Taxation Law Assignment: Determining Bridget's Income and Deductions

This taxation law assignment analyzes the tax implications of Bridget's various income sources and expenses for the 2016-17 tax year. The assignment assesses her income from salaries, rent, cash awards, and television appearances, applying relevant sections of the ITAA 1997 and case law such as Scott v CT, Adelaide Fruit and Produce Exchange Co Ltd, Moore v Griffiths, FCT v Stone, Jarrold v Boustead, FCT v Finn, and FCT v Edwards. It examines the taxability of different income types and the deductibility of expenses, including self-education, professional clothing, and travel. The solution calculates Bridget's total assessable income, allowable deductions, and ultimately, her tax payable, providing a comprehensive understanding of the tax principles involved. The analysis also addresses specific scenarios such as cash prizes, payments for limiting rights, and expenses related to employment and travel, ensuring a detailed and practical application of taxation law principles.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Heading:.....................................................................................................................................2
Issue:..........................................................................................................................................2
Rule:...........................................................................................................................................2
Application:................................................................................................................................4
Conclusion:................................................................................................................................7
Reference List:...........................................................................................................................8

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Heading:
The following problems of tax assessment is based on the determination of the
incomes and expenditure that is reported during the year 2016-17.
Issue:
The following case study of Bridget is linked with the understanding of the issue
arising from the consequences of assessment of the earnings from salaries, income from rent,
cash awards and prize winnings. Further issues accompanying the study is regarding the
claim of allowable deductions for expenses reported by Bridget.
Rule:
According to the “Section 6-5 of the ITAA 1997” income that is derived through the
private exertion as the income from salary, wages, pension, superannuation, retiring gratuities
etc. relating to the services rendered or the proceeds related to business is performed by an
individual or the amount received as subsidy will be included in the taxable revenue
(Santhanam 2016). Earnings derived through private exertion must be included in taxable
earnings as statutory income or ordinary income. As held in “Scott v CT (1935)” receipts will
be treated as income and should be determined in compliance with the ordinary concepts
(Edmonds, Holle and Hartanti 2015).
Rent is regarded as payment made by an individual to another person possessions
namely the building or equipment shall be accountable for tax. The judgement of court in
“Adelaide Fruit and Produce Exchange Co Ltd (1932)” represents money received will be
regarded as taxable pay (Kirchler and Hoelzl 2017). Expenses arising out renting the property
is regarded as the permissible deductions till when the property has been let out.

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As stated under “ATO ID 2002/644” winning from prizes is not assessable income
under both the ordinary and statutory concepts because the winning from prizes is a windfall
gain under “Section 6-5 and Section 6-10” (Saad 2014). As held in the case of “Moore v
Griffiths (1972)” mere winning from the prizes is not treated as income and the same is
barred from being included in the taxable income of taxpayer.
The feature of a transaction to be treated as the earnings should be viewed in
circumstances when the income is earned by the taxpayer. Consequently, income from prizes
will be treated as taxable income if the amount received by the taxpayer is holding
appropriate connection with the revenue generating ability of the taxpayer. As held in “FCT
v Stone 2005” the court stated that Mrs Stone being a policewomen and javelin thrower
derived earnings from salary and endorsement (King 2016). She carried the prize money in
executing business of professional athlete therefore the money will be treated as income since
it was related with her employment.
Amount that is received by the taxpayer for limiting the rights is not regarded as the
income. Amount received by the taxpayer and complying with the agreement of not doing
anything is not a taxable income (Yuan 2016). As held in “Jarrold v Boustead (1964)” lump
sum that is received by rugby player for giving up the amateur status does not constitute
income.
The “taxation ruling of TR 98/9” expenses incurred in self-education is entirely
allowed for deductions since these expense is occurred to enhance the skill of the taxpayer
where the individual is currently employed (Somers and Eynaud 2015). These expenses are
occurred by taxpayer for getting promotion and deriving greater income. As held in the case
of “FCT v Finn (1961)” the architecture was allowed an allowable deduction for studying

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architecture since it was occurred in enhancing the skill for income producing activities
(Peiros and Smyth 2017).
As stated in “section 8-1 of ITAA 1997” expenses occurred in compulsory clothing or
professional related clothing will be allowed as deductions (Butler 2016.). The court of law
stated in “FCT v Edwards (1994)” the commissioner allowed deductions to the taxpayer for
additional clothing such as hats, formal evening wear since these were required in her job.
According to the “section 25-100 of the ITAA 1997” a deduction is allowable
relating to expenses of travel amid the workplaces (Woellner et al. 2016). Travel expense is
only allowed for deductions when these expenses has been occurred between the two places
of employment with none of the places is related to taxpayers’ home. The federal court
judgement in the case of “Lunney v FCT (1958)” travel between home and the taxpayers
usual place of work is usually not treated as the allowable deductions.
Application:
The following case study provides that Bridget derived assessable income from the
salaries derived from being employed in both part and full time work. The salary that is
received by Bridget is from the personal exertion for the services that is provided as the
accountant. With reference to the case of “Scott v CT (1935)” earnings generated through
private exertion is taxable under “section 6-5 of the act” (Doerrenberg, Peichl and Siegloch
2017).
Observance from the circumstance of Bridget suggest that she has earned an income
from rent of $30,000 and these rental income is regarded as the part of earnings which would
be treated as taxable income. Additionally, evidences suggest that expenses that are directly
associated with the taxpayer assessable income is allowed as deductions. The expenses

