Advisory Report: Assessability of Jacinta Wells' Income (Taxation Law)

This advisory report assesses the assessability of income derived by Jacinta Wells for the income years 2016/17 and 2017/18, focusing on Australian taxation law. It examines her employment income, considering both domestic and foreign sources, and analyzes the implications of her residency status. The report delves into the tax treatment of fringe benefits, such as a free airline ticket and a car, and the application of relevant sections of the ITAA 1936, ITAA 1997, and FBTAA 1986. It considers the impact of voluntary payments and compensation, concluding with an assessment of her tax liabilities for each year, taking into account changes in her residency and income sources. The report references various court cases and legal principles to support its analysis, providing a comprehensive overview of Jacinta's tax situation.

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
BUSL 320 TAXATION LAW AND PRACTICE.....................................................................2
Advisory Report:........................................................................................................................2
References List:..........................................................................................................................7

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BUSL 320 TAXATION LAW AND PRACTICE
Advisory Report:
The current report is based on determining the assessability of income derived by
Jacinta Wells for the income year of 2016/17 and 2017/18. “Section 6 of the ITAA 1936”
provides that income derived from the personal exertion or income generated personal
exertion represents income that comprises of earnings, salaries, wages, commissions bonus,
fees or proceeds derived from the business that are carried on by the taxpayer (Pinto 2013).
“Section 6-5 of the ITAA 1997” states that most of income that comes home to the taxpayer
is held as ordinary income.
The court of law in “Commissioner of Taxation v Scott (1935)” have explained
income that are as per the ordinary concepts (Woellner et al. 2016). As evident in the current
situation of Jacinta Wells she lived in Melbourne and worked as the management consultant.
She was employed in an American firm and derived a salary of $8000. The salary derived by
Jacinta is regarded as the income from the personal exertion and the same will be considered
for assessment under “section 6-5 of the ITAA 1936” as income from ordinary concepts.
Conversely, in the later instances it is noticed that Jacinta was required to move
Singapore to arrange the installation of the new computer system. Initially her salary was
paid in Melbourne bank account but from 1st May the salary of Jacinta was paid in her
Singapore bank account. According “section 6-5(2), 6-10 (4) (a) ITAA 1997” residents are
usually assessed based on the ordinary income and the statutory income derived from all the
sources (Barkoczy 2016). When an individual residing in overseas they remain to be an
Australian tax resident and are taxes are levied on all the worldwide income but credits are
available for offset relating to the foreign tax paid.

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An individual remains to be an Australian tax resident under the law but also become
the tax resident of the overseas nation. The primary considerations of the Australian taxation
office at the time of assessment is whether the person held as the Australian resident for
assessment purpose (Tan, Braithwaite and Reinhart 2016). Given the person is an Australian
resident their employment income is assessable in Australia. Their income would be held
foreign employment income and any form of taxes that are paid in the jurisdiction would
form the part of tax return and would be eligible for income tax offset. The court of law in
“French v Federal Commissioner of Taxation (1957)” to consider an income assessable
place where services are performed are taken into the considerations.
Similarly, in the situation of Jacinta she would be held as Australian resident and the
salary paid to the Australian bank account will be considered for assessment. Jacinta salary
paid into her Melbourne bank account will be held for taxation under “section 6-5(2), 6-10
(4) (a) ITAA 1997” (Cao et al. 2015). However, from 1st May 2016 her salary was paid to
Singapore bank account which constitute that her salary would be assessable as the
employment income from the overseas employment. Jacinta would remain to be an
Australian resident for taxation purpose but her income from foreign employment income
would be liable for tax offset.
As Jacinta is an Australian resident her employment income will be taxable in
Australia. Jacinta income would be classified as the foreign employment income and any
form of taxes paid in the jurisdiction where Jacinta is working would include in her tax return
as the overseas income tax offset for the year 2016-17.
In the later instances it has been noticed that Jacinta received a free airline ticket and
holiday package in London that for a value of $8,000. For a receipt to qualify as the ordinary
income to a taxpayer under the section 6-5 of the ITAA 1997 a principles were stated by the

