LAW3130: Detailed Taxation Law Assignment Solution, Semester 3, 2019

This document presents a comprehensive solution to a taxation law assignment, addressing two case studies. The first case study analyzes the tax implications for Catherine, considering her residency status and various income sources, including employment income, prize winnings, and interest. It differentiates between Australian and foreign sourced income and their tax treatment. The second case study focuses on Roy, examining the taxability of non-refundable holidays, incentives for business relocation, the use of trading stock for private purposes, and the application of section 129 of the ITAA 1997. The solution applies relevant tax laws and case precedents to determine assessable income and tax deductions. The assignment covers key concepts such as ordinary income, trading stock, and deemed income, providing a detailed analysis of each scenario.

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

1TAXATION LAW
Table of Contents
Part B:.........................................................................................................................................2
Requirement 1: If Catherine is a Resident.............................................................................2
Requirement 2: If Catherine is a Non-Resident.....................................................................3
Part C:.........................................................................................................................................3
Issues:.....................................................................................................................................3
Laws:......................................................................................................................................3
Application:............................................................................................................................5
Conclusion:............................................................................................................................6
References:.................................................................................................................................7

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Part B:
Requirement 1: If Catherine is a Resident
The sources of income are mainly important for those that are non-residents. Citing
“Nathan v FCT (1918)” the salary from employment in Wales does not has source in
Australia and it will not be contained within in her taxable earnings (Miller and Oats 2016).
Catherine also received employment income that was paid to her by her Australian employers
for work in Australia. The salary income is sourced in Australia and will be counted in her
assessable income for tax purpose.
She also received a prize of $250 for winning the annual pie-contest. Referring to
“Moore v Griffiths (1972)”, the prize winning of $250 is non-taxable since it is a simple
prize winning (Barkoczy 2016). While the interest of $50 earned from the Australian bank
account has a source in Australia. Mentioning the case of “FCT v Spotless Services (1995)”
the interest income will be contained within in Catherine taxable earnings. While the interest
received from Wales bank account will be counted in her assessable returns as income from
foreign sources however she will be entitled to a tax offset of $20 for withholding tax paid.
Finally, Catherine reports the sale of excessive clothing, sleeping bag and other personal
items on eBay. As Catherine is not carrying on any online selling business, the receipt will
not be included in her assessable income.

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Requirement 2: If Catherine is a Non-Resident
On assuming that Catherine is not an Australian resident, she will only be needed to
include in her taxable pay the earnings that is made from the Australian sources. She will be
needed to include the salary received from her work in café and the interest received from
Australian bank account as these are sourced in Australia.
Part C:
Issues:
a. Whether Roy will be taxable for the receipt of non-refundable non-transferrable
holiday received from his supplier and receipt of incentive to move the shop to
Keperra on signing a five-year lease?
b. Will Roy be considered taxable for the taking the trading stock for private use inside
the ordinary conceptions of “sect 6-5 ITAA 1997”?
c. Whether the sum of $45,000 will be treated as deemed income under “section 129
ITAA 1997”?

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Laws:
An ordinary income is regarded as income on the basis of ordinary conceptions and it
is taxable within the “sect 6-5 ITAA 1997”. An income is usually cash or can be translatable
to cash and should be real gain for the taxpayer (Gashenko, Zima and Davidyan 2019). A
gain which is cannot be treated as ordinary proceeds if it is not cash or cannot be translatable
into cash. As noted in “FCT v Cooke and Sherden (1980)” the law court held that the benefit
given to retailers which was cannot be translatable into money or money’s worth then it
cannot be regarded as income in agreement with the ordinary concept.
A nexus among the amount received and the work done is considered vital for
ascertaining whether the receipt is regarded as the ordinary proceeds under “sect 6-5 ITAA
1997” (Morgan and Castelyn 2018). As noticed in “GP International Pipecoaters v FCT
(1990)” a broader or narrow view of the business activities ascertains whether or not it
amounts to the normal proceeds of the business. The law court held that unusual receipts may
still be considered as income.
As noted in the “subdivision 70-D of the ITAA 1997” the worth of an item relating to
a trading stock is included into the assessable income if the trading stock is sold outside the
ordinary business course or if the item stops being the trading stock under some other
situations (Du Preez 2016). As per the ATO if an individual is carrying on the business and
the donate the trading stock then it may be considered as tax deductible. In order to consider
the trading stock as tax deductible then the taxpayer should be donating their trading stock
out of the ordinary course of business or the taxpayer has not claimed an income tax
deduction for the involuntary sale or loss of livestock. The tax deduction a taxpayer can claim
is the market value of the trading stock on the day when they donate it.

