TAXATION LAW Taxation Law Name of the Student Name of the University Authors

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Part A:........................................................................................................................................2
Part B:.........................................................................................................................................7
Facts of the Case:...................................................................................................................7
Decisions and main principles applied in judgement:............................................................8
Relevance of Case and likely decision on similar facts:........................................................9
References:...............................................................................................................................10

2TAXATION LAW
Part A:
According to “section 6-1, ITAA 1936”, personal exertion income includes income
that is derived from wages, salaries, gratuities, superannuation allowance etc. by working as
the employee or from business activities. According to “section 6-5, ITAA 1997” most of
the income that is earned by the taxpayer is treated as ordinary income. According to the
taxation commissioner in “Scott v CT (1935)” income should be not be viewed as the word
of art instead the receipts must be determined based on in relation to the ordinary concepts
and usage (Maley, 2018). Jane reports the receipts of gross salary from her employment. The
gross salary amounts to income from personal exertion by Jane under “section 6-1, ITAA
1936”. Citing the court judgement in “Scott v CT (1935)” the gross salary is an ordinary
income based on the ordinary concepts of “section 6-5, ITAA 1997” and it is included for
taxation purpose.
As per the nexus test a sufficient relation should be present between the receipts and
provisions of services namely the reward or the ordinary incidence of service. The court in
“Dean v FCT (1997)” held that receipt of retention payment by employee to continue
employment for twelve more months following the takeover constitute an ordinary income
(Barnes, 2018). The performance bonus of $25,000 received by Jane is treated as taxable
income because the bonus holds adequate nexus with the occupation. She also received from
Milton Hotel her clothing allowance of $4,500. The amount has been included for assessment
as ordinary income under “section 6-5, ITAA 1997” as the sum is received by Jane during
the course of her employment by working in capacity of employee.
According to “Section 8-1, ITAA 1997” expenses occurred in purchasing ordinary clothing
items namely suits are non-deductible expenses. The court in “Mansfield v FCT (1996)”
stated that cost occurred on ordinary articles of apparel is not allowed for deduction

3TAXATION LAW
notwithstanding if the expenses are necessary to assure that a proper appearance is
maintained in a particular job (Braithwaite, 2017). The jewellery expense of $7,500 is non-
deductible under “section 8-1, ITAA 1997” for Jane since it is an ordinary item of apparel
which is not related to work.
A simple winning of prize is not held as income unless the receipts forms the part of
taxpayers income generating activities. The court in “FCT v Kelly (1985)” held that receipt
of award for being the fairest player was treated as taxable income since it was related to
employment and use of taxpayer’s skills (Miller & Oats, 2016). The receipt of award by Jane
for being best Australian financial controller is a taxable receipts since it is related to her
profession and work. Jane also received a computer in her award that valued $2,550. Citing
“Cooke and Sherden (1980)” gains which are non-convertible to cash is not held as ordinary
income. The computer received by Jane as an award is a gain which is easily convertible
cash. Therefore, it is included into the taxable income as ordinary income under “section 6-5,
ITAA 1997”.
If the employer gives an employee with the benefit then in such case the benefit will
be treated as non-taxable income for the employee under “section 23 L, ITAA 1936” whereas
for employer the value of benefit given to employee will be considered as FBT. Milton
Hotels Ltd paid Jane’s membership fees (Woellner et al., 2016). The amount will be treated
as non-taxable fringe benefit under “section 23 L, ITAA 1936” for Jane whereas Milton
Hotel Ltd will be liable for fringe benefit tax.
As stated by ATO a taxpayer is permitted to obtain a permissible deduction for
expenses that is occurred for attending seminars, conferences and workshop education that is
associated to work purpose (Awasthi, 2017). Any private part of the expenses must be
excluded that is occurred on trip. Jane with her husband attended a finance conference. The