Taxation Law

Get comprehensive study material on Taxation Law at Desklib. Find solved assignments, essays, and dissertations on Taxation Law. Course code, course name, and college/university mentioned.

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:.................................................................................................................3
Answer A:..............................................................................................................................3
Answer B:...............................................................................................................................3
Answer C:...............................................................................................................................3
Answer D:..............................................................................................................................3
Answer E................................................................................................................................4
Answer F:...............................................................................................................................4
Answer to G:..........................................................................................................................4
Answer H:..............................................................................................................................5
Answer I:................................................................................................................................5
Answer to question 2:.................................................................................................................6
Answer A:..............................................................................................................................6
Answer B:...............................................................................................................................6
Answer C:...............................................................................................................................7
Answer D:..............................................................................................................................7
Answer E:...............................................................................................................................8
Answer to question 3:.................................................................................................................8
Answer A:..............................................................................................................................8
Answer B:...............................................................................................................................9
Answer C:...............................................................................................................................9
Answer D:............................................................................................................................10

2TAXATION LAW
Answer to Question 4...............................................................................................................10
Answer A.............................................................................................................................10
Answer B..............................................................................................................................11
Answer C..............................................................................................................................11
Answer D.............................................................................................................................12
Answer E..............................................................................................................................12
Answer to Question 5...............................................................................................................13
Issues....................................................................................................................................13
Laws.....................................................................................................................................13
Application...........................................................................................................................14
Conclusions..........................................................................................................................14
References:...............................................................................................................................15

3TAXATION LAW
Answer to question 1:
Answer A:
The ruling is associated with the methodology given by the commissioner of taxation
to determine the depreciating assets effective life within the section 40-100, ITAA 1997. The
ruling is effective in computing the decline in value of the depreciating assets.
Answer B:
The taxpayers are provided with the information regarding the entitlement of claiming
tax offsets under the “Division 13, ITAA 1997”.
Answer C:
Assessable Earnings Amount of Tax to be paid (in $AUD)
$180,001 or more $54,097 + 45c for each $1 over $180,000
The table above signifies the highest amount of tax that the Australian residents are
required to pay for the year 2018-19.
Answer D:
Denoting the description that is made in the “Section 108-10 (2)” explains regarding
the collectible that are mainly used by the taxpayer for their personal enjoyment and use1.
Certain kind of rules are applied on the purchase of collectibles this includes that the capital
gains that are made from the sale of collectibles that are bought for less than $500 must be
overlooked under “section 118-10 (1), ITAA 1997”.
1 Smith, Julie P. "Taxing popularity: The story of taxation in Australia." Australian Tax
Research Foundation Research Studies (2014): viii.

4TAXATION LAW
Answer E:
The CGT event B1 is largely associated with the use of title before the title of the
asset passes away under the “section 104-15, ITAA 1997”2. A CGT event B1 happens if the
taxpayer enters in the agreement with the another entity based on conditions that;
a. The right of using and enjoying the CGT asset that is owed to them is passed to some
another individual
b. The title that is contained in the asset may be passed to another individual prior to or
before the end of the agreement.
Answer F:
The “section 4-10 (3)” is important in working out the amount of tax for the financial
year. The formula is given below;
Income Tax = (Taxable Income x Rate) – Tax Offsets
Answer to G:
The respondent in the case of “FC of T v Day 2008 ATC 20-064” was the public
officer and within the legislative provision of “section 8-1, ITAA 1997” the expenditure that
was occurred by the taxpayer in defending the legal charges were not permissible as
deductible expenditure3. This is because the numerous charges that were levied on the
2 Pope, Jeff. "The compliance costs of taxation in Australia and tax simplification: The
issues." Australian Journal of Management 18.1 (2013): 69-89.
3 Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.

5TAXATION LAW
taxpayer were as a result of his own concern of disciplinary charges. Therefore, the legal
expenditure was not allowed as deduction under “section 8-1, ITAA 1997”.
Answer H:
Marginal Tax Rate Average Tax Rate
The marginal tax rate is regarded as the
rising amount of tax that is paid on the
increase in income.
The average tax rate represents the total
amount of tax which is divided by the total
income.
In contrast to this, the marginal tax is the tax
that is applied on his or her last dollar of
income.
The average tax is the defined as the share
of income which a taxpayer pays
Marginal tax assesses the effect of tax on
the determination to earn, save and spend.
This tax is useful in measuring the burden
Answer I:
Tax that is levied on the consumption spending of the goods and services is regarded
as the consumption tax4. The tax base of the consumption tax is generally the amount of
money that is spend on the consumption. This kind of tax generally involves the indirect tax
that includes the sales tax and the value added tax.
4 King, Alexander. "Mid market focus: The new attribution tax regime for MITs: Part
1." Taxation in Australia 50.10 (2016): 590.