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Different from the ordinary provision of ordinary assessment given under the “ITAA
1997” which determines the taxable on the actual net income basis, “section 129 of the
ITAA 1997” estimates the arbitrary sum of profit to be considered as taxable income of the
ship owner of charterer that is derived in Australia (Woellner et al. 2016). The arbitrary sum
of profit stands 5% of the gross amount that is paid or payable in regard to the carriage of
goods “shipped” in Australia. No income tax is permitted under any provision of “ITAA
1936 or ITAA 1997”.
Application:
During the year Roy reports the receipt of non-refundable non-transferrable holiday
that worth $15,000 for achieving highest sales. The receipt of non-refundable non-
transferrable holiday cannot be treated as ordinary income since it is not cash or cannot be
translatable into cash. Referring to “FCT v Cooke and Sherden (1980)” the non-refundable
non-transferrable holiday given to Roy cannot be translatable into money or money’s value
(Blakelock and King 2017). As a result, it cannot be regarded as income in agreement with
the ordinary conception of “sect 6-5 ITAA 1997”.
Roy later reports the receipts of $24,000 on 12 November 2018 from the owner in the
form of incentive to move his shop to Keperra. Referring to “GP International Pipecoaters v
FCT (1990)” the receipt of $24,000 will be considered chargeable as ordinary proceeds
because the money received holds sufficient nexus with the business activities of Roy (Taylor
et al. 2017). The sum will be assessable under “section 6-5 ITAA 1997”.
During the year Roy donated dog food to Guide Dogs Queensland. With respect to the
explanation given by ATO as Roy donated the trading stock to a Deductible Gift Recipient it
will be considered as tax deductible. The trading stock was donated by Roy outside the
ordinary business course and he will be entitled to claim deduction on the basis of the market

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value of the trading stock on the day of donation. Roy also took some of dog and chicken
food for private purpose to feed his own pets. Referring to “subdivision 70-D of the ITAA
1997” Roy is needed to include in his assessable income at cost the value of dog and chicken
food which is took for private purpose.
Finally, Roy placed an order with a US based organic food producer and Roy took full
responsibility of it. In the present case of Roy, the deemed taxable income under the “section
129 ITAA 1997” is 5% of the entire amount of $45,000.
Conclusion:
Conclusively, the non-refundable non-transferrable is a non-cash business benefit
which will not be included for assessment. While the incentives to move shop, taking private
goods and 5% of the order placed with organic producer will be included in his assessable
income.

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References:
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.
Du Preez, H., 2016. A construction of the fundamental principles of taxation (Doctoral
dissertation, University of Pretoria).
Gashenko, I.V., Zima, Y.S. and Davidyan, A.V., 2019. Principles and Methods of Taxation.
In Optimization of the Taxation System: Preconditions, Tendencies and Perspectives (pp. 33-
39). Springer, Cham.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Morgan, A. and Castelyn, D., 2018. Taxation Education in Secondary Schools. J.
Australasian Tax Tchrs. Ass'n, 13, p.307.
Taylor, J., Walpole, M., Burton, M., Ciro, T. and Murray, I., 2017. Understanding Taxation
Law 2018. LexisNexis Butterworths.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.