Taxation

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Running head: TAXATION
TAXATION
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to Question 1:................................................................................................................3
Answer A:..............................................................................................................................3
Answer B:...............................................................................................................................3
Answer C:...............................................................................................................................3
Answer D:..............................................................................................................................3
Answer E:...............................................................................................................................3
Answer F:...............................................................................................................................4
Answer G:..............................................................................................................................4
Answer H:..............................................................................................................................4
Answer I:................................................................................................................................4
Answer to Question 2:................................................................................................................5
Answer to Question 3:................................................................................................................6
Answer to Question 4:..............................................................................................................10
4A.........................................................................................................................................10
4B.........................................................................................................................................10
4C.........................................................................................................................................10
4D.........................................................................................................................................11
Answer to Question 5:..............................................................................................................12
5A.........................................................................................................................................12
5B.........................................................................................................................................12

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5C.........................................................................................................................................12
5D.........................................................................................................................................13
5E.........................................................................................................................................13
Reference..................................................................................................................................14

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Answer to Question 1:
Answer A:
The topic is that when the company is able to carry its business as per the definition of
small business as per the view of commissioner which is given as per section 23 is been
covered under Taxation Ruling of TR 2019/1 as per ITRA 1986 that is applicable for the
income year 2015-16 and 2016-17. It includes the view of commissioner that is covered
under s-328-110, ITAA 19971.
Answer B:
The Div-30, ITAA 1997 is the legislature that is in regards of the claiming deduction
for contribution and gifts2.
Answer C:
The individual who pay tax, has been treated as resident in the current assessment
year is able to apply a tax rate of 45 per cent upon the top marginal as it is applicable for the
same.
Answer D:
The section 108-29, ITAA 1997 is in related to the motor cycle which is consider as
personal use asset, so if the tax payer is able to earn any amount of capital gain from the
disposal of asset than it is not exempted and it has to pay the capital gain tax3.
1 Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law & Policy 29.1
(2017): 3-10.
2 Division 30, Income Tax Assessment Act 1997 (Cth).
3 Sec-104-20, Income Tax Assessment Act 1997 (Cth).

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Answer E:
This section applies for the Destruction or the loss of the CGT asset as it applied
under C1 Sec-104-20 of ITAA 19974. It take place when the CGT Asset is been destroyed or
lost. The taxpayer firstly able to get the compensation in regards of the destruction or loss, it
does not able to get any money for the compensation in regards of the finding of the loss and
destruction in the business.
Answer F:
The taxpayer is able to get proper amount tax-free threshold limit in the income, as
the individual is able to get upto $18200 as non-taxable amount as it not able to attract any
amount of tax in the business.
Answer G:
The case “Hayes v FCT (1956)” is one the importance case as it show that the
taxpayer cannot treat the receipt as an ordinary income as it is not related to reward for
service or product of employment. As per the court judgement on the case it said that the
taxpayer is able to gain the receipt upon its personal qualities so it cannot be treated as an
ordinary income, so it should not be assessable to recipient5. The case has its point as the
donor and recipient is able to have some kind of personal relationship in the business. There
is some kind of personal relation in the parties so this directly decrease the application of
ordinary income about the payment made to the taxpayer.
Answer H:
Ordinary income are the income which is earn by every individual in their respective
jobs, this denote the normal income of taxpayers. The statutory income is the amount of
4 Sec-104-20, Income Tax Assessment Act 1997 (Cth).
5 Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47