6TAXATION LAW
Answer to question 2:
Answer A:
Claiming deduction on interest is largely dependent on satisfying the provision of
“section 8-1, ITAA 1997” which is capable of representing that the expenses are occurred in
producing the assessable income of taxpayer5. The judgement made in “FCT v Roberts and
Smith (1992)” interest expenditure is allowed to deduction when the expenses are directly
associated to the derivation of taxpayer’s assessable income.
An interest on loan has been occurred by Brett for paying the employee wages for the
loan taken out by him. Referring to “FCT v Roberts and Smith (1992)” the interest on loan
that was taken by the Brett is allowed as deduction under “section 8-1, ITAA 1997”.
Answer B:
As stated by the ATO at the time of filing return, deduction is allowed to individual
taxpayer for outgoings occurred directly in generating assessable income. It is necessary
apportion the outgoings that are incurred by the taxpayer for dual purpose. Citing “Ronpibon
Tin NL v FC of T (1949)” it is held that expenses occurred by taxpayer in generating
assessable income is allowed as deduction under “section 8-1, ITAA 1997”6.
The mobile phone expenses were incurred by Julie that were for dual purpose. Noting
the decision in “Ronpibon Tin NL v FC of T (1949)” mobile phone bill expenses is only
5 Edmonds, Richard. "Resource Capital Fund IV LP: the issues on appeal?." Taxation in
Australia 53.1 (2018): 22.
6 Butler, Daniel. "Who can provide taxation advice?." Taxation in Australia 53.7 (2019): 381.

7TAXATION LAW
allowed up to 60% for deduction because it is associated with Julie income producing
activities7.
Answer C:
Outgoings occurred for private nature is not permitted for deduction under “section 8-
1, ITAA 1997”. The court in “Lodge v FC of T (1972)” held that child care expenses was not
deductible since it was not relevant in the derivation of assessable income8.
Sally incurred the baby sitter expenses so that she can attend work. Mentioning
“Lodge v FC of T (1972)” no deduction for baby sitter expense is allowed to Sally because it
is not relevant in producing income.
Answer D:
Within the legislation of “section 8-1, ITAA 1997” deduction for financial resources
loss is permitted to taxpayer that depletes financial position of taxpayer. The law court in
“Charles Moore & Co (WA) Pty Ltd v FCT (1965)” allowed deduction for theft of money to
taxpayer because it depleted financial position of taxpayer9.
7 Pinto, Dale, and Michelle Evans. "Returning income taxation revenue to the states: back to
the future." (2018).
8 McCluskey, William J., and Riël CD Franzsen. Land value taxation: An applied analysis.
Routledge, 2017.
9 Tan, Denise. "Discretionary trusts and landholder duty: Part 1." Taxation in Australia 53.7
(2019): 378.

8TAXATION LAW
Jerry is permitted to claim deduction allowable deduction under the “section 8-1,
ITAA 1997” for the goods valuing $20,000 stolen by employee because it resulted in loss of
financial position for the Jerry.
Answer E:
Denoting the explanation made in “8-1, ITAA 1997” deduction for expenses that are
pre-commencement to income generating activities is non-deductible since it is not occurred
during the income producing course. Citing “Maddalena v FCT (1971)” deduction for pre-
commencement expenses were not deductible because it incurred a point too soon10.
Expenses for fighting the elections and expenses associated to political party spending
by the taxpayer is regarded as the pre-commencement expenses. In light of “Maddalena v
FCT (1971)” the expenses are not allowed for deduction under section “8-1, ITAA 1997”
because it is not in the course of producing income.
Answer to question 3:
Answer A:
CGT event F2 only happens when the taxpayer as the land owner provides the land on
long term lease, or renews the lease. The event is applicable when the taxpayer is the land
owner and sub-lease the land. Nonetheless, taxpayers are provided to apply CGT discount
under the CGT event F211.
10 Brown, Katrina E. "Related party LRBAs and PCG 2016/5: Recommendations for trustees
for smooth sailing." Taxation in Australia 50.11 (2016): 670.
11 Mangioni, Vince. Land Tax in Australia: Fiscal reform of sub-national government.
Routledge, 2015.

