Taxation Law

Running head: TAXATION LAW
Taxation Law
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TAXATION LAW1
Table of Contents
Part A:........................................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................4
Conclusion:............................................................................................................................7
Part B: Sun Newspaper Ltd v FCT (1938).................................................................................8
Facts:......................................................................................................................................8
Judgement and reason for Judgement:.......................................................................................8
Significance of Principles in Case:........................................................................................8
References:...............................................................................................................................10

TAXATION LAW2
Part A:
Issues:
a. Will the taxpayer will be considered assessable for deriving income from the personal
exertion on the basis of ordinary meaning of “section 6-5, ITAA 1997”?
b. Whether or not the gains that are made from the business activities of the taxpayer
will be considered taxable during the course of business?
c. Whether or not the expenses that are incurred at the time of generating taxable
earnings is allowed for income tax deduction under “sec 8-1, ITAA 1997”?
Rule:
As defined in sec “6 (1) of the ITAA 1936”, income derived from an individual
private effort’s following the execution of the contract or conducting any personal services
generally includes the wages, salaries, bonus, fees, gratuities etc. The most important part is
to determine the nature of receipts that is received in the hands of taxpayer (Barkoczy, 2014).
The income earned from the private efforts is usually treated as income if it exhibits
satisfactory nexus with the income generating activities of the taxpayer. The decision of court
in “Hayes v FCT (1956)” explained that income derived from the personal exertion is
generally held as related to employment or receiving a reward in exchange of performing
service.
Certain circumstances explain that employers often pay the employee with the
expenses which is incurred by them. Where the employee is reimbursed by employer for any
kind of expenditure occurred by them then the reimbursed amount is held as non-taxable
earnings for employee (Grange et al., 2014). The employer on the other hand is held taxable
under the fringe benefit rules given in “section 23L of the ITAA 1936”.

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Certain circumstances explain that receipts of prize money that holds satisfactory
nexus with the employment are treated as income. The decision in “Kelly v FCT (1985)”
explained that receiving the award for the best player was perceived as having the nexus with
the income producing acts of the taxpayer (Krever, 2015). The amount was taxable under
“section 6-5, ITAA 1997” since it was related to taxpayer’s skill and employment. On the
other hand, “section 21A, ITAA 1936” lay down that benefits that are non-convertible to cash
may be having relationship with the personal service of the taxpayer however, if the benefit
cannot be converted into cash then it is not held as income (Morgan et al., 2013). The court in
“Cooke & Sherden v FCT (1980)” noted that benefits which cannot be converted into
monies or monetary value hardly possess the income characteristics.
Gift that are simple gain do not have any kind of characteristics of income. The
verdict given in “Scott v FC of T (1966)” stated that gifts when it is received by taxpayer
because of their personal relation then the gift will be considered as having income character
(Sadiq & Coleman, 2013). The ATO further explains that a taxpayer is permitted to deduction
for the expenditure that are occurred while taking business trips. This includes the airfares,
taxi fares, accommodations etc. Taxpayers often receive voluntary payments that has
satisfactory relationship with their income generating activities. The voluntary payments are
treated as taxable income under ordinary meaning of “sec 6-5, ITAA 1997”. The court in
“Calvert v Wainwright (1947)” held that tips which is received by taxi driver was treated
taxable income under ordinary sense.
Where a taxpayer incurs any expenses that are related to the purchase price of the
acquiring or selling an investment property, no deduction is allowed to taxpayer in this
situation. Examples of such cost involves the purchase price of property, bank fees or stamp
duty etc. instead these costs are added to the cost base of the investment property for the
purpose of CGT (Sadiq, 2014). The taxpayers within the “sec 8-1, ITAA 1997” is only