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income on which the individual has to pay tax as per some rules and regulation of the
authority. The ordinary income can be classified as wages, rent and salaries. The statutory is
classified as different types of capital gain to the individual.
Answer I:
Each Australian individual should able to contribute towards the cos of Medicare as it
is the viewed a manner under Medicare Levy. There is an proper limit for the contribution in
Medical Levy as the individual earning more than $27069 in the current tax year should
contribute in the same. The surcharge of Medical Levy is levied on the taxpayer which does
not able to have proper amount of private patient hospital cover and able to earn lot of money
which is beyond the limit. The MLS rate is 1%,1.25% or 1.5% that is consider on the taxable
income.
Answer to Question 2:
The individual is able to have many resident so to identify its resident as per the
“subsection 6 (1)”, firstly it have to know the reason of the individual to have its resident in
the country as if the resident is having proper amount of intension than only it will have home
for indefinite purpose6. The “IT 2650” which is related to “Permanent place of adobe” show
that the individual is able to have its permanent home in Australia only and it does not have
any home outside of Australia. The commissioner is sure that the taxpayer is not having any
home or resident in any other countries or outside Australia. As “usual place of adobe” is
consider it is in regards of the individual resident where the individual resides with its family
members and able to carry its all operation in that place only as it stay in night in that place.
The case of “Levene v IRC (1928)” show that the individual is physically staying or
dwelling is been consider as “usual place of abode”
6 Woellner, Robin H., et al. Australian taxation law. CCH Australia, 2016.

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The “permanent place of abode” show about the taxpayer’s ordinary place of
dwelling, it can be consider as the one type of home for the taxpayer but it will not be
consider as permanent home of taxpayer7. The relationship of the taxpayer should be more
with the resident as it in regards of the ordinary resident or the “usual place of abode”. The
material factor which is to consider is the continuity or the involvement of taxpayer, the time
duration of the presence of taxpayer in regards of their relationship with the place.
The case of “FCT v Jenkins (1982)” can be refer in this situation as it involves about
the bank offices that has been transferred to New Hebrides for three years. It have to return to
Australia as due to ill health8. The supreme court of Queensland has consider the taxpayers
“permanent place of adobe” is out of Australia as it always stay outside the overseas
boundary but the taxpayer has not given any kind of intention about the indefinite time period
in regards of the place.
The individual is having “usual place of abode” in Australia, but it does not have any
fixed place or “permanent place of abode” in overseas area, but it keep shifting from one
nation to other one and it would able to be treated as abode place and it consider as transitory
as it is not able to choice of “permanent place of abode”. The case of “Harding v FC of T
(2019)” can be consider one of the most important case in regards of tax residence for the
individual who able tom work in overseas, but have some relationship in Australia. As per the
federal court it9 able to state that “permanent place of abode” state that only the place in
which the taxpayer is able to have permanent stay can be consider as same. The individual
should able to comply the primary test of the “permanent place of adobe” is in foreign.
7 Taxation Ruling IT 2650
8 Federal Commissioner of Taxation v Jenkins (1982) 82 ATC 4098
9 Harding v Federal Commissioner of Taxation (2019) FCAFC 29

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Answer to Question 3:
HECS-HELP: $850:
The individual has to make some contribution in HECS-HELP and Higher Education
Loan Program so as per the Australian Taxation Office, an individual is not able to ask any
kind of refunds upon the above-mentioned plans. As per the case studies, accountant had
incurred an on its training program of $850 in regards of HRECS-HELP. The guidelines
clearly state that the accountant is not liable for any kind of deduction in regards of the
contribution of $850 which is made in HECS-HELP.
Travel- work to University $110:
The individual has to follow many rules and legislation to get the deduction in income
tax, as it can able to get the deduction for self-education outgoings only when it able to
satisfy or meet any one of conditions mentioned below:
 Individual has undertaken the course so that it can able to increase its knowledge that
is required in the present job.
 Individual is able to have an increase in overall performance and earning after the
training process is been carried in the business.
The individual after complying with the above rules able to meet them it can get the
deduction for the travel expense which is been incurred in regards of the travel towards
of home and the place of education so it can able to get deduction for the same10.
The case study show that the trainee has incurred an expense of $110 in related to
travel to the university so it is been consider that the trainee has undergone the training
10