9TAXATION LAW
Andy being the land owner provides Brian with land by granting the lease of land for
a premium of $5,000. Andy can apply the CGT event F2 while granting the lease of land
however no CGT discount is applied to Andy in this case.
Answer B:
Where the landowner forms the agreement with another individual by passing the
right and title of land to another person or entity then the CGT event B1 happens under
“subsection 104-15 (1), ITAA 1997”. Upon the end of the contract the title is eventually
passed to the new owner of land.
An option was exercised by John to grant the Farm Ltd to purchase the land in
exchange for the sum of $800,000. The title of land is passed by John to Farm Ltd which
ultimately resulted in CGT event B1 within the legislation of subsection 104-15 (1), ITAA
1997. In this circumstances a 50% CGT discount is allowed to John relating to capital gains
made from the asset.
Answer C:
The ATO explains that taxpayers are permitted to claim exemption from the CGT
where the main residence is used by taxpayer for residence use only under “section 118-110
(1), ITAA 1997”12. When the taxpayer uses the dwelling for producing income then only
partial main residence exemption is allowed for CGT. The taxpayer here purchased the
property in 2006 and it was put on rent for two years. The house was reoccupied for using its
main residence and finally selling it in 2018 where the capital gains of $300,000 was made.
Jamie and Olivia is allowed to claim partial main residence exemption because they used
their dwelling for business purpose. Additionally, they will also be allowed to a 50% CGT
12 Freebairn, John. "Taxation of housing." Australian Economic Review 49.3 (2016): 307-316.

10TAXATION LAW
discount from the capital gains made since the asset was under their ownership for 12
months.
Answer D:
Particulars Amount (AUD$) Amount (AUD$)
Proceeds from the sale of BHP Shares (CGT Event A1 (section 104-10(1)) 18720
Element 1: Cost of Acquisition (section 110-25(1)) 5400
Taxable Capital gains 13320
Proceeds from the sale of Wesfarmers Shares (CGT Event A1 (section 104-
10(1)) 10500
Element 1: Cost of Acquisition (section 110-25(1)) 26000
Loss on Sale -15500
Net capital loss -2180
Calculation of Capital Gains Tax
In the Books of Chris
For the year ended 2019
Chris is only allowed to include in his taxable income the gains made from BHP share
and should ignore the capital loss from Wesfarmers shares. No CGT discount method is
applicable because Chris did not hold the asset for 12 months.
Answer to Question 4
Answer A
Prizes and winnings which are of uncertain nature are considered to be not taxable if
the same are generated by chance. In case of prizes which are related to application of
personal skills and development would be considered as ordinary income in the nature of the
business. The case laws of “Kelly v FCT (1985)” shows that winnings from professional
sports people are considered as taxable income which is derived from personal skills13.
As per the case shows that the tax payer received $ 2000 for the best TV
advertisement which would be considered as ordinary income under “section 6-5, ITAA
13 Devos, Ken, and Marcus Zackrisson. "Tax compliance and the public disclosure of tax
information: An Australia/Norway comparison." eJTR 13 (2015): 108.

11TAXATION LAW
1997”. Referring to the case of “Kelly v FCT (1985)” the amount which is received would be
held taxable as it is related to the skills.
Answer B
As per the provisions of “section 6-1 of the ITAA 1936” income earned by an
employee of the business consists of allowances, salaries, wages or retirements benefits etc.
However, reimbursement of expenses from the employer should not be considered as
income14. As per the case which is provided the employee has received $ 500 as travel
allowance for travel which from workplace to Sydney where the office is situated. Therefore,
the same would be considered as taxable income as it is of ordinary income nature and would
be covered under “section 6-5, ITAA 1997”.
Answer C
The gifts which are received by Taxpayer would not be considered as income in
relation to ordinary income under the meaning of “section 6-5, ITAA 1997”. The case of
“Scott v FCT (1966)” shows that the gifts received from personal relations with the parties
would not be considered as income.
As per the case, the taxpayer received iphone as a gift from the client which has a
value of $ 1000. The decisions which was given in “Scott v FCT (1966)” guides that gifts are
not considered as income in ordinary sense as per “section 6-5, ITAA 1997” because the
same is not related to the business activities or generation of income for the taxpayer.
14 Walrut, Bernie, John Tucker, and Paul Ingram. "Tax files: A submission on the proposed
review of SA's tax laws." Bulletin (Law Society of South Australia) 37.4 (2015): 36.

12TAXATION LAW
Answer D
As per the provisions which is stated in “paragraph 118-37 (1) (b) of the ITAA
1997” taxpayers should not consider capital gains which is made from compensation which is
received from personal injury or damages15. These types of compensation which is received
would be exempted from the purview of taxes.
As per case, a compensation of $ 10,000 has received by the taxpayer for injuries
sustained from car accident. The compensation is received for injuries and therefore the same
would be exempted from the purview of taxes.
Answer E
In a situation where a taxpayer anticipates a certain amount of money from future
which can be considered as future income cannot be considered as present year’s income as
there is a very remote link between the two. In the case, a taxpayer purchased a share of $ 5
per share which was later valued at $ 7.5 per share. In such a case, it is to be noted that an
increase in the value of shares does not amount to income unless the shares are actually sold
off16. Therefore, it can be stated that it is too soon to consider the same as income in
accordance with relation to ordinary concept of “section 6-5, ITAA 1997”.
15 Pawson, Matthew. "How can we simplify the tax system?." Taxation in Australia 51.9
(2017): 468.
16 Tran-Nam, Binh. "Tax Reform and Tax Simplification: Conceptual and Measurement
Issues and Australian Experiences." The Complexity of Tax Simplification. Palgrave
Macmillan, London, 2016. 11-44.

