Taxation Law

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 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................4
Conclusion:............................................................................................................................6
References:.................................................................................................................................7

TAXATION LAW2
Answer to question 1:
Issues:
Whether the amounts that is received by the taxpayer from the employment will be
considered taxable within the ordinary meaning of “section 6-5, ITAA 1997”?
Rule:
According to “section 6, ITAA 1936” income from the personal services or
employment usually comprises of the salaries, wages, commissions, bonus, allowances
gratuities etc. that is received by the person by working as the employee. A large part of the
receipts received by the taxpayer are treated as assessable income under “section 6-5, ITAA
1997”. The commissioner in “Scott v CT (1935)” explained by stating that income should be
viewed as the word of art and involves the use of the basic principles to consider the receipts
as ordinary income1.
The income tax consequences is dependent on the residency status of an individual.
To consider an individual an Australian resident under the section 995-1, ITAA 1997 it is
necessary to determine the residency status. An individual will be held Australian resident if
one meets any of the following test;
a. Resides Test
b. Domicile Test
c. 183 days Test
d. Superannuation Test
The federal commissioner decision in “Dean & Anor v FCT (1997)” explained the
meaning of employment remuneration. Accordingly, the taxpayer was held assessable for the
1 Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing, 2016.

TAXATION LAW3
amount paid to remain employed for 12 months’ period because the amount constituted
income in nature2. A non-cash benefit may be treated as having connection with employment
however when the benefit cannot be converted into cash then it is not considered as income.
The federal commissioner in “FCT v Payne (1996)” passed its by explaining that receipt of
flight reward by an individual that renders services or receipt of reward in the form of
business expenditure, then the amount is not regarded as assessable income since the flight
reward has originated because of personal contractual relationships3. According to “section
6-5, ITAA 1997” receipt of flight reward by an employee from the employer-paid
expenditure are not held as taxable income.
Where a taxpayer receives payment for relinquishing or restricting the rights are not
treated as income. For instance, it amounts to payment that is received for agreeing not do
something is not an income. As held in “Higgs v Olivier (1951)” lump sum amount that is
paid to the actor who decided not to produce, direct or act in another movie for a period of
eighteen months was not held as income4. Rather such kind of payment under “section 104-
35 (1)” results in CGT event D1 since the taxpayer in such a circumstances forms a promised
right with another entity.
Capital gains tax began on 20th September 1985 and only applies to the CGT asset that
are purchased on or after the 20th September 1985. The assets that are bought before the 20th
September 1985 are considered as Pre-CGT asset and capital gains made from the sale of
2 Jones, Sally, and Shelley Rhoades-Catanach. Principles of Taxation for Business and Investment Planning 2016 Edition.
McGraw-Hill Education, 2015.
3 Schön, Wolfgang. "Destination-Based Income Taxation and WTO Law: A Note." (2016).
4 Davison, Mark, Ann Monotti, and Leanne Wiseman. Australian intellectual property law. Cambridge University Press,
2015.