Tax Law Assignment

This assignment provides solutions to various tax law problems. It covers topics such as the taxability of frequent flier points, compensation for damaged assets, gifts, fundraising returns, sports benefits, allowances for construction apprentices, allowable deductions for artists, travel expenses, and the residency status of students for tax purposes. The assignment analyzes relevant Australian Taxation Office (ATO) rulings and case law, applying the principles of the Income Tax Assessment Act 1997 (ITAA 1997) to determine the tax implications of various scenarios. A detailed calculation of assessable income for a hypothetical student is also included, along with a bibliography of relevant resources.

Running head: TAX
Law
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Question 1........................................................................................................................................2
Answer to I..................................................................................................................................2
Answer to II.................................................................................................................................3
Answer to III................................................................................................................................4
Answer to IV................................................................................................................................4
Answer to V.................................................................................................................................5
Answer to VI................................................................................................................................5
Answer to VII..............................................................................................................................6
Answer to VIII.............................................................................................................................7
Answer to IX................................................................................................................................7
Answer to X.................................................................................................................................8
Question 2........................................................................................................................................8
Calculation of Assessable Income.............................................................................................12
Bibliographies................................................................................................................................13

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Question 1
Answer to I
Taxation ruling of TR 1999/6 deals with the reward of flight that the airline companies
provide to the loyal customers1. According to this rule, the rewards received by the airline
companies are not subjected to taxation as the form of income. However, in case of the
fulfillment of the following conditions, these rewards can be treated as Fringe benefits Tax:
i. A family relation is there between the employee and the employer; and the employee
receives the reward as a part of his/her employment.
ii. The employees receive the flight reward under some kinds of specific arrangement.
The law of Taxation ruling TR 1999/6 states that the reward that the regular fliers receive
from the airline companies needs to be taxed under the taxation law. The particular individual
receives the reward as he/she has been providing services and for this reason, they are entitled to
get the rewards from the airline companies. This reward will be accrued with the services and for
the employers; these rewards will be treated as per the business expenses.
Based on the above discussion, it can be observed that Webjet frequent flier point
received by the business analyst employed by the large business consultancy in relation to the
work related travel will not be treated as per the taxable income. In addition, the taxation
authority will not impose Fringe Benefits Tax (FBT) on these kinds of rewards.
1 Barkoczy, Stephen, et al. Foundations Student Tax Pack 3 2016. Oxford University Press
Australia & New Zealand, 2016.

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Answer to II
In case, an individual receives compensation from the customers as a reply of any kind of
damage for the capital assets at the time of providing services to the customer, the receipts of that
compensation will not be taxable under the income tax law for the recipient2. In this situation, the
following points need to be considered:
i. The type of the asset needs to be capital assets and the recipient should actively use that
asset for his/her business purposes.
ii. The customer should receive the sum at the time of the damage to whom the service was
provided with the help of the capital asset.
iii. The received sum was used in order to repair the damaged part of the capital asset.
iv. The capital asset needs to be depreciable in nature and there has been the record of
depreciation on that asset on the regular basis3.
Based on the above discussion, it can be said that the particular amount that Crane Hire
Company received from the customer as a part of the damage compensations shall not be
subjected to taxable under income taxation for Crane Hire Company for the fulfillment of the
above-mentioned conditions.
2 Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting
Review 91.1 (2015): 47-68.
3 Berg, Chris, and Sinclair Davidson. "Submission to the House of Representatives Standing
Committee on Tax and Revenue Inquiry into the External Scrutiny of the Australian Taxation
Office." (2016).

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Answer to III
As per the regulations of Australian Taxation Office (ATO), in case an individual
receives any gift that will not be considered as a part of the income tax exemption and also, it
will not be any part of non-assessable and non-exempted income. At the time of the calculation
of the taxable income of the individuals, small gifts need to be excluded4. However, in case, the
gift is large, it is a cash gift, the gift can be easily converted into money, or the gift is cash that
are provided to the employees, then the gift needs to be included at the time of computing the
taxable income of the recipient. Thus, based on the above discussion, free overseas holiday
package that the manager of the nightclub from the alcohol suppliers receives needs to be
considered as taxable income at the time of computing the income of the nightclub manager.
Answer to IV
As per the provided situation, the return to the members of the Canoe Club for the raise
of additional fund in order to purchase additional canoes will not be subjected to taxation for the
taxable income of the recipients. The main reason is that the received fund is not considered as
income unless the members further contribute fund for the purchase of additional canoes and the
collected fund must not more than the total required purchase amount5.
4 Braithwaite, Valerie, ed. Taxing democracy: Understanding tax avoidance and evasion.
Routledge, 2017.
5 Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016.
Oxford University Press, 2016.

