Taxation Law

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer I:................................................................................................................................2
Answer II:...............................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer I:................................................................................................................................3
Answer to question 3:.................................................................................................................4
Answer I:................................................................................................................................4
Answer II:...............................................................................................................................5
Answer to question 4:.................................................................................................................5
Answer to question 5:.................................................................................................................6
Answer to question 6:.................................................................................................................8
References:...............................................................................................................................10

2TAXATION LAW
Answer to question 1:
Answer I:
A restrictive covenant or the arrangement is better understood as an activity that is
undertaken by one party to another party for doing trade in certain line of products or not to
directly or indirectly compete against one another (Woellner et al. 2016). Restrictive
covenant should be considered as the agreement that is entered by the party that imposes
restrictions on the other person’s trading activity or other revenue generating rights or
activities. The payments that are received from entering into the restrictive covenants are
treated as capital in nature.
As held in “Dickenson v FCT (1958)” the taxpayer was the proprietor and had the
service station (Braithwaite and Reinhart 2019). The taxpayer formed an agreement with the
Shell Oil Company that restricted the sales of the taxpayer to their product only for a specific
period of time and not to operate another service station inside the radius of five miles of his
parent’s business without forming any kind of identical trading activity. The amount that was
received for entering in the agreement was considered as capital in nature because the
payment portrayed the character of compensation for the taxpayer as he gave up or restricted
a portion of his trading activity.
Similarly, in the situation of George the payment of $40,000 that was receive for
entering into the agreement of not revealing or using their private information and also
limiting his ability of not working for a competitor for the remaining period of the
employment contract should be considered as capital in nature. This is because the payment
portrayed the character of compensation for George as he gave up and restricted his income
producing activities.

3TAXATION LAW
Answer II:
a. As stated under the “division 30, ITAA 1997” an income tax deduction might be
claimed by the taxpayers for gift or donations of property or money that has the value
of $2 or greater than that which is made to the gift deductible recipient, given that
certain conditions are met (Barkoczy 2016). Cheryl made a donation of $300 to the
building fund of local public primary school. The donation that is made by Cheryl
will be allowed as deduction under the “division 30, ITAA 1997” because the local
public primary school is considered as deductible gift recipient.
b. The donation of $50 that is made to the local public library will be considered as
deductible under the “division 30, ITAA 1997” because the public library is an
Australiana fund and meets the requirements of section 30-17 (Morgan, Mortimer and
Pinto 2018). The library is an eligible gift recipient and Cheryl will be permitted to
claim income tax deduction for the same.
c. An individual taxpayer is permitted to claim deduction for the entire amount of
payment that is made to the membership of trade, business or professional association
that is directly associated to the derivation of taxable income (Freudenberg et al.
2017). A taxpayer is permitted to claim up to $42 per annum in relation to the
subscription made for any membership of trade, business or professional which is not
directly associated to the income producing activities of the taxpayer. Cheryl has paid
$700 as the membership fees to the real estate agent association. Though she has not
been working for couple of years following the birth of her child but intends to return
to work someday. With respect to this, Cheryl is only permitted to claim deduction of
$42 for the membership subscription since it is not directly associated to the income
generating activities of the taxpayer.