Taxation Law

Running head: TAXATION LAW
Taxation Law
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TAXATION LAW1
Table of Contents
Answer to question 1..................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................5
Conclusion:............................................................................................................................8
References:.................................................................................................................................9

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Answer to question 1
Issues:
Is Anna held assessable for the numerous receipts that is received by her in the course
of her employment in accordance with the ordinary concepts of “section 6-5, ITAA 1997”? Is
Anna entitled to income tax deduction for outgoings occurred while gaining the taxable
income within the positive limbs of “section 8-1, ITAA 1997”?
Rule:
According to “section 6, ITAA 1936”, receipts that is earned from the employment
and providing personal services will be considered taxable in the hands the recipient. If the
receipts has sufficient connection with the taxpayer’s personal services then it will be treated
as income according to ordinary concepts1. Usually nexus is found with the common items of
personal exertion income. This includes the wages, salaries, commissions and bonus.
According to the “section 6-5 (1), ITAA 1997” the taxable income of the taxpayer commonly
includes the income from ordinary concepts. The commissioner in “Scott v CT (1935)” stated
that the income cannot be regarded as the simple word of art and necessarily requires the
implementation of the adequate principles to consider the receipts within the meaning of
ordinary concepts2.
Employers sometime to attract the candidates offers them with the sign-on fees.
Correspondingly, in “FCT v Pickford (1998)” the sign on fees which is received by
employee on joining was treated as payment made for the future services and was treated as
ordinary income. Income derived from personal services such as employment remuneration
1 LJ Nethercott, G Richardson and K Devos, Australian Taxation Study Manual, Questions and Suggested Solutions (28th
edn, Oxford University Press, 2018)
2 Woellner, Barkoczy, Murphy, Evans and Pinto, Australian Taxation Law (29th edn, Oxford University Press 2019)

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are held taxable in the hands of recipient3. As held in “Dean & Anor v FCT (1997)”
employment remuneration paid to the employee for being employed following the acquisition
of the company was considered as income under ordinary concepts.
According to the “section 23L, ITAA 1936”, if an employer provides any kind of
benefit of the employee then the benefit will not be considered as taxable for the employees.
If the employer pays the superannuation contribution to the employee, then the amount of
contribution paid to superfund cannot be considered as income for the employee. As stated by
the ATO salary sacrifice constitute a preparation which is usually treated as total
remuneration packages4. It is treated as arrangement between the employer and employee
given the employee decides to sacrifice a part of their future entitlements towards salary or
wages. If the employee makes a superannuation contribution on his own then the amount can
be claimed as deduction by the employee.
The ATO explains that employees that incurs cost of travelling to attend the seminars
or conference related to work then a deduction can be claimed for expenses incurred in
attending the seminars, conferences and education workshops. As stated in “section 15-2” an
employee during the course of employment may receive certain benefits. Such benefits may
be considered as taxable earnings together with the non-cash benefits that cannot be
converted into cash in accordance with ordinary meaning5. These amounts includes bonuses,
premium or allowances and gratuities.
As stated under the “Taxation Ruling of TR 1999/6” the taxpayers not required to
declare in their assessable the value of frequent flyer points which they accrued from frequent
3 Sadiq, Australian Taxation Law Cases (Thomson Reuters, 2019)
4 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).
5 Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).