Australia Taxation Law Assignment: Case Study and Calculation

This assignment delves into the intricacies of Australian taxation law, addressing various scenarios and their tax implications. Question 1 provides detailed advice on the tax treatment of items such as airline reward points, damage payments, gifts, club funds, payments to sportspeople, building apprentice expenses, short course fees, work-related makeup and dresses, home-to-work travel, and work-related travel expenses. Each scenario is analyzed in the context of relevant tax rulings and legislation, such as the Taxation Ruling 1999/6, TR 95/35, TD 2016/14, TR 1999/17, and TR 95/22, along with the Income Tax Assessment Act 1936 and 1997. Question 2 involves calculating Manpreet's net tax payable for the 2016/17 financial year, considering assessable income from salary, foreign income, and deductions for work-related expenses. The calculation includes total income, deductions, taxable income, total tax, low-income tax offset, Medicare levy, and the final tax payable, providing a comprehensive overview of the tax liability.

Running head: AUSTRALIA TAXATION LAW
Australia Taxation Law
Name of the University:
Name of the Student:
Authors Note:

1AUSTRALIA TAXATION LAW
Table of Contents
Question 1: Advising Client on the following items to be treated for tax purposes under
Australian Tax Law....................................................................................................................2
Answer to i)................................................................................................................................2
Answer to ii)...............................................................................................................................2
Answer to iii)..............................................................................................................................3
Answer to iv)..............................................................................................................................4
Answer to v)...............................................................................................................................4
Answer to vi)..............................................................................................................................5
Answer to vii).............................................................................................................................6
Answer to viii)............................................................................................................................7
Answer to ix)..............................................................................................................................8
Answer to x)...............................................................................................................................8
Question 2: Calculating Manpreet’s net tax payable for the year 2016/17 financial year.........9
Reference..................................................................................................................................12

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Question 1: Advising Client on the following items to be treated for tax purposes under
Australian Tax Law
Answer to i)
The relevant point that is provided by Airline Company does not come under the
taxation ruling, which directly indicates that this type of benefit cannot be considered as a
income. However, there are certain rules regarding the benefits provided by a company to its
employees, which directly comes under fringe benefit tax. There are certain scenarios where
the reward points could be considered under the fringe benefit tax. For instances if the reward
points are received by the employee in form of benefits provided by the employer then it
could be considered as taxable amount coming under fringe benefit tax. The second instance
is mainly when the reward points are provided to the employee in a particular arrangement
with its company. However, in the particular case there are no circumstances identified,
which directly indicates that there will be no taxation on the reward points provided by the
Airline Company. The Taxation Ruling 1999/6 is mainly states that fight reward received by
employee from employer paid expenses is not considered under assessable income. The case
related to Foster J of the Federal Court in Payne v. FC of T (1996) 66 FCR 299; 96 ATC
4407; (1996) 32 ATR 516 (Payne's case) can be identified from the Tax ruling of 1999/61.
Answer to ii)
The overall case mainly depicts that damage payment has been conducted by the
service receiver, which directly states that overall tax needs to be provided by service
receiver. The damage that was conducted to the Capital Asset does not come under the
1 Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=TXR/TR19996/NAT/ATO/00001>

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taxable amount of the payment receiver. This directly indicates that the service receiver needs
to pay the overall tax for the capital damage that is been conducted. However, there are some
points that need to be considered before identifying the Asset to be taxed. That should be
considered as a capital and needs to be utilised by the organisation thoroughly. In addition,
the asset should also be depreciated under the depreciation clause and should be shown in the
annual report. Thus, the compensation payment of crane is not considered under taxable
income. The Taxation Ruling TR 95/35 mainly states the treatment of compensation receipts
by companies for their assets. The ruling directly states that compensation received for
damaged capital assets are not considered under assessable income of the individual2.
Answer to iii)
The overall case mainly indicates that the there is relevant gift, which is provided by
the supplier to the nightclub manager. However, according to the Australian taxation law for
individuals, gifts of small kind is relevantly not considered, while big and expensive gifts are
taken into consideration for the taxable income. In addition, the big gifts that could be
converted into cash or amounts of high cash value could be considered under the taxable
income of the receiver. Therefore, in the case scenario the manager of the nightclub has
received the overall a package for the overseas holidays, which has relevant monetary
benefits that is been received by the manager. This only indicates that individual taxation of
the manger will include the overall overseas packages provided by the supplier. TD 2016/14
mainly depicts that overall no deductions are provided when individual provide gifts3.
2 Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
DocID=TXR/TR9535/NAT/ATO/00001&PiT=99991231235958#P29>
3 Morgan, John, TD 2016/14 – A General Deduction Is Allowed For Gifts To Clients Of A
Business (Query Whether It Be Aimed At Getting Future Income) (2017) Tax Technical

