University Taxation Law Assignment: ACC3TAX S2 2019 Analysis

This document presents a comprehensive solution to a taxation law assignment, likely for an ACC3TAX course. The assignment analyzes various income sources, including wages, allowances, and dividends, determining their assessability under Australian tax law. It covers topics such as personal service income, entertainment allowances, unused leave, gifts, lump sum payments, and the treatment of frequent flyer points. The solution also addresses dividend income, bank interest, marriage celebrant fees, bingo winnings, compensation receipts, superannuation withdrawals, and the sale of a main residence. Furthermore, it examines work expenses, car expenses, and repair deductions. The document provides detailed explanations of relevant legislation, including the ITAA 1936 and ITAA 1997, and incorporates case law to support its analysis. The assignment concludes with a list of cited references, demonstrating a thorough understanding of taxation principles and their application to the given scenario. The solution is structured to address specific issues, providing the relevant law, reasoning, and the calculated amount for each item, making it a useful resource for students studying taxation law.

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:...............................................................................................................12
References:...............................................................................................................................14

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Answer to question 1:
Issues Law and Reasons Amount ($)
Personal service income
(wages) & PayG
Within “sec 6, ITAA 1936”
the personal exertion income
includes wages, allowances,
salaries that is received in
relation to employment or
services rendered (Woellner
et al. 2016). The receipt of
$80,000 wages is a personal
service earnings and will be
taxable as ordinary income
under “sec 6-5, ITAA
1997”. While the PayG of
$24,000 will be allowed for
tax offset.
$80,000
Assessable
$24,000 Not Assessable
Entertainment Allowances Jean will be permitted to
obtain tax deduction for the
entertainment allowance
because it was spent on
entertaining the clients for
work purpose.
$10,000
Not Assessable
Unused annual leave and
unused service leave
A taxpayer may receive
lump sum payment for the
unused annual leave or long
Unused Annual Leave
$5000

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service leave (Barkoczy
2016). The sum of unused
annual leave and long
service leave amounting to
$5000 each will be included
in the salary and wages of
Jean Johnson.
(Taxable Income)
Unused long service leave
$5000
(Taxable Income)
Gift of I-phone and travel
accommodation
Gains that are simple gift is
not held income. In “Scott v
FCT (1966)” gift of 1000
shares received by taxpayer
was not an income (Sadiq
2019). The gift of I-phone
worth $1000 and travel
accommodation is not an
income for Jean Johnson.
$1000 (I-phone)
Not examinable
$1,000 (travel and
accommodation)
Not examinable
Lump sum of $100,000 The numerous lump sum
payment which is received
by employee upon the
termination of service is
taxed as the statutory
income. The one-off receipts
of $10,000 received by Jean
will be included in the
$10,000
(Assessable)

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assessable statutory income
under “section 15-20, ITAA
1936” of Jean.
Unexpected or the voluntary
payment received as the
employment incidence is
held as taxable ordinary
earnings. In “FCT v Dixon
(1952)” periodic payment as
the substitute for wages was
held as taxable income
(Butler 2019).
The sum of $3,000 received
by Jean for each year of
service will be considered as
taxable ordinary income
under “sec 6-5, ITAA
1997”.
$3000
(Assessable)
Qantas frequent flyer
point
The law court in “FCT v
Payne” held that the
taxpayer was not required to
include the amount of
frequent flyer point earned
throughout their
employment in their tax
$1500
Not examinable

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return (Murray et al. 2018).
Jean redeemed frequent
flyer point of $1500. The
amount is non-taxable
because it is not transferable
for cash.
Gross up BHP dividend
income
Under “sec 202-5 and 207-
20 (1)” the fully franked
dividends that are paid to a
resident by company are
grossed up to include it in
their assessable income
(Morgan, Mortimer and
Pinto 2018).
The dividend received by
Jean will be grossed up to
include in assessable income
$14,000 x 30/70 = 6000
While the sum of $8000 is a
taxable statutory income
under “sec 44 (1), ITAA
1936”.
$6000
Not examinable
$8000
Assessable Income
Tax offset
BHP Franking credit
Jean can claim a tax offset
for during the year under
“sec 207-20 (2)” (Morgan
Not examinable

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and Castelyn 2018). The tax
offset will be equivalent to
the franking credit on
distribution under “sec 205-
15”.
Bank Interest The bank interest of $500
received by Jean holds the
nature of periodical receipts
and it is more likely
constitute an ordinary
income under “sec 6-5,
ITAA 1997”.
$500
Assessable
Marriage celebrant fees Reward for personal effort
or providing a personal
service constitute taxable
income under “sec 6-5,
ITAA 1997” (Maley and
Maley 2018). In “Brent v
FCT (1971)” where the
taxpayer was held taxable
for making herself available
for a series of interview. The
receipt of $200 each for
conducting marriage
ceremonies is a reward for
$200 x 3 = 600
Assessable Income