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program which will help it to gain more amount of knowledge in regards of the present
work so it will able to get the deduction as per “s8-1, ITAA 1997”11.
Books $200:
Individual is able to have general deduction in regards of the Self-Education, as the
amount is been incurred so that the taxpayer is able to upgrade the skill which ae required by
the individual in their employment services. This show when the individual is able to have an
increase in expense it automatically able to increase the production capacity of the individual.
The example of self-education is been provided in TR 98/9 as registration fees, course fee
and the cost of study material such like textbooks. As per the case “FC of T v Highfield
(1982) ATC 4463” it was found that the dentist is able to get the deduction upon the expenses
as the expenses which were occurred by the dentist is course fees, accommodation and travel
as all these expense are done by it to increase and improve its skills and able to earn from the
same.
As per the case study it can see that the trainee has also spend similarly on books,
expenses amount to $200. So as per the decision in “FC of T v Highfield (1982) ATC
4463”, it can able to get the deduction for the books as this was incurred by it, so that the
trainee can increase its learning and earning capacity12.
Child care during evening classes $80:
The deduction in regards for outgoings or loss is not permitted as per the “s8-1(2)(b)”
of the negative limbs. It is because as these does not able to meet the positive limbs criteria.
11 Section 8-1, Income Tax Assessment Act 1997 (Cth).
12 Federal Commissioner of Taxation v Highfield (1982) ATC 4463

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As per the case “Lodge v FCT (1972)” it saw that there were no deduction was given to the
clerk in regards of childcare expenditure as this will help to carry more work. The court
ruling stated that the expense is not allowed for deduction as it is not related to taxable
earning.
As per the information given in the case study, it show that the trainee has incurred
child care expense so that it can able to carry with its evening classes13. The expenses of $80
is not been permitted for deduction as it does not able to meet the criteria of positive limbs.
As per the above case “Lodge v FCT (1972)” it show that it should not be allowed as
deduction as it is not relevant to taxable earnings.
Repairs to Fridge at home $250:
As per the “s25-10 ITAA 1997” an individual is able to get proper amount of
deduction in regards of the expenses incurred for the repair of an asset should be also related
to the capabilities of taxable earning. This section does not allowed any amount of private
expenses deduction.
The case study show that the trainee has able to incurred expenses for the repairing of
its fridge. So as per the “s25-10 ITAA 1997” it does not able to get any amount of deduction
for the expense of $250 in the company business. The expenses which it had done is personal
expense so no deduction shall be allowed.
Black trousers and shirt required to be worn at office $145:
The section “s8-1, ITAA 1997” state that it not treats ordinary clothing item is not
been treated as permissible income tax. As per the case of “Mansfield v FCT (1996)” is not
able to allow any expenses which is a general deductions as it is been applicable on some
13 Coleman, Geoffrey Lehmann Cynthia. "Taxation law in Australia." (2015).

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common articles of apparel even if the expenses are been incurred for the maintains of an
appearance which is related to particular work or job14.
The case study show that the trainee is able to incur the expenses of $145 for the
black trousers which is been needed for work purpose in the job. So as per the case of
“Mansfield v FCT (1996)” it will not get any amount of deduction as per section “s8-1,
ITAA 1997” so expenses of $145 as it is regards of ordinary item.
Legal expenses for writing up a new employment with a new employer $300:
The individual is not entitled to get any kind of deduction in regards of the expenses
which are carried for pre-commencement stage for generating revenue as per the “s8-1,
ITAA 1997”. It is because that expenses is not able to generate any kind of revenue in the
business. As per the case of “Maddalena v FCT (1971)” it was found out that the getting
new job is not equivalent for chargeable earnings.
The case study show that the trainee has spend $300 for the letter of employment to
new employee of the company15. So as far the case of “Maddalena v FCT (1971)” is
concern, it is been spend upon the pre-commencement of income so this will not able to have
any income producing activities so this will not get any amount of deduction for the
individual as per the “s8-1, ITAA 1997”.
14 Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law &
Policy 29.1 (2017): 3-10.
15 Kewley, Gretchen M. Australian Taxation: principles and practice. Longman Professional,
2017.

