Optimal Taxation In Theories And Practice

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Part A: Income from Employment.............................................................................................2
Part B: Income from business:...................................................................................................4
Part C: Income from Rental Property:.......................................................................................7
Dependent tax Offset:..............................................................................................................10
References:...............................................................................................................................12

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Part A: Income from Employment
When a person gets any receipts which is associated to the execution of employment
contracts or the provision of service then it is viewed as income from personal exertion. It is
characterised as the payment that is received in the hands of recipient from their employment.
The amount received must be having an adequate relation with the receipts and income
activity. In “Hayes v FCT (1956)” the sum that is characterised as the product of
employment or reward for rendering any service then is a taxable personal exertion income
(Nightingale, 2014). As per “sec 6-5 (1) ITAA 1997” the assessable earnings comprises of
income that is earned in agreement with the ordinary conception.
Eric is employed with Blue Merlin Pty Ltd and received wages of $7800. The wages
of Eric is a personal exertion income and because the payment that is received in the hands of
Eric is from his employment. Mentioning “Hayes v FCT (1956)” the amount will be viewed
as taxable ordinary income under “sec 6-5 (1) ITAA 1997” as the product of employment.
There are common issues associated to whether a payment made to an employee is an
allowance or reimbursement. Under “sec 15-2 (1) ITAA 1997” allowances are viewed as
salary and wages and it is considered taxable in the employee’s hand within income tax
systems (Mankiw et al., 2019). While reimbursement does not constitute any salary or wage
and it is not included in the taxable income. In Roads and Traffic Authority of “NSW v FCT
(1993)” a reimbursement is pay given in relation to actual expenditure.
Eric here receives a shift allowance of $2,000. The shift allowance is a taxable
statutory income under “sec 15-2 (1) ITAA 1997” since it is received by Eric in relation to
his employment (Dye and England, 2015). While the sum of $800 received as a
reimbursement does not constitute any salary or wage and it is not included in the taxable

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income. Mentioning, Roads and Traffic Authority of “NSW v FCT (1993)” a reimbursement
is pay given to Eric in relation to actual expenditure.
A car fringe benefit happens when the employer gives a car to the employee for their
private usage purpose under the “sec 7 (1) FBTAA 1997”. When the employer is found to be
giving fringe benefit to employees then they are considered taxable under the Fringe benefit
act while the employee is exempted from tax under “sec 23 L ITAA 1936” (Burman et al.,
2016). A car was given to Eric by his employer Blue Merlin. The car is a fringe benefit under
the “sec 7 (1) FBTAA 1997” for Eric because it was given to him directly in relation to his
employment. The employer here will be considered taxable under the FBT legislation while
for Eric it is non-assessable income under “sec 23L ITAA 1936”.
The general provision of “sec 8-1 ITAA 1997” gives permission to all taxpayers to
claim deduction for expenditures that relates to the production of taxable earnings (Duff,
2014). Eric has reported occurrence of expenditure on work related portion of telephone and
stationary. As per explanation made in “sec 8-1 ITAA 1997” Eric can get deduction for the
expenditure on telephone and stationary.