Taxation Analysis and Solutions: University Homework Assignment

This document presents a comprehensive solution to a taxation assignment, addressing various aspects of Australian taxation law. The assignment delves into several scenarios, including the tax treatment of frequent flyer rewards, reimbursements for damaged capital assets, gifts, and funds raised by clubs. It also covers the tax implications for sportsmen, construction workers, and performing artists. Furthermore, the solution explores the deductibility of expenses related to short-term courses, travel, and self-education. The assignment also includes the computation of Manpreet's assessable income, considering his employment and educational expenses. The solution references relevant taxation rulings and case law, providing a detailed analysis of each question and offering insights into the application of tax principles.

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..................................................................................................................2
Answer to question – i............................................................................................................2
Answer to question – ii..........................................................................................................2
Answer to question – iii.........................................................................................................3
Answer to question – iv..........................................................................................................3
Answer to question – v...........................................................................................................4
Answer to question – vi..........................................................................................................4
Answer to question – vii........................................................................................................5
Answer to question – viii.......................................................................................................5
Answer to question – ix..........................................................................................................6
Answer to question – x...........................................................................................................6
Answer to question 2..................................................................................................................7
Manpreet’s assessable income computation..........................................................................9
Reference..................................................................................................................................10

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Answer to question 1
Answer to question – i
As per the TR 1999/6 taxation ruling if any points or rewards received by any regular
fliers from the airline organization, the amount will be included under the assessable income
of the receiver. Further, the TR 1999/6 taxation ruling deals with the points or rewards
received from the flight that is offered to the loyal customers. However, the rewards will be
dealt as fringe benefit tax if the below mentioned criteria are fulfilled –
 The rewards or points offered to the employee in consideration with the specific
arrangement
 The reward or point is offered to the employee owing to his job with the company or a
family relationship is there between the employee and the employer1
If the individual received the reward for offering the service as there is an entitlement
for the flight rewards, the rewards will be dealt in as the business expense of the employer. It
is evident from the given circumstances that points or rewards received by the frequent flier
of the Webjet from the large business firm in consideration for their work shall not be taxed
under regular taxable income and it shall not be included even under the fringe benefit tax.
Answer to question – ii
Where any person receives any reimbursement due to the damage of his capital asset
that he provided to the customers as part of provision of services, the amount of
1 Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At Cquniversity (2017)
Libguides.library.cqu.edu.au http://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174

3TAXATION
reimbursement shall not be assessed as income under the income tax of the person. However,
to be qualified to get deduction, the below mentioned conditions must be fulfilled –
 The asset offered under the provision of service must be of capital nature and the asset
must be used for the purpose of business solely2
 The amount of reimbursement received from the customer shall be used exclusively
for restructuring the part of the capital asset that is damaged.
 The capital asset must be depreciable asset and the proof of budgeted depreciation
must be there in the books of account for the asset.
Taking into consideration the above mentioned conditions, the amount received as
reimbursement with regard to damage of the asset while it was used under the provision of
service shall not be included as income for the purpose of assessing the taxable income.
However, the above mentioned conditions must be complied with for getting the deductions.
Answer to question – iii
Any amount be it in cash or kind, received as the gift are not qualified as the
deductible income or is not included under the exempted income rather, it is included under
the assessable income as per the taxation ruling of Australian Tax Office or ATO. The small
gifts are not taken into consideration in the period while the person’s tax is assessed. On the
contrary, the bigger amounts of the gifts that are convertible into monetary form and the gifts
that are received in the form of kind, the total measurable amount with regard to the gift are
assessed as the assessable income as per the income tax ruling. In the given circumstances,
the manager of the night club was offered the holiday package to overseas by the alcohol
2 The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/

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supplier. This gift shall be included as the taxable income while calculating the assessable
income.
Answer to question – iv
In the given case, Canoe club fund-raised for buy of extra canoes and in the end the
extra monies were returned to the individual from the Canoe club. Under the ATO, the extra
cash raised which will eventually returned to the club member will not be taken into account
as assessable income while processing the assessable earning. This cash won't be assessed as
income while figuring the assessable pay under the taxable income as the additional cash
does not qualify as the option of additional reserve. Further, it will be treated as raised for the
need only3.
Answer to question – v
The benefit that is received by the sportsmen with regard to his engagement in the
sport is included while assessing his income under income tax. As per the TR 1999/17,
Taxation ruling, under the normal concept of income, if the advantage received by the
sportsman forms the part of assessable income for the purpose of tax, then the amount will be
considered as income. Under the given circumstance, the footballer received the amount from
television station as he was selected as fairest and the best player in the AFL4. Therefore, the
amount shall be assessed as taxable under the taxable ruling while the income of the player
will be calculated.
3 Bankman, Joseph, et al. Federal Income Taxation. Wolters Kluwer Law & Business, 2017.
4 Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data matching." Proctor, The 37.6
(2017): 18.

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Answer to question – vi
TR 95/22 under the Taxation ruling deals with the allowance and reimbursement of
the employees. It is mentioned under the ruling that the activities which are qualified for
construction and building of the employees are as follows –
 Labours those are engaged for the purpose of constructing the building
 Trainees, apprentice and the carpenters5
 Project manager or overseer engaged for the said post for any under construction
building
 The engagement of the project manager in the construction site.
Expenditures made for the apprentice to construct their qualification with regard to
building is included under the taxation ruling and are regarded as construction and building of
labours and therefore, will be allowed under deduction as compensation.
Answer to question – vii
For the amount spend under the short term course to be qualified as deduction it must
be exclusively incurred for the course only6. Further, if only a part of the expenses are
incurred for the course, then the deduction will be allowed proportionately only and not for
the total amount. If any person spend monies for undertaking short course with regard to the
subject of art management in consideration of becoming art director will be qualified as
deduction, if the below mentioned conditions are satisfied –
5 Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’ view." Procedia-Social and
Behavioral Sciences 109 (2014): 1069-1075.
6 Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting Review 91.1 (2015):
47-68.

