TAXATION 11 Assignment: Taxation Law Analysis, Question and Answers

This assignment solution for TAXATION 11 provides detailed answers to various taxation-related questions, analyzing scenarios such as fringe benefit tax, compensation for damaged assets, gifts, and travel expenses. It delves into specific rulings from the Australian Taxation Office (ATO) to determine assessable income and allowable deductions for different situations. The assignment also includes a case study on Manpreet, an international student, calculating his assessable income, considering his salary, income from overseas sources, and self-education expenses, along with deductions for work-related purchases. The solution references relevant taxation rulings and legal precedents to support its analysis, culminating in a computation of Manpreet's taxable income and tax liability.

Running head: TAXATION
Taxation
Name of the student
Name of the university
Author note

1TAXATION
Table of Contents
QUESTION 1.............................................................................................................................2
Answer i.................................................................................................................................2
Answer ii................................................................................................................................2
Answer iii...............................................................................................................................3
Answer iv...............................................................................................................................3
Answer v................................................................................................................................4
Answer vi...............................................................................................................................4
Answer vii..............................................................................................................................4
Answer viii.............................................................................................................................5
Answer ix...............................................................................................................................6
Answer x................................................................................................................................6
QUESTION 2.............................................................................................................................7
Computation of assessable income of Manpreet........................................................................9
Reference..................................................................................................................................10

2TAXATION
QUESTION 1
Answer i
It is clearly mentioned under the Taxation ruling for TR 1999/6 that the rewards or the
points received by the clients from the airline business organizations are not treated as
income under taxation. However, these rewards or points may attract the fringe benefit tax if
the below mentioned conditions are satisfied –
 The rewards or the flight points are allocated to the customers under some specific
arrangement
 There exists a family relationship among the employer and employee or the rewards
and points received by the employees with regard to his employment1
From the above discussion, it is clear that the reward for repeated flier of Webjet
received from the large business entity by the employees with regard to their travel related to
work that is paid by the company shall not be included under the taxable income, nor it shall
be taxed as the fringe benefit tax.
Answer ii
If any person receives any compensation from the customer owing to the damages of
the capital asset while providing service to that customer with that capital asset, the damage
compensation shall not be included under the assessable income for tax. However, to get the
benefit followings factors must be taken into account –
 The compensation amount received for the damage must be used for refurbishing the
damaged part of the asset.
1 Ato.Gov.Au/ (2017) Ato.gov.au <https://www.ato.gov.au/>.

3TAXATION
 The asset shall be a depreciable asset and the forecasted depreciation must be
accounted for in the record with regard to the asset.
 The assets shall be in the nature of capital asset and shall be exclusively used for the
business purpose of the receiver2.
Therefore, the compensation received for the damaged goods while providing services
by the company that hires crane will not be included under the taxable income, provided the
conditions mentioned above are fulfilled.
Answer iii
As per the ATO (Australian Taxation Office), any gifts received in for form of cash or
kind by any individual are treated as part of the assessable income for taxation and not
included under the non-assessable income or exempted income. With regard to the receipt of
big gifts that can be transferred into cash or money and the cash gifts or gifts received in kind
that are offered to the employee, the sum of gifts are included under the taxable income of the
receiver. However, the small amount of gift is not included under the period when the tax of
the person is calculated. Here in the given case, the supplier of alcohol offered free overseas
holiday package to the night club manager. This gift will be considered and included under
the assessable income of the night club manager.
Answer iv
A per the ATO, the additional money raised that will be refunded to the member will
not be considered as income while computing the assessable income. In the given case,
Canoe club raised money for purchase of additional canoes and eventually the additional
monies were refunded to the member of the Canoe club3. This money will not be considered
as income while computing the assessable income under income tax as the extra money does
2 CPA Australia (2017) Cpaaustralia.com.au <https://www.cpaaustralia.com.au/>.

4TAXATION
not qualify as the alternative extra fund. Rather the money was collected as per the
requirement only.
Answer v
Any benefit received by any sportsman owing to his connection with the sport is
treated under as per the Taxation ruling for TR 1999/17. With regard to the ruling, any
benefits or any sum that is received by the sportsman will be treated as income while
calculating the assessable income under taxation if the receipt forms part of the assessable
income under the general concept4. Here in the given case, the Australian footballer received
the money for being the fairest and best player in AFL from the television station will be
included under the assessable income of the player while computation the income for the
purpose of taxation.
Answer vi
The reimbursement, allowance for employees building is dealt with under the
Taxation Ruling for TR 95/22. According the said ruling the below mentioned activities are
considered as building and construction of the employees –
 Apprentice, trainees and carpenters
 The site of the construction where the project managers work
 Supervisor or the project manager for the building which is under construction
3 Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data matching." Proctor, The 37.6
(2017): 18.
4 Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University
Press, 2016.

5TAXATION
 Labours employed for the building construction5
Expenses incur with regard to the construction of apprentice for the qualification of
the building is clearly stated under the ruling as building and construction of the labours as
allowance and the compensation.
Answer vii
With regard to the expenses incurred for the purpose of short course under art
management with the expectation of becoming the art director will be allowed as deduction
provided the following conditions are fulfilled –
 The expenses incurred with regard to the travelling to and from the institution of the
course
 Training expenses with regard to the modules and any software
 Recommended expenses incurred for meal
 Expenses towards payment of fees for the short term course under art management
Further, the expenses shall be qualified for deductions if and only if the expenses
incurred in association with the short term curse on art. Moreover, if the expenses cannot be
proportionately related to the expenses associated with the course, the amount will be
disallowed as deduction. In the given case, as all the details are not provided, it can be
assumed that the expenses incurred were in association with the course only and therefore,
will be allowed as deduction.
Answer viii
As per the ATO, any artist performing and the expenses incurred with regard to the
performance will be allowed as deduction provided that the person is regarded as the
5 Chartered Accountants Australia & New Zealand (2017) CAANZ
<https://www.charteredaccountantsanz.com/>.