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personal service and will be
taxable as ordinary income
under “sec 6-5, ITAA
1997”.
Bingo winnings and TAB
Account
A simple windfall gain has
no income nature. The bingo
winning of $50,000 by Jean
is a windfall gain and not
assessable as ordinary
income under “sec 6-5,
ITAA 1997”.
Gambling winnings is not
treated as income unless the
taxpayer is conducting any
gambling business (Robin
and Barkoczy 2019). The
sum of $25,000 received
from betting on trifecta is a
windfall gain which does not
has the income character
under “sec 118-37 (11)(c),
ITAA 1997”.
50,000
Not examinable
$25,000
Not examinable
Compensation receipts
from settlement proceeds
The compensation or
damages received by the
$10,000
Not examinable

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taxpayer for any wrong or
injury suffered is non-
taxable under “sec 118-37
(1)(b), ITAA 1997” (Main
2019). The compensation
received by Jean from
neighbour is non-taxable
under “sec 118-37 (1)(b),
ITAA 1997”. While the
legal fees incurred is a
capital expenses incurred by
Jean in defending his title to
the asset. The amount will
not be considered as
deductible expenses but
would form the part of
Jean’s property cost base
under “sec 110-25 (6),
ITAA 1997”.
$8000
Not examinable
Superannuation withdrawal According to the ATO, if an
individual taxpayer access
the super funds before
reaching the preservation
age then any withdrawals
made from the super fund
$50,000
Assessable Income

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will be taxed. The
withdrawal of $50,000 by
Jean will be considered
taxable as income.
Main residence sale When a taxpayer uses the
main residence for deriving
assessable income and upon
the rise of CGT event, the
taxpayer will be required to
bring into the account the
portion of the proceeds as
the gain or loss under “sec
118-190, ITAA 1997”
(Morgan and Castelyn
2018).
Jean used his main residence
for producing assessable
income from 1st May to 30
June 2016. He will be only
eligible to claim partial main
residence exemption under
“sec 118-190, ITAA 1997”.
The taxable value is =
A x (B / C)
A = total capital gain
B = no. of. Days as
taxpayer’s non-ownership of
dwelling
C = no. of. Days as
ownership
450000 x 365 / 3226 =
$50,914
$50,914
Assessable
Sale of personal home
assets
Personal use asset acquired
for greater than $10,000 will
be considered taxable under
$11,000
Assessable Income

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“sec 108-20, ITAA 1997”.
The sale of personal use
asset and deriving a sum of
$11,000 will be included for
assessment under “sec 108-
20, ITAA 1997”.
Work expenses deduction As per the “sec 8-1, ITAA
1997” any cost that is
occurred by the taxpayer
that relates to the ordinary
clothing item is not
permitted for deduction. The
law court in “Mansfield v
FCT (1996)” held that
usually no deduction is
permitted for the ordinary
clothing items and apparel,
irrespective of whether the
employee maintains a
suitable appearance in a
workplace (Butler 2019).
Expenses incurred by Jean
on clothing, grooming,
make-up and suits are
ordinary clothing expenses.
$4,000
Not deductible
$3,000
Not deductible
$1,000
Not deductible
$5,000
Not deductible

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It is non-deductible under
“sec 8-1, ITAA 1997”.
Car expenses In certain situation
outgoings may be
apportioned partially till the
assessable portion. In
“Ronpibon Tin NL v FCT
(1949)” it is necessary to
ascertain the proportion of
expenses incurred in gaining
assessable income (Sadiq
2019).
Up to 50% of the petroleum
expenses is allowed for
deduction to Jean as it was
incurred in deriving
assessable income while an
instant write off can be
claimed Jean since the cost
of car is within the instant
threshold limit of $20,000.
$10,000 x 50% = $5,000
Allowable deduction
$20,000
Allowable deduction
Repairs Repairs are allowed for
deduction under “sec 25-10,
ITAA 1997”. The repairs to
$2,000
Allowable deduction

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car by Jean is allowed for
deduction under “sec 25-10,
ITAA 1997” since the car
was solely used for
producing assessable
income.
Compensation for car Insurance payment for the
loss of capital asset is not
considered as taxable
income. The compensation
payment received for
damage to car in accident is
a capital receipt and cannot
be considered as taxable
income.
$20,000
Not examinable

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Answer to question 2:

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References:
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Butler, D., 2019. Who can provide taxation advice?. Taxation in Australia, 53(7), p.381.
Main, J., 2019. Taxation: Buying or selling: beware the sting of GST. LSJ: Law Society of
NSW Journal, (55), p.73.
Maley, M.N. and Maley, D.M., 2018. Australian Taxation Office Guidance on the Diverted
Profits Tax.
Morgan, A. and Castelyn, D., 2018. Taxation Education in Secondary Schools. J.
Australasian Tax Tchrs. Ass'n, 13, p.307.
Morgan, A., Mortimer, C. and Pinto, D., 2018. A practical introduction to Australian
taxation law 2018. Oxford University Press.
Murray, I., Taylor, J., Walpole, M., Burton, M. and Ciro, T., 2018. Understanding Taxation
Law 2019.
Robin and Barkoczy Woellner (Stephen & Murphy, Shirley Et Al.), 2019. Australian
Taxation Law Select 2019: Legislation And Commentary. Oxford University Press.
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.