4AUSTRALIA TAXATION LAW
Answer to iv)
The overall scenario mainly indicates that extra funds were mainly collected from the
members for the purchase of Canoe for the club. This mainly helped in understanding that
individuals use the funds donated to Canoe club is not deductable under the taxation method.
Thus, any returns provided from the club cannot be considered an additional income. The
overall income for the individual members has already induced the overall funds that are paid
to be club. Therefore, the overall individual’s income tax of the members will not reflect the
returns of the money provided by the club as additional income and will be reflected as
taxable income4.
Answer to v)
The overall case scenario mainly indicates that relevant payment is been conducted to
a football player by a television company. According to the Taxation ruling in Australian TR
1999/17, it directly indicates that any sports person gaining income from individuals for its
performance in sports needs to be considered under taxable income. This mainly indicates
that the relevant income generated by the sports person from the television company will be
considered, as the taxable income. Therefore, the individual taxation law indicates that
relevant taxes needs to be paid by the footballer, as the money provided by the television
company is directly considered as taxable income. The taxable income needs to be considered
http://taxtechnical.com.au/td-201614-a-general-deduction-is-allowed-for-gifts-to-clients-of-a-
business-query-whether-it-be-aimed-at-getting-future-income/
4 Excess Contributions Tax Learner Guide (2017) Ato.gov.au
https://www.ato.gov.au/Super/APRA-regulated-funds/In-detail/APRA-resources/Learner-
guides/Excess-Contributions-Tax-learner-guide/?page=52

5AUSTRALIA TAXATION LAW
under the rulings TR 1999/17, where relevant taxes need to be paid by the footballer5.
Relevant measures are taken into consideration, where Income Tax Assessment Act
1936 (ITAA 1936) or the Income Tax Assessment Act 1997 (ITAA 1997) could be used. In
addition, relevant section 6-5 of the Income Tax Assessment Act 1996 helps in deriving the
ordinary income and detect the overall assemble income of an individual.
Answer to vi)
The overall scenario mainly indicates that expenses related to building qualification
for a building apprentice is been conducted. According to TR 95/22 relevant consideration for
the deduction of allowance to the employees of the construction company could be
identified6. This mainly indicates that relevant expenses conducted on the building
apprentices is relevantly deducted for the construction company. Therefore, the overall
expenses conducted by the construction could be used as deductible expenses, which directly
reduce the overall taxable amount of the company. There are relevant sections, which could
be seen under sections 25, 26AD, 27A, 27C, 27F and paragraphs 26(e) and 26(eaa) of
the Income Tax Assessment Act 1936 (the Act). There are relevant abbreviations mentioned in
TR 95/22, which are depicted as follows.
 The labours, trainees, carpenters, and apprentices used for building are mainly considered
under the ruling.
 The overall supervisors work conducted for the building purpose and project manager’s
work is considered under this ruling.
5 Legal Database (2017) Ato.gov.au https://www.ato.gov.au/law/view/document?
DocID=TXR/TR199917/NAT/ATO/00001&PiT=99991231235958
6 Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=TXR/TR9522/NAT/ATO/00001>

6AUSTRALIA TAXATION LAW
Therefore, the overall expenses conducted in the scenario mainly indicate that an expense
conducted on the building apprentice is directly stated as compensation, which is deductible
under the Taxation Ruling. The ruling also states whether the deduction is allowable or not
with the help of under subsections 51(1), 51(4) or 51(6), or sections 51AB, 51AF, 51AGA,
51AH, 51AL, 53, 54, 55, 61 or 82A of the Act.
Answer to vii)
The relevant situation mainly indicates that relevant expenses are mainly conducted
for a short course in art management in hope of becoming an art director. This directly
indicates that overall expenses are mainly conducted to enhance the career of an individual,
which under the taxation law of Australia is deductable from the taxable amount. However,
there are certain criteria’s, which needs to be evaluated before identifying the expenses as
deductable from taxable income. There are relevant criteria’s that need to be followed such as
education module and software that is conducted by the individual needs to improve its
income in future. In addition, short term fees course are mainly allowed as deduction, while
other education facilities are ignored. The D4 work related expense directly states that
relevant expenses of the course fees could be conducted for reducing the taxable income7.
Therefore, the situation where the individual used a short term course to enhance its
career and become the art director is considered under the deductions of taxation. Hence, the
deductions could directly help in reducing the overall taxable income of the individual.
Therefore, according to the D4 clause in ATO relevant expenses conducted by individual on
courses, which is work related is mainly deductable in nature.
7 D4 Work-Related Self-Education Expenses 2017 (2017) Ato.gov.au
<https://www.ato.gov.au/Individuals/Tax-Return/2017/Tax-return/Deduction-questions-D1-
D10/D4-Work-related-self-education-expenses-2017/?=redirected>