6TAXATION
performing artist. As per the ATO taxation ruling the below mentioned persons will be
considered as the performing artists –
 Different types of artists will be regarded as the performing artist
 Any musician is considered as performing artist
 The circus or dance performer will be considered as performing artist
 A singer is considered as performing artist
 An actor is considered as performing artist
Here in the given case the expenses incurred with regard to work dresses and work
make-up (Barkoczy, 2016). In absence of information, it is assumed as the expenses incurred
with regard to the performing artist and therefore, will be allowable as deduction under the
ATO ruling.
Answer ix
As per the general ruling the travel between home and the office is considered as the
personal expenses. However, some specific provisions are there where the expenses are
allowed as deductions as the travelling expense. If the travel is partly personal and partly
official then the official part will be allowed as deduction. However, if the travel is
exclusively fr office purpose only then the travelling expenses will be allowed as deduction.
In the given circumstance, it is assumed from the scenario that the travelling expenses were
exclusively for office purpose only and thus will be allowed as deduction while assessing the
income under taxation.
Answer x
Expenses incurred for the purpose of travelling to two different workplaces qualify for
deduction under ATO taxation ruling, provided both the workplaces are under the same

7TAXATION
employer6. However, in the given case this deduction will not be allowed as the person
travelling to two different workplaces for two different employers. Therefore, the expenses
for travelling will not qualify for deduction as the employers are different.
6 Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major Australian
taxes." Treasury WP 1 (2015).

8TAXATION
QUESTION 2
To decide the assessable circumstance of an individual it is important to work out if
an individual is foreign resident or Australian resident for calculating the assessable income
under tax. A student from abroad taken admission for a course under Australian institution,
duration for which is more than six months will be accounted for as the Australian resident
for calculating the tax. The deduction can be claimed by any individual for the expenses
related to self-education if the student receives any bonded taxable scholarship or her study is
related to the work7. It is also an important factor that the course must be considerably
associated with present employment. As comprehended from the present situation Manpreet
will be accounted for as the Australian resident with the end goal of tax collection since he is
selected in a course having term of over a half year in Australian institution. Further,
Manpreet incurred some education related expenses that are not allowed as deduction under
income tax. Moreover, Manpreet also engaged himself as a part time employee under an
Australian firm from where he received monthly remuneration amounted to $45,000.
Furthermore, the self-education expenditure of $ 18,000 incurred by Manpreet will also not
qualify as deductible expense8. To get the deduction following factors must be taken into
consideration –
7 Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax avoidance structures:
Evidence from Australian firms." Journal of International Accounting, Auditing and Taxation 22.1 (2013): 12-
25.
8 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).

9TAXATION
 The study will increase or it is expected to increase the earning from their current
employment.
 Maintain or enhance the required knowledge or skills of the student necessary for the
current employment.
It is also an important factor that the course must be considerably associated with
present employment, otherwise the person will not be allowed deductions for the expenses
associated with self-education irrespective of the fact that –
 It enable the person to get the opportunity for new employment
 It is generally associated with the present employment
At the same rime Manpreet spend some amount towards printer and computer and
purchase of a new mobile phone, which was associated with the requirement of work. As per
the general ruling, the expenditures are qualified for deduction under the ITAA 1997, Section
8-1, if there is significant relation among the capacity of earning and expenditures and it
forms required character for the association of work and it is not in the domestic or private
nature 9
Expenditures shall be incidental and relevant with regard to the activities for
generation of income. It is not enough that the expenditures are pre-requisite for generation of
the taxable income. With regard to ITAA 1997, Section 8-1, the expenditures made for
purchasing the new mobile phone is related with earning the assessable income and therefore,
Manpreet’s expenditure will be allowable deduction under income tax. Further, it can be
identified from FC of T vs M I Roberts 92 ATC 4787 that the application of Maddalena
9 Sara McDonald Karin Simon, 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>.

10TAXATION
principles to the federal court allowed the mine manager to get qualification for the expenses
as deductible with regard to study of MBA.
Further, as per the viewpoint of the case study Ronpibon Tin NL vs FC of T (1949),
the earning shall have correlation among the taxable income and the outgoing which in turn
will associate the outgoing crucially for arriving at the assessable income. Hence, the
expenses by Manpreet on the self-education will not be qualified as deductible expense as the
expenses will qualify for deduction only if it is incurred for getting opportunity of new
income10. Further, as held in the case of Lunney v. FC of T; Hayley v. FC of T (1958) 100
CLR 478; (1958), if the expenditure meets the required criteria under the outgoing incurred
for assessing the taxable income. As per the ITAA 1997, Section 8-1 the expenses will be
qualified for deduction if there is significant correlation among the activities that generate
income and the expenses.
Computation of assessable income of Manpreet
Computation of Taxable Income of Manpreet
For the year ended 2016/17
Particulars Amount Amount
Taxable income of Manpreet
Gross Salary $ 45,000.00
Income from overseas source
Income From the Trust $ 10,000.00
Total taxable Income $ 55,000.00
Less: Deductions allowed under ITAA
Printer and Computer $ 2,000.00
New mobile for the purpose of work $ 500.00
Total Allowable Deductions $ 2,500.00
Total Taxable Income $ 52,500.00
Tax on taxable Income $ 8,609.00
Add: Medicare Levy $ 1,050.00
10 The Tax Institute (2017) Taxinstitute.com.au <https://www.taxinstitute.com.au/>.

11TAXATION
Less: Low income tax offset $ 212.50
Net Payable tax $ 9,446.50