Taxation Law: Personal Service Income, Deductions, and Assessable Income

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 (b):...........................................................................................................2
References:.................................................................................................................................5

TAXATION LAW2
Answer to question 1 (b):
As clarified in “sec 6 ITAA 1936”, receipts that are produced from the product of
personal services are known as personal service income. This hold an adequate relation with
income generating capacity of the taxpayer. The decision cited in “Hayes v FC of T (1956)”
stated that proceeds that is made from execution of personal services is commonly considered
as the incidence of services or business or for any kind of reward for services (Woellner et al.
2016). Commonly a large number of pay that is earned by taxpayer are considered as
ordinary earnings under “sec 6-5, ITA Act 1997”. Income that is earned through personal
service may be held chargeable under ordinary concepts or as statutory income.
The income earned by Thomas Hawks from his business activities of tax and
accounting is viewed as personal service business income. Citing “Hayes v FC of T
(1956)”The receipt of $648,000 amounts to personal business receipts under “sec 6 ITAA
1936” (Barkoczy 2016). The amount received by him has necessary relation with his income
generating activities and will held chargeable in “sec 6-5, ITAA 1997” as proceeds from
ordinary conceptions.
While taxation ruling of “TR 98/1” is connected with classifying business proceeds
based on receipts or earning method. Meanwhile “subsection 6-4 (4), ITAA 1997” states that
income is generally considered as earned by taxpayer when it is received by them (Sadiq
2019). Receipts method is useful for business that earns receipts on the basis of knowledge or
use of skills based on the provision of services. The law court in “FCT v Carden” explained
that proceeds earned mainly by rendering services on personal basis is taxable under receipt
method.
As Thomas has billed an invoice of $648,000 but only managed to receive $576,000,
hence receipt method is followed to take into the account the receipts for assessment purpose.