Taxation Law Assignment: Analysis of Tax Law Questions and Answers

This document presents a detailed solution to a taxation law assignment, addressing five key questions with thorough analysis and referencing. The assignment covers various aspects of Australian taxation law, including business processes, deductibility of gifts, taxable income, capital gains tax (CGT), ordinary and statutory income, Medicare Levy, and residential status. The solution provides in-depth explanations, references to relevant legislation (ITAA97, ITAA36), tax rulings, and case law to support the arguments. It includes analysis of specific scenarios, such as lease of land, deductible expenses (HECS-HELP, travel, books, childcare, fridge repairs, clothing, legal expenses) and CGT events. The answers are well-structured and provide a comprehensive understanding of the concepts discussed. The document adheres to the Australian Guide to Legal Citation (AGLC) 4th Edition referencing method.

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
Answer to question 1:......................................................................................................................3
Answer A:....................................................................................................................................3
Answer B:....................................................................................................................................3
Answer C:....................................................................................................................................3
Answer D:....................................................................................................................................3
Answer F:.....................................................................................................................................4
Answer H:....................................................................................................................................4
Answer I:.....................................................................................................................................5
Answer to question 2:......................................................................................................................6
Answer to Question – 3...................................................................................................................8
Answer to Question – 4.................................................................................................................12
Answer (a).................................................................................................................................12
Answer (b).................................................................................................................................12
Answer (c).................................................................................................................................13
Answer (d).................................................................................................................................14
Answer to Question – 5.................................................................................................................15
Answer (a).................................................................................................................................15
Answer (b).................................................................................................................................15

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Answer (c).................................................................................................................................16
Answer (d).................................................................................................................................16
Answer (e).................................................................................................................................17
References:....................................................................................................................................18

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Answer to question 1:
Answer A:
The “taxation ruling of TR 2019/1” deals with the business process through which a
company is carried out1. Under “s-23, ITRA 1986”, the company carries its business entity and
it is valid from 2015-16 and 2016-17 income years, as per the commissioners under ‘s328-110,
IITA 1997”.
Answer B:
The procedure and the rules for working out the deduction for any contribution or gifts, is
explained under “Division 30, ITAA 1997” a taxpayer during the year.
Answer C:
The taxable income for the Australian resident is beyond the $108,000 and the top
marginal tax of 45% is applied over $180,000; it is levied for the income year of 2019-20.
Answer D:
Neither the motorcycle nor the car is exempted from the capital gains. Thus, it will be
treated as personal use asset under the “Sec-108-20, IITA 1997”2. An exemption can be allowed
from the capital gains or loss, if the first element of the asset cost base is below $10,000.
Answer E:
1 Woellner, Robin H., et al. Australian taxation law. CCH Australia, 2015.
2 Coleman, Geoffrey Lehmann Cynthia. "Taxation law in Australia." (2017)

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The CGT assets is mainly dealt by the CGT event, under the “s 104-20(1), IITA 1997”.
Thus, when the owner who is the tax payer gets destroyed or loss of the CGT assets, then the
CGT event happens3. Thus the compensation by the taxpayer is received when the event
happens.
Answer F:
The receipt will not be considered as ordinary earnings, because as per the case of
“Hayes v FCT (1956)”, the reward of services or the occupational production is not found in the
receipt. As the gift is considered as which gives a personal qualities, then it will not be included
in the assessable income of the recipient and it will not be considered as taxable ordinary
income4. The nature of receipts which the recipient received has more emphasis which has been
placed by the court, which is related to the services and can be found in time of distinguishing
the assessable voluntary payments and non-taxable personal gifts. The services which they
offered is appreciated and the unsolicited gifts cannot be considered as unsolicited gifts.
Answer H:
Ordinary Income Statutory Income
3 Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law & Policy 29.1
(2017): 3-10.
4 Kewley, Gretchen M. Australian Taxation: principles and practice. Longman Professional,
2017.

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 The income which an individual
earns through various sources, which
can be direct or indirect, irrespective
of the location, then it is considered
as Ordinary income5.
 Some of the examples which
indicates as ordinary income are
Salaries, wages, bonus, commissions
are.
 The income which is earned and can
be considered as assessable income
based on certain rules as per the laws
of taxation is known as Statutory
income.
 Some of the examples of statutory
Capital gains and dividends.
Answer I:
The differences of the Medicare Levy and Medicare Levy Surcharge are as follows:
Medicare Levy Medicare Levy Surcharge
5 Lymer, Andrew, and John Hasseldine, eds. The international taxation system. Springer Science
& Business Media, 2015.

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 Most of the Australian citizen
contributes the cost of Medicare,
those who are working; this method
is known as Medicare Levy.
 The individual who will be under the
obligation of paying Medicare Levy,
are those who have income excess of
$27,609.
 The rate is 2% on the taxable income
of the Medicare Levy.
 The Federal Government, through
which the tax is levied, that helps in
the payment for the health system of
the public is known as Medicare
Levy Surcharge6.
 Those who do not have an additional
hospital cover, this additional tax
imposed on the higher income
earners.
 The range includes $90,000 for
singles and $180,000 for couples
and families, and the rate ranges
from 1% to 1.5%.
Answer to question 2:
It is important to know that if the person wants to make their home in the country of their
own choice, this has to be determined under “subsection 6 (1)”, which is the residential status of
the person. Thus, as per “Taxation Ruling of IT 2650” “permanent place of abode”; the person
should set up a domicile in Australia, therefore if the taxpayer have no other ‘permanent place of
6 Tomasic, Roman, and Brendan Pentony. "Taxation law compliance and the role of professional
tax advisers." Australian & New Zealand Journal of Criminology 24.3 (2018): 241-257.

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adobe” outside Australia, the taxation officer is satisfied7. The resident who lives with the family
in the state is usually expressed as “usual place of abode”. In “Levene v IRC (1928)” the “usual
place of abode” it signifies that the resident live with the physical surroundings.
In the meantime, “permanent place of abode” denoted that the residence have a fixed
home on the taxpayer’s dwelling. Sometimes, it is treated as abode or home of the tax payer so it
cannot be considered as their permanent residence8. Those who live as an ordinary residence, the
relationship between the particular places of abode, thus having their “usual place of abode”.
Time space, durability of relationship and continuity of presence are some of the factors which
should be considered.
As per the judgment of “FCT v Jenkins (1982)”, it was considered as “permanent place
of abode” out of Australia because the tax payer was setting up office for three years’ time after
transferred to New Hebrides. There was no development of the material intention, which is
remaining in overseas for indefinite time as per the taxpayer.
The movement of the tax payer would be fully temporary in nature if the individual will
keep on moving from on state to other. Thus, as per the statement there is no “usual place of
abode” in Australia or any “permanent place of abode”9.
7 Braithwaite, Valerie, and Monika Reinhart. The Taxpayers' Charter: Does the Australian Tax
Office comply and who benefits?. Centre for Tax System Integrity (CTSI), Research School of
Social Sciences, The Australian National University, 2019.
8 Oats, Lynne, ed. Taxation: A fieldwork research handbook. Routledge, 2014.

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The tax payers maintain a family and financial bond in Australia, those who use to work
overseas; it is seen as per the case of “Harding v FC of T (2019)”. Thus, there is a judgment
