Taxation Law

This document provides an in-depth analysis of taxation law, specifically focusing on the treatment of income from personal exertion, deductions for travel expenses, deductions for repair expenses, and capital gains tax. It includes relevant case law and references to support the analysis.

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 Part B........................................................................................................................2
Answer to Question A:...........................................................................................................2
References:.................................................................................................................................6

2TAXATION LAW
Answer to Part B
Answer to Question A:
As stated under “section 6, ITAA 1936” when a taxpayer obtains income from
earnings, wages, salaries, commissions, wages, bonus etc. received in capacity of the
employee would be treated as earnings from private effort. Furthermore, under “section 6-5,
ITAA 1997” a larger portion of the income that is received by the taxpayer is treated as
ordinary income (Woellner et al., 2016). The law court in “Scott v FCT (1935)” stated that
earnings must not be viewed as art and requires the application of essential principles to treat
those receipts as income in agreement with ordinary conceptions and mankind usage.
As evident in case of Paul he is employed as a doctor at John James Hospital and
earns annual income of $175,000. He also works as the part-time lecturer at medical school in
Canberra and earns $65,000 per year. Referring to “section 6, ITAA 1936” the income
earned by Paul constitutes income from personal exertion (Blakelock & King, 2017).
Therefore, the salary from the employment at hospital and part-time lecturer would be
considered as assessable income under the ordinary meaning of “section 6-5, ITAA 1997”.
The court in “Lunney v FCT (1958)” travel amid the home and person’s place of
work is not allowed for deductions (Barkoczy, 2016). While “section 25-100, ITAA 1997”
allows the taxpayer to obtain deduction for the charges incurred in travelling amid the
workplaces. The travel must be related among the two workplaces where the profits
producing activities are performed by the taxpayer and neither of the place is the home of
taxpayer. The law court in “FCT v Wiener (1978)” permitted the taxpayer with the allowable
tax deduction for traveling expenses amid schools and also between home and travel between
home and the first and last school attended each day by the taxpayer (Sadiq, 2018).

3TAXATION LAW
Similarly, in the case of John, under “section 25-100, ITAA 1997” he will be
permitted to claim deduction for travelling expenditures between two place of work. The
occupation of the taxpayer here is inherently travelling and he travelled in the performance of
his duty from the time when John leaves his home till the time he returns home.
Under the first limb, to obtain a new employment are not treated as in the course of
generating the taxable revenue. The court in “Maddalena v FCT (1971)” denied the football
player with the deduction for the travel expenses incurred in negotiating his contract (Morgan
& Castelyn, 2018). The Commissioner of Taxation held that the expenses were not allowed
for deductions as it occurred point too soon. Similarly, the travelling and accommodation
expenses occurred by Paul to attend a post-graduate course in USA so that he can apply for
the promotion is not tax deductible under the positive limbs of “section 8-1, ITAA 1997”.
The expenditures occurred at a point too soon. Furthermore, the expenditure incurred by Paul
does not holds sufficient nexus with the earnings generating activities of the taxpayer.
Under “section 25-10, ITAA 1997” work done on the premises to remedy the defect
or prevent any further deterioration is considered as repair (Morgan et al., 2018). If the work
done on the property goes further than the repair under “section 25-10, ITAA 1997” then any
such expenditure for work is not allowed as deductions. Expenses incurred on repair is not
permissible for deduction under “section 25-10, ITAA 1997”, if the outgoings that are
occurred is capital in nature (Robin, 2019). The law court in “Sun Newspapers Ltd v FC of
T (1938)” held that expenditure was occurred in establishing, replacing or expanding the
profit deriving structure instead of being working or operational expenditure.
In an another example of “Lindsay v FCT (1960)” the court of law held that
expenditures occurred for renewing the slipway was the renewal of the entirety and does not
constitute a deductible repair (Robin & Barkoczy, 2019). Renovating the asset to its previous

4TAXATION LAW
conditions without causing any kind of change to its essential character or function
constitutes repairs. It may involve renewal or replacement of secondary parts as the whole but
not the rebuilding of the entirety. Similarly, the replacement of floor coverings with the new
wooden floorboards by Paul cannot be allowed for deductions because it amounted to
improvement under “section 25-10, ITAA 1997”.
On the other hand, Paul also incurred expenses on repainting and re-plastering the
wall of investment property that was damaged because of leak can be allowed as tax
deductible expenses because it amounts to repairs under “section 25-10, ITAA 1997”. The
repairs were undertaken by Paul to restore the assets to its previous state without causing any
kind of change in its functions (Blakelock & King, 2017). The aim was only to make the
deterioration good through the wear and tear.
A taxpayer usually makes the capital gains or capital loss if the CGT event happens
under “section 102-20 of the ITAA 1997”. A CGT event A1 happens under “section 104-10
(1), ITAA 1997” when the CGT assets is disposed (Morgan et al., 2018). To work out the
capital gains the cost base are regarded as the total costs that are related with the CGT asset.
Under “section 110-25”, the cost base of the property includes the incidental costs such as
acquisition or event. While the 3rd element of cost base items includes the non-capital costs of
ownerships such as capital repairs (Blakelock & King, 2017). The legal fees and stamp duty
paid on acquisition by Paul will be included in the cost base under the second element while
the legal fees and sales commission upon disposal would be excluded from the sales proceeds
of the investment property. The sale of investment property by Paul to his sister constitutes
the CGT event A1 under section “section 102-20 of the ITAA 1997”. The total taxable
income derived by Paul and allowable deductions for the year has been stated below;

5TAXATION LAW

6TAXATION LAW
References:
Barkoczy, S. (2016). Foundations of taxation law 2016. OUP Catalogue.
Blakelock, S., & King, P. (2017). Taxation law: The advance of ATO data
matching. Proctor, The, 37(6), 18.
Morgan, A., & Castelyn, D. (2018). Taxation Education in Secondary Schools. J.
Australasian Tax Tchrs. Ass'n, 13, 307.
Morgan, A., Mortimer, C., & Pinto, D. (2018). A practical introduction to Australian
taxation law 2018. Oxford University Press.
Robin & Barkoczy Woellner (Stephen & Murphy, Shirley Et Al.). (2019). Australian
Taxation Law Select 2019: Legislation And Commentary. Oxford University Press.
Robin, H. (2019). Australian Taxation Law 2019. Oxford University Press.
Sadiq, K. (2018). Australian Tax Law Cases 2018. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation
Law 2016. OUP Catalogue.