of the “Tax Determination 93/190” explains
that income by society or any association that is created for community services purpose
6 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation
7 Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013
8 Belloc, Hilaire, On (Nabu Press, 2010)

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which is not carried on for purpose of profit or gains the individual members would be
exempted from taxation9.
As evident under “section 6-23” recognizes the fourth basic income category is the
non-assessable non-exempt income, which is neither held for assessment nor it is exempted10.
This represents the class of income that is not held for assessment but is not considered as
exempted income under circumstances where the exempted income is taken into the
considerations for particular purpose namely in computing and deducting the tax losses under
the “Division 36”11. The non-assessable non-exempted income is held as untaxed income and
it is considered as if not an income. The classification of NANE was introduced during the
year 2003 to avoid any overlap between the taxable and the exempted earnings. An element
of income is only considered taxable, exempt or non-assessable non-exempt income and
hence cannot fall in greater than one category.
On noticing that the sum is not the ordinary income it is not assessed for taxation
purpose since it does not meet the conception of stated under the Australian jurisdiction12.
This is because it is not the type of income that is captured by the taxation law which is not to
assessment under “section 6-15(1)”. The income might not be particularly treated as
exempted or NANE income since it fails to satisfy the criteria of section 6-5 and section 6-10
which is not taxable.
9 Barkoczy, Stephen, Foundations Of Taxation Law 2014
10 James, Simon, The Economics Of Taxation 2014.
11 Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
12 Woellner, R. H, Australian Taxation Law 2012 (CCH Australia, 2013)