13TAXATION LAW
Answer to Question 5
Issues
The issue which is discussed in the case relates to residential status of Nisu who
visited Australia for the purpose of Academic migration.
Laws
The definition of resident under “section 6 (1), ITAA 1936” explains that residency
stratus of Australian Residents if the same is residing in Australia for a considerable period of
time or if the taxpayer has no fixed place of abode in any other country. A taxpayer in order
to qualify as a resident of the business needs to satisfy the four types of tests which is used
for determination of residency status of a business. The first test is the resides test which
states that if a taxpayer has stayed in the country for a considerable amount of time than the
person would be considered as a resident of the country17. The domicile test states that an
individual is considered as a resident if the person has a place of residence which is
permanent in Australia unless it can be proven than the person has a permanent place of
abode outside Australia. As per the case of “FCT v Applegate (1979)” the opinion which was
given states that permanent does not signifies as forever but it is considered on year to year
basis.
The 183 days test states that if a person is physically present in Australia for more
than 6 months that the person would be considered as resident of Australia.’
Application
Nisu is an academic migrant who is present in Australia for the purpose of residing in
Australia for permanent basis. However, due to some unforeseen circumstances, Nisu had to
return to Nepal. Applying the Residing test Nisu cannot be considered as a resident of
17 Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.

14TAXATION LAW
Australia as he has not spent significant amount of time in the country as its resident. On the
other hand, Domicile test states that the resident’s home should be present in Australia which
is of permanent nature which is not applicable in the case of Nisu and therefore he does not
satisfy this case. As per the 183 days test, Nisu qualifies as he has stayed in Australia for
more than 6 months during the relevant year and therefore would be considered as a resident
under “section 6 (1), ITAA 1936”.
Conclusions
The discussion above shows that Nisu has satisfied the residency criteria under 183-
Day Test and therefore would be considered as a resident under “section 6 (1), ITAA 1936”.
References:
Bankman, Joseph, et al. Federal Income Taxation. Aspen Publishers, 2018.
Brown, Katrina E. "Related party LRBAs and PCG 2016/5: Recommendations for trustees
for smooth sailing." Taxation in Australia 50.11 (2016): 670.

15TAXATION LAW
Butler, Daniel. "Who can provide taxation advice?." Taxation in Australia 53.7 (2019): 381.
Devos, Ken, and Marcus Zackrisson. "Tax compliance and the public disclosure of tax
information: An Australia/Norway comparison." eJTR 13 (2015): 108.
Edmonds, Richard. "Resource Capital Fund IV LP: the issues on appeal?." Taxation in
Australia 53.1 (2018): 22.
Freebairn, John. "Taxation of housing." Australian Economic Review 49.3 (2016): 307-316.
King, Alexander. "Mid market focus: The new attribution tax regime for MITs: Part
1." Taxation in Australia 50.10 (2016): 590.
Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.
Mangioni, Vince. Land Tax in Australia: Fiscal reform of sub-national government.
Routledge, 2015.
McCluskey, William J., and Riël CD Franzsen. Land value taxation: An applied analysis.
Routledge, 2017.
Pawson, Matthew. "How can we simplify the tax system?." Taxation in Australia 51.9
(2017): 468.
Pinto, Dale, and Michelle Evans. "Returning income taxation revenue to the states: back to
the future." (2018).
Pope, Jeff. "The compliance costs of taxation in Australia and tax simplification: The
issues." Australian Journal of Management 18.1 (2013): 69-89.
Smith, Julie P. "Taxing popularity: The story of taxation in Australia." Australian Tax
Research Foundation Research Studies (2014): viii.

16TAXATION LAW
Tan, Denise. "Discretionary trusts and landholder duty: Part 1." Taxation in Australia 53.7
(2019): 378.
Tran-Nam, Binh. "Tax Reform and Tax Simplification: Conceptual and Measurement Issues
and Australian Experiences." The Complexity of Tax Simplification. Palgrave Macmillan,
London, 2016. 11-44.
Walrut, Bernie, John Tucker, and Paul Ingram. "Tax files: A submission on the proposed
review of SA's tax laws." Bulletin (Law Society of South Australia) 37.4 (2015): 36.