7AUSTRALIA TAXATION LAW
Answer to viii)
Situation many indicates that relevant expenses on makeup and dresses related to
work are conducted by the individual. There is relevant taxation deduction for the expenses
conducted on artist who is going to perform. These tax deductions are mainly limited to
specified or subsequent individuals who are artists and can be provided the relevant
exemptions. Performing artist mentioned in the taxation rule can be an actor, singer, variety
artist, musician, circus performer, and dancer. Therefore, any kind of expenses that is
conducted on the performing artist is allowed, as a deduction on the taxable amount. Hence,
the expenses conducted on the makeup and dresses which work related are mainly deductible
from taxable income8. The performing artist clause mainly states that any kind of expenses,
which is conducted for work related, is deductible in nature. Therefore, the expenses
conducted on makeup and dresses are directly related to work expenses. The Taxation ruling
of TR 93/30 directly states any kind of expenses, which is directly related to work is
deductible in nature.
Answer to ix)
The situation many states in that overall expenses are been conducted by an individual
travelling from home to work. This only indicates that relevant deductions could be possible
under the taxation law, which travelling related to work activity could be deducted from the
taxable amount. However, any kind of non official expense that is conducted on travelling
cannot be identified, as the deductible expenses from the taxable income. Moreover, it is
assumed that the expenses conducted on travelling from home to office are for official
purposes, which is deductible in nature according to the Australian taxation law. However, on
a different assumption if the expenses conducted on travelling are for personal use then it is
8 Performing Artists 2017 (2017) Ato.gov.au <https://www.ato.gov.au/Forms/Performing-
artists-2017/>

8AUSTRALIA TAXATION LAW
not deductible according to the Australian taxation law. Therefore, determination of the
expense is necessary for identifying the overall measure that could be conducted on taxable
income9. Under the ruling of D2 relevant work related travel expense are directly deductible
in nature, which could help in reducing the overall assessable income of an individual. The
Taxation ruling TR 95/34 mainly includes relevant employees carrying out itinerant work.
Answer to x)
The scenario mainly states that overall expenses on travel are mainly conducted by
the individual for office purposes. This overall expenses conducted on travel is mainly
productively nature according to the Australian taxation law. The Australian taxation law
directly states that any kind of expenses that is conducted for official purposes are deductible
in nature, which could directly be used for reducing the taxable income. According to the
scenario, overall expenses were mainly conducted from one workplace to another, which in
the case could be used as a deduction amount for the taxable income. Therefore, the overall
expenses can be deducted by the employer from its taxable income. The TR 95/34 mainly
states that relevant expenses related to work is deductable in nature10. However, the TR 95/34
is not linked in the situation, as the individual is not conducting work related expense.
9 D2 Work-Related Travel Expenses 2017 (2017) Ato.gov.au
<https://www.ato.gov.au/Individuals/Tax-Return/2017/Tax-return/Deduction-questions-D1-
D10/D2-Work-related-travel-expenses-2017/?=redirected>
10 TR 95/34 - Income Tax: Employees Carrying Out Itinerant Work - Deductions, Allowances
And Reimbursements For Transport Expenses (As At 29 November 2006) (2017)
Law.ato.gov.au <http://law.ato.gov.au/atolaw/view.htm?docid=txr/tr9534/nat/ato/00001>