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Answer to V
The Australian Taxation Office (ATO) has introduced the regulation of Taxation
rulings of TR 1999/17 in order to deal with the benefits that the sportspersons receive for their
involvement is various sports activities6. This particular ruling states that the sums of benefits
that the sportspersons receive needs to be taxed under income tax act in case those incomes are
the part of the income from ordinary concepts. Based on the above discussion, it can be said that
the amount that the Australian footballer received from the television company as the best and
fairest player needs to be considered as taxable income under the ordinary concept.
Answer to VI
The Australian Taxation Office (ATO) has introduced the regulation of Taxation
rulings of TR 95/22 for the treatment of various allowances, reimbursement and others for the
employees of construction industry7. According to this taxation principle, the components of
building and construction employees are provided below:
i. Supervisors and project managers of the construction projects
ii. The labors of various building and contraction projects
iii. The employed project managed in the constriction cites
iv. Various other employees like carpenter, trainees, apprentice and others
6 Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).
7 Schenk, Deborah H. Federal Taxation of S Corporations. Law Journal Press, 2016.

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Based on the above discussion, it can be said that the expenses that are related to a building
qualification for the building apprentice need to be considered as the reimbursement and other
allowances.
Answer to VII
For the calculation of taxable income for an artist, the following expenditures for the
short-term basis need to be allowed for the deduction:
i. The short-term course fees related with arts
ii. The training costs for different kinds of modules and software
iii. The traveling cost at the time of pursuing the art courses
iv. The expenses for the meals
For the above discussions, it needs to be mentioned that at the time of deduction, the above-
discussed expenditures will only be considered if they are linked with the short-term courses. In
case, it can be seen that the expenses are made and they are not the short-term expenses, then
they will not be considered as the allowable deduction under the taxation. Thus, the expenses in
the provided case needs to be considered as allowable based on the presumption that all the
expenses have incurred on the short-term basis8.
Answer to VIII
As per the regulation of Australian Taxation Office (ATO), the expenditures related to
artists are subject to deduction for the long-term basis for the performing artists9. According to
8 ROBIN, H. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press, 2017.
9 Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’
view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.

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the Australian Taxation Office (ATO), the following persons are considered as the performing
artists:
i. A musician can be considered as a performing artist
ii. An actor can be considered as a performing artist
iii. A singer can be considered as a performing artist
iv. A variety artist can be considered as a performing artist
v. A dancer and performer in circus can be considered as a performing artist
In the provided situation, based on the presumption that the expenses are related with the
makeup and dresses of an performing artist, the expenses will be allowed as deduction for the
calculation of the taxable income of the performing artist.
Answer to IX
Generally, the travel of the individuals between home and workplace is considered as
private travel. However, as per certain provisions, one can claim allowable deduction on the
above-mentioned traveling expenses. Office travel expenses will be considered when the whole
travel is for office or the travel is partly for office and partly for private. In this situation, one can
claim allowable deduction. As per the provided situation, it can be seen that the travel is solely
for the purpose of work and for this reason; allowable deduction can be claimed for such
expenses at the time of the calculation of taxable income10.
10 Feld, Alan. "Federal Taxation of State Tax Credits." (2016).