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occurred by Bridget when the property was rented out will be considered for deductions
under “section 8-1 of the act”.
In the following scenario it is found that Bridget received a cash of $3000 in the form
of prize. The winning from prizes of $3000 by Bridget represents a windfall gain and does
not has the character of being classified as income. Citing the reference of “Moore v
Griffiths (1972)” mere winning from the prizes is not treated as income and the same is
barred from being included in the taxable income of Bridget (Lombard 2017).
Evidences from the study suggest that Bridget has received a sum of $30,000 as the
considerations for appearing on television cooking program along with this she also received
an equipment of $10,000. The sum of considerations received forms the part of taxable
income which will be taxable under “section 6-5” of the act.
As observed Bridget has received a payment of $20,000 from the TV station with the
agreement of not making an appearance on any form of identical cooking show for two years.
With reference to “Jarrold v Boustead (1964)” amount that is received by the Bridget for
limiting the rights for not making appearance on similar cooking show does not constitute an
income and will not be assessable under “section 6-5 of the ITAA 1997” (Butler 2016).
An instance was bought up where Bridget reported a self-education expenses in order
to get promotion. As the expenses is incurred by Bridget during the course of employment
where she is currently engaged a deduction will be allowed to her. Citing the reference of
“FCT v Finn (1961)” a deduction is permissible to Bridget in respect of “section 8-1 of the
act”.
Another instances were found where Bridget was reward with cash for being the best
accountant. The cash prize was related to the profession in which she is engaged and
associated with the income generating activities. Citing the judgement of “FCT v Stone

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2005”, income from prizes will be treated as taxable income since the amount received by the
Bridget is holding appropriate connection with the revenue generating ability of the taxpayer.
Expenses were occurred by Bridget on suits which would make her look more
professional. As held in “FCT v Edwards (1994)” deductions can be only allowable for
expenses if it holding a relation with occupation of the taxpayer (Woellner et al. 2016).
Similarly, the contemporary suit is neither compulsory uniform nor it is occupation specific
therefore it will be treated as non-allowable deduction under “section 8-1 of the ITAA 1997”.
An expense on airfares and accommodation is was reported by Bridget as she
attended an interview related to new job in an accounting firm of Melbourne. A deduction
will be considered as permissible deductions relating to the expenses on travelling between
the two place of work. It is noteworthy to denote that travel expenses will be regarded as
allowable expenses if the travel is directly associated with the two place of taxpayer income
generating activities having no relation with taxpayer’s home (Peiros and Smyth 2017).
Citing the reference of “Lunney v FCT (1958)” the taxpayer in the current context will be
not be allowed for claiming an allowable deductions relating to the expenses on airfare and
accommodations since it is not related to Bridget income earning activities.
A computation of the taxable income and deductions is stated below determining the
tax payable and deductions that can be claimed is stated below;
Computation of Taxable Income
In the books of Bridget
For the year ended 2016/17
Particulars Amount ($) Amount ($)
Assessable Income
Income from Salaries
Salary from Accounting Firm 100000
Salary from Part-time Bookkeeping 60000
Australian Sourced Rental Income 30000
Consideration from TV Show 30000

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Cash Award 5000
Total Assessable Income 225000
Allowable Deductions
Expenses on Rental Property 40000
Self-education expenses 7000
Other Allowable Deductions 70000
Total Allowable Expenditure 117000
Total Taxable Income 108000
Tax on taxable Income 93832
Add: Medicare Levy 2160
Total Tax Payable 74482
Conclusion:
The case study can be concluded by stating that the income generated by Bridget from
her personal exertion will be considered to be assessable along with the rental income derived
under “section 6-5” of the act. Similarly, under “section 6-5” of the act Bridget will be able
to claim an allowable deductions relating to the expenses on self-study, rental property
expenses and other expenses reported as allowable deductions.

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Reference List:
Butler, D., 2016. Superannuation: Transferring foreign super fund amounts to an Australian
resident. Taxation in Australia, 50(8), p.481.
Doerrenberg, P., Peichl, A. and Siegloch, S., 2017. The elasticity of taxable income in the
presence of deduction possibilities. Journal of Public Economics, 151, pp.41-55.
Edmonds, M., Holle, C. and Hartanti, W., 2015. Alternative assets insights: Super funds-tax
impediments to going global. Taxation in Australia, 49(7), p.413.
King, A., 2016. Mid market focus: The new attribution tax regime for MITs: Part 2. Taxation
in Australia, 51(1), p.12.
Kirchler, E. and Hoelzl, E., 2017. 16 Tax Behaviour. Economic Psychology, 2380, p.255.
Lombard, M., 2017. Everything producers need to know about tax: current
affairs. FarmBiz, 3(2), pp.10-11.
Peiros, K. and Smyth, C., 2017. Successful succession: Tax treatment of executor's
commission. Taxation in Australia, 51(7), p.394.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Santhanam, R., 2016. 51_Salaries and Income-Tax.
Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO's proposed treatment of
unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.

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Yuan, H., 2016. Mid market focus: The sharing economy and taxation. Taxation in
Australia, 51(6), p.293.