Taxation Law: Understanding Personal Service Income and Fringe Benefits

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

TAXATION LAW1
Table of Contents
Answer to question A:................................................................................................................2
Answer to question B:................................................................................................................6
References:.................................................................................................................................8

TAXATION LAW2
Answer to question A:
The main provision of the “sec 6-5 (2)” explains that if a person is viewed as the
dweller of Australia then their chargeable earnings would take consider the ordinary proceeds
that they have derived from every sources. The judgement in “Levene v IRC” considered the
aspects such as the period of physical presence in Australia considers s person as an
Australian inhabitant1. While “sec 6-5 (3), ITAA 1997” clarifies that if an individual is a
foreign resident then their taxable earnings would include the ordinary earnings which is
earned either directly or indirectly from all the Australian bases. Under the “sec 84-5, ITAA
1997” a personal service income is regarded as those income that a person has earned mainly
as the reward for an individual’s effort or particular skills. It usually includes only the
individuals. A person can get the personal service income from the personal service entity.
Nevertheless, the income would be considered taxable to that person based on the marginal
tax rate.
Carla is found to be living in Australia and spends greater than 80% of her time in
Australia. Referring to “Levene v IRC” Carla will be viewed as the Australian occupant
based on “sec 6-5 (2)” because she has been constantly living in Australia for a considerable
time period2. She further reports the receipts of $80,000 from her own law firm and also pays
expenses towards her vicinity of $20,000. The income that is earned by Carla is viewed as
personal service entity or a personal service entity under “sec 84-5, ITAA 1997”. The amount
of $80,000 will be assessable receipts and will be assessable as ordinary proceeds under “sec
6-5, ITAA 1997”.
1 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).
2 Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).