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Answer to X
Expense occurred for the traveling between two workplaces can be considered for
allowable deduction. However, in case of the provided situation, the expenses for the traveling
between two employers will be allowed for deduction. The reason is that one cannot claim
allowable deduction for the traveling between two different employers11.
Question 2
It is needed to determine whether an individual is an Australian resident or foreign
resident in order to determine the taxable income and situation of that individual. In case, an
overseas student is enrolled in an Australian educational institution for duration of more than six
months, that student will be considered as Australian resident for the purpose of taxation12. As
per the information of the provided situation, the Australian Taxation Office will consider
Manpreet as a resident of Australia for taxation purpose as she has enrolled in a course in an
Australia institution having course duration of more than six months. In addition, Manpreet also
provides services to an Australian firm and got remuneration of $45000. Apart from this, several
educational expenses of Manpreet are not allowable for deduction. Manpreet had to incur self-
educational expenses of $18000 that is not allowable for deduction13. A student has the option to
11 Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major
Australian taxes." Treasury WP 1 (2015).
12 Barkoczy, Stephen. "Core Tax Legislation and Study Guide." OUP Catalogue(2017).
13 Barkoczy, Stephen. "Foundations of Taxation Law 2016." OUP Catalogue(2016).

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claim allowable deduction on self-educational expenses in case of work associated study or the
student receives scholarship that is taxable bonded. It needs to be mentioned that the educational
courses need to have link with the current employment and;
i. Maintain or improve the required skills and knowledge of an individual for the
employment
ii. The result of the course will help in the increase of the employment income of the
individual14.
An individual will not be eligible for the claiming of allowable deduction for self-educational
expenses for the types of course that have not enough link to his/her current employment even
though,
i. He/she may be generally associated with it; or
ii. He/she provides an individual for the obtaining of new employment15
According to the rules under Section 8-1 of the ITAA 1997, an expenditure is deductable in case
there is sufficient association between the expenses and production activities related to income;
it implies that the required features of this expenditure needs to be related with the work And it
should not be private or domestic in nature. As per the case of Lunney v. FC of T; Hayley v. FC
14 Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’
view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.
15 Tran-Nam, Binh, and Michael Walpole. "Tax disputes, litigation costs and access to tax
justice." eJournal of Tax Research 14.2 (2016): 319.

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of T (1958) 100 CLR 478; (1958) for the meeting of expenditure under the section of 8-1 of the
ITAA 1997, the expenditure needs to have required characteristics in order to gain allowable
deduction under the assessment of income.
As per the ruling in the case of Ronpibon Tin NL v. FC of T (1949), an income should
have the connection between the taxable and outgoing income in order to gain the importance of
assessable income. For this reason, the expenses that Manpreet incurred for the self-education
will not be subjected to allowable deduction under taxation laws. This is the outcome because the
taxation authority cannot allow deduction for the expenses for self-education in case the main
motive of the self-expenditure is to gain new employment or to open the way for the activities
regarding new income.
As per the provided situation, it can be seen that some of the major expenses of
Manpreet are related with the expenses of computer and printer and expenses related with the
new mobile phone that is use for the work purpose. According to the general principles, under
section 8-1 of the ITAA 1997 the specific expenses are considered for allowable deduction in
case enough links can be noticed between the capacity of income earning and expenses and it
must be connected with the work but not with the private and domestic works.
It cannot be said that expenses are a perquisite for the generation of assessable income.
For this reason, the expenses need to be incidental and relevant with the actual income activities
in order to gain income. As per the results of the case named FC of T v. M I Roberts 92 ATC
4787, the federal court has allowed the mine manager for the deduction of expenditure related to
MBA with the help of the application of Maddalena principles. As per the rules under section 8-

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1 of the ITAA 1997, the new mobile phone expenses in relevant in order to gain assessable
income and for this reason, Manpreet is eligible for claiming allowable deduction.
Assumptions:
i. The receipt of amount from India is related with an income from trust and thus, it needs
to be considered under subsection 6AB (1)16.
ii. It can be seen that the taxable income of Manpreet is less than $37000. Thus, there will
be a decrease in 1.5% for each amount of dollar over the amount $37000. Hence,
Manpreet is eligible for claiming of a low income tax offset $212.5.
iii. The total sum of taxable income of Manpreet is $8609. Thus, there is a scope of
application of a Medical Levy of 2% in order to arrive at the taxable income17.
16 Low Income Earners (2017) Ato.gov.au <https://www.ato.gov.au/Individuals/Income-and-
deductions/Offsets-and-rebates/Low-income-earners/>
17 Medicare Levy (2017) Ato.gov.au <https://www.ato.gov.au/Individuals/Medicare-levy/>