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 Training cost incurred for the software or any module
 Expenses for the meal that is recommended to be incurred7
 Travelling expenses for up and down travel to the course institution
 Amount paid for the course as fees under the short term course of art management.
Taking into consideration the above facts, it is presumed that the individual incurred
the expenses exclusively for the course as the detail information is not provided related to the
head of expenses and therefore will be qualified for deduction.
Answer to question – viii
Under the Australian Taxation Office ruling, the persons to be regarded as the
performing artist must satisfy one of the below mentioned criteria –
 Any person performing in circus will be performing artist
 Any person performing as dancer will be performing artist
 Any person perform as a singer will be performing artist
 Any person performing as musician will be performing artist
 Any person performing as an actor will be performing artist
 Various kinds of artists will be performing artist.
Under the ATO, any expenditure incurred by a performing artist in association with
the performance will be qualified as deduction, if the person is qualified as performing artist
as per the above mentioned criteria8. In the given circumstance, in absence of sufficient
7 Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).
8 CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/

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information, it will be presumed that the expenses incurred were for the make-up and work
dress of the performing artist and will be therefore, allowed under deduction.
Answer to question – ix
Where the travelling expenses is proportionately official and proportionately private,
then the official part will only be qualified as deduction. The travel between office and home
is regarded as personal expenditure. However, under some particular circumstances, the
travelling to office is qualified under deduction. Where the travelling is solely carried out for
official purpose, the expenses with regard to travel will be qualified as deduction. Here in the
given case study, the expenditure with regard to travel will be presumed as incurred solely for
office purpose and thus will be qualified under deduction9.
Answer to question – x
As per the taxation ruling of Australian Tax Office, if any individual incur any travel
expense for travelling two places of work, will be qualified as the deduction. The deduction
will only be allowed if both the workplace falls under the control of same employer. In the
given circumstance, the individual travelled two workplaces that were under control of
different employers and hence will be disallowed as deduction under the taxation ruling.
Answer to question 2
Any individual can claim deduction for the self education related expenditures if she
qualifies to receive taxable scholarship that is bonded or she conduct the study for the
purpose of work. To choose the assessable situation of an individual it is essential to work out
if an individual is overseas resident or Australian inhabitant for computing the assessable
earning under taxation ruling. A foreign student admitted for a course in Australian
9 Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/

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foundation, term for which is over a half year will be represented as the Australian inhabitant
for computing the expense. It is likewise a vital factor that the course should be impressively
connected with current employment. As appreciated from the current circumstance Manpreet
will be represented as the Australian inhabitant with the true objective of assessment
gathering since he is chosen in a course that has the term of more than six months period in
Australian institution. In addition, Manpreet additionally connected with himself as part time
office assistant under an Australian firm from where he got month to month compensation
added up to $45,000. Further, Manpreet spend some costs associated with education that are
not permitted as deduction under assessable income. Moreover, the expenses with regard to
self-education amounted to $ 18,000 spend by Manpreet will likewise not qualify as
deductible costs. Further, to qualify for deduction, following conditions must be satisfied –
 The study will enhance or at least will maintain the necessary knowledge and the
skills pre-requisite for the present work
 The study is likely to enhance or will enhance the income of the person from the
present work10 .
One more notable fact is that to be qualified for the deduction, the course are bound to be
related to the current employment, else the expenses will not qualify for deduction even if –
 It assisted the person for the opportunity of new job
 It is related to the current employment in general terms
As to ITAA 1997, Section 8-1, the expenses incurred for obtaining the new mobile
phone is connected with procuring the assessable pay and in this way, Manpreet's expenses
will be reasonable deduction under the income tax ruling. Further, it is recognized from FC of
10 Chartered Accountants Australia & New Zealand (2017) CAANZ https://www.charteredaccountantsanz.com/

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T versus M I Roberts 92 ATC 4787 that the use of Maddalena standards to the government
court enabled the mine director to be qualified for deductible expenses as to study under
MBA.
Simultaneously, Manpreet incurred some money towards printer and computer and
buy of another mobile phone, which was related with the prerequisite of work. According to
the general ruling, the expenses qualified for deduction under the ITAA 1997, Section 8-1, if
there is noteworthy connection among the limit of gaining and uses and it frames required
character for the relationship of work and it is not in the local or private nature. As per the
case study of Ronpibon Tin NL vs FC of T (1949), there must exist a correlation between the
taxable income and the incurred expenses for the calculation of assessable income. Therefore,
Manpreet’s expenditures for self education will be disallowed for deduction as it was not
incurred for getting new income.
Manpreet’s assessable income computation

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Reference
Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/
Bankman, Joseph, et al. Federal Income Taxation. Wolters Kluwer Law & Business, 2017.
Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data
matching." Proctor, The 37.6 (2017): 18.
Chartered Accountants Australia & New Zealand (2017) CAANZ
https://www.charteredaccountantsanz.com/
CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/
Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting
Review 91.1 (2015): 47-68.
Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At
Cquniversity (2017) Libguides.library.cqu.edu.au
http://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174
Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’
view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.
The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/
Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).