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court that it should be “come in” for the taxpayer and it is received as the money or in the
form that are convertible into money (Robin and Barkoczy 2018). The statutory intervention
of “section 15-2 of the ITAA 1997 and FBT” includes allowances and other things that are
in respect of the employment or services. The principle of court was experimented in “Cooke
& Sherden v FC of T (1980)” where the taxpayer was provided with free holiday by their
supplier.
The argument of the commissioner stated that value of the free holiday was
considered as the money worth and must be considered as ordinary income or alternatively
must be considered for assessment under “section 26 e of the ITAA 1936” that was
associated to benefits received for the services rendered. However, it must be noted that
section 26 e has been replaced with the “section 15-21 of the ITAA 1997” (Robin et al.
2017). As per the ordinary concepts in “Tennant v Smith (1892)” for an income to be
receipts the same should be in the form of money or convertible to money.
The judgement of the court held that the value of the overseas holiday that is received
was not considered as the ordinary income since the holiday does not constitute money or
worth’s money due to the benefit in kind and cannot be transformed to money. Additionally,
it was held that the section 26 e cannot be implemented since the taxpayer did not provided
any service to the supplier under the employer or employee relation (Blakelock and King
2017). Eventually, this represents that 26 e cannot be implemented on the business taxpayers.
Following the replacement of “section 26 e with section 15-2 of the ITAA 1997”
allowance or any form of allowances and other benefits that are provided related to the
employment or services does not constitutes an ordinary income but would be held for
assessment as taxable income (McDaniel 2017). As evident in the current situation of Jacinta
the value of airline ticket and voucher of free holiday for a worth of $8,000 cannot be

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classified as ordinary income but would be included in the assessable income for tax purpose
under “section 15-2 of the ITAA 1997”. This is because the benefits that is provided by
Jacinta is in respect of the employment and attracts tax liabilities.
A taxable fringe benefits originates where the benefit is provided to the employee
during the year by the employer or by the third party agreement or in relation to the
employment of the employee. “Section 136 (1) of the FBTAA 1986” provides that a taxable
fringe benefit originates as the consequences of employment association (Bankman et al.
2017).
Evidences suggest that Jacinta received consulting job contract for a three-year term
with an employment salary of $100,000 and a car. The salary received by Jacinta for the year
2016/17 will be considered for assessment under income from employment however for the
year 2017/18 her salary would be not form the part of assessable income as she is not held as
the Australian resident.
As defined under the “section 7 of the FBTAA 1986” car fringe benefit origins where
the vehicle is provided to the employee or it is made available to the employee for their
private use represents taxable fringe benefit (Schmalbeck, Zelenak and Lawsky 2015).
Additionally, the car provided to Jacinta during the year constitute a taxable fringe benefit
under the positive limbs of “section 136 (1) of the FBTAA 1986” that is provided in respect
of the employment by the employer. The benefit of car provided to Jacinta represents a
benefit as the consequence of employment relationship in respect of employment.
The income from personal exertion also includes voluntary payments can be
considered as the income that has sufficient association with the taxpayer income earning
activities. The court of law in “Federal Court of Taxation v Dixon” stated that
supplementary payments will be considered as the assessable income (Saad 2014). The court

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of law stated that the payments were considered in accordance with the ordinary concepts. In
an another example of “Calver v Wainwright (1947)” the federal commissioner held that the
tips received by the taxi driver were held as the income.
Similarly, in the situation of Jacinta the receipt of incentive to join EZI and receiving
a compensation payment to leave the Staedler Ltd constitutes income under the ordinary
concepts. This is because the income holds sufficient connection with her employment or the
income earning activities of Jacinta. Therefore, a portion of $40,000 or in other words the
sum of $20,000 would be held assessable for the income year of 2016/17.
Moving to the second tax year of 2017/18 assessability of amounts derived by Jacinta
is taken into the consideration. As evident she decided to permanently move to Singapore for
the year 2017/18 therefore she no longer would be held as the Australian resident.
Additionally, the she has also opened a bank account in Singapore. The salary income would
not be considered for assessment as she is a foreign resident. Additionally, a part of her
compensation payment for leaving Steadler which was due to be in next year does not
constitute income from the Australian sources and would not be considered assessable for the
tax year of 2017/18.

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References List:
Bankman, J., Shaviro, D.N., Stark, K.J. and Kleinbard, E.D., 2017. Federal Income Taxation.
Wolters Kluwer Law & Business.
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data
matching. Proctor, The, 37(6), p.18.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and
Wende, S., 2015. Understanding the economy-wide efficiency and incidence of major
Australian taxes. Canberra: Treasury working paper, 2001.
McDaniel, P., 2017. Federal Income Taxation. Foundation Press.
Pinto, D., 2011. State taxes. In Australian Taxation Law (pp. 1763-1762). CCH Australia
Limited.
ROBIN & BARKOCZY WOELLNER (STEPHEN & MURPHY, SHIRLEY ET AL.),
2018. AUSTRALIAN TAXATION LAW 2018. OXFORD University Press.
ROBIN, H., 2017. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Schmalbeck, R., Zelenak, L. and Lawsky, S.B., 2015. Federal Income Taxation. Wolters
Kluwer Law & Business.
Tan, L.M., Braithwaite, V. and Reinhart, M., 2016. Why do small business taxpayers stay
with their practitioners? Trust, competence and aggressive advice. International Small
Business Journal, 34(3), pp.329-344.

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Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.