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Answer to Question 4:
4A
The lease of land is having many events which attract the capital gain regulations. The
CGT event F1 is concern it state about the events as when an person is able to renew or
extend the lease which it is using previously also. The discount which an individual is able to
get on CGT is not applicable for CGT event F1.
The case study information show that there is some part of land which is owned by
John and it give it to lease to David for a time period of seven years on a premium of $7000.
The above point is covered in CGT event F1. This show that it will not able to get the
discount on the capital proceed in case of the sale of the land.
4B
4C
The individual is able to get exemption on the main residence in capital gain tax. The
exemption is limited to household purpose, but if the taxpayer is using the residence for
commercial purpose than it will not able to get full deduction in capital gain. It take into

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consideration whole floor area for commercial purpose. The fact of information of Li is it
used some part of building for physiotherapy business16. The commercial area is 20% of total
are so the calculation is shown below:
Capital gain x Percentage of floor area = Assessable portion
= $700,000 – $400,000
= $300,000 (net capital gain)
= 300,000 x 20%
= $60,000 (Taxable portion)
As the house is owned for more than 12 months so it s=can avail the CGT discount in
capital gain computation. It also apply to the rule of “home first used to produce income” as
the house is bought by her.
4D
The taxpayer is able to have an CGT event in regards of CGT asset and it does not
able to have any capital gain, so to compute the gain or loss, the analysis of the cost reduction
is to be consider by the taxpayer. The capital loss can only be set off with the capital gain
and not with any other head of income in the business. Cost of Capital gain asset comprises
of purchase price, ownership cost, capital cost, cost of defending the asset and incidental
cost17.
The cost base show about the changes which has arise on the purchase price of the
asset as whether the tax payer is having capital loss or gain in the asset.
16 Sadiq, Kerrie. Australian Taxation Law Cases 2019. Thomson Reuters, 2019.
17 Murray, Ian, et al. "Understanding Taxation Law 2019." (2018).

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Answer to Question 5:
5A
As per the section “s6-5, ITAA 1997” it explained the item which can be termed as
income as it state when the tax payer able to get the amount than it can consider it as income.
As per the case of “Lindsay v IRC (1993)” as the illegal money cannot be termed as taxable
income. The availability of illegal income does not source the original income of taxpayer. So
as the taxpayer is able to earn income from illegal source such as drug-dealing or theft so it
will still be taken as ordinary income.
5B
As per the “s6-5, ITAA 1997” state that the period receipt and annuities is taxable, so
the bank interest income of $500 is an period receipt so it is consider to be taxable income as
per “s6-5, ITAA 1997”.18 The gains is not consider as income of taxpayer. The amount of
$10000 which is from winning from casino cannot be treated as taxable income. The period
receipt is rent of $2000 is consider as regular income so its is taxable as per “s6-5, ITAA
1997”.
18 Woellner, Robin H., et al. Australian taxation law. CCH Australia, 2016.

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5C
The main earning of the taxpayer is consider from the salaries, gratuities and wages as
the taxpayer is able to earn from the employment in the business, so this income are generally
treated as taxable income under “section 6-5, ITAA 1997”. This take into consideration of
$500 the employee is able to receive is an taxable income.
5D
5E

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Reference
Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law & Policy 29.1
(2017): 3-10.
Coleman, Geoffrey Lehmann Cynthia. "Taxation law in Australia." (2015).
Division 30, Income Tax Assessment Act 1997 (Cth).
Federal Commissioner of Taxation v Highfield (1982) ATC 4463
Federal Commissioner of Taxation v Jenkins (1982) 82 ATC 4098
Harding v Federal Commissioner of Taxation (2019) FCAFC 29
Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47
Kewley, Gretchen M. Australian Taxation: principles and practice. Longman Professional,
2017.
Lodge v Federal Commissioner of Taxation (1972) HCA 49
Morgan, Annette, Colleen Mortimer, and Dale Pinto. A practical introduction to Australian
taxation law 2018. Oxford University Press, 2018.
Murray, Ian, et al. "Understanding Taxation Law 2019." (2018).
Sadiq, Kerrie. Australian Taxation Law Cases 2019. Thomson Reuters, 2019.
Sec-104-20, Income Tax Assessment Act 1997 (Cth).
Sec-108-20, Income Tax Assessment Act 1997 (Cth).
Section 6-5, Income Tax Assessment Act 1997 (Cth).
Section 8-1, Income Tax Assessment Act 1997 (Cth).

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Taxation Ruling IT 2650
Taxation Ruling of TR 2019/1
Woellner, Robin H., et al. Australian taxation law. CCH Australia, 2016.