9AUSTRALIA TAXATION LAW
Question 2: Calculating Manpreet’s net tax payable for the year 2016/17 financial year
Assessable Income of Manpreet For the year ended 2016/17
Particulars Amount Amount
Gross Salary AUD 45,000.00
Foreign Income
Income From Trust AUD 10,000.00
Total Income AUD 55,000.00
Deductions
Purchase of mobile work purpose AUD 500.00
Total Deductions AUD 500.00
Taxable Income AUD 54,500.00
Total tax AUD 9,259.50
Low income tax offset AUD 182.50
Medicare Levy AUD 1,090.00
Tax Payable AUD 10,167.00
The above table mainly helps in identifying the overall taxable income of Manpreet
for the financial year of 2016-17. Only the residence of Australia needs to provide relevant
taxes to the government, which will only be decided by using adequate residential method
that helps in determining the need for taxation. Manpreet as relevantly stayed in Australia for
more than 6 month, which directly makes her resident of Australia, where relevant taxes
needs to be paid. Manpreet also earns around $45,000 from its part time job, which directly
ensures that she needs to pay the relevant individual tax. The assessable income can be
identified from the overall table, which helps in identifying the relevant taxable income of
Manpreet.

10AUSTRALIA TAXATION LAW
Manpreet has conducted different type of expenses for educational purposes, which
does not indicate any kind of improvement in the income from part time job. Therefore, both
educational expenses and computer expensive is not deductible from the taxable income.
According to Section 8-1 of the Income Tax Assessment Act, domestic or private nature
expenses are not deductible under this act11. Hence, both the expenses conducted in computer
and education is not deductible under the taxation law. However, any kind of expenses that is
conducted to enhance the career or income of the individual is deductible under the taxation
law. Relevant case laws such as Ronpibon Tin NL v. FC of T (1949), Lunney v. FC of T;
Hayley v. FC of T (1958) 100 CLR 478; (1958) and FC of T v. M I Roberts 92 ATC 4787
could be used in supporting the Individual taxation law12.
11 Individual Income Tax Rates (2017) Ato.gov.au <https://www.ato.gov.au/rates/individual-
income-tax-rates/>
12 Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=PAC/19970038/8-1>

11AUSTRALIA TAXATION LAW
Reference
D2 Work-Related Travel Expenses 2017 (2017) Ato.gov.au
<https://www.ato.gov.au/Individuals/Tax-Return/2017/Tax-return/Deduction-questions-D1-
D10/D2-Work-related-travel-expenses-2017/?=redirected>
D4 Work-Related Self-Education Expenses 2017 (2017) Ato.gov.au
<https://www.ato.gov.au/Individuals/Tax-Return/2017/Tax-return/Deduction-questions-D1-
D10/D4-Work-related-self-education-expenses-2017/?=redirected>
Excess Contributions Tax Learner Guide (2017) Ato.gov.au
https://www.ato.gov.au/Super/APRA-regulated-funds/In-detail/APRA-resources/Learner-
guides/Excess-Contributions-Tax-learner-guide/?page=52
Individual Income Tax Rates (2017) Ato.gov.au <https://www.ato.gov.au/rates/individual-
income-tax-rates/>
Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=TXR/TR19996/NAT/ATO/00001>
Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=TXR/TR9522/NAT/ATO/00001>
Legal Database (2017) Ato.gov.au <https://www.ato.gov.au/law/view/document?
docid=PAC/19970038/8-1>
Legal Database (2017) Ato.gov.au https://www.ato.gov.au/law/view/document?
DocID=TXR/TR9535/NAT/ATO/00001&PiT=99991231235958#P29
Legal Database (2017) Ato.gov.au https://www.ato.gov.au/law/view/document?
DocID=TXR/TR199917/NAT/ATO/00001&PiT=99991231235958

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Morgan, John, TD 2016/14 – A General Deduction Is Allowed For Gifts To Clients Of A
Business (Query Whether It Be Aimed At Getting Future Income) (2017) Tax Technical
http://taxtechnical.com.au/td-201614-a-general-deduction-is-allowed-for-gifts-to-clients-of-a-
business-query-whether-it-be-aimed-at-getting-future-income/
Performing Artists 2017 (2017) Ato.gov.au <https://www.ato.gov.au/Forms/Performing-
artists-2017/>
TR 95/34 - Income Tax: Employees Carrying Out Itinerant Work - Deductions, Allowances
And Reimbursements For Transport Expenses (As At 29 November 2006) (2017)
Law.ato.gov.au <http://law.ato.gov.au/atolaw/view.htm?docid=txr/tr9534/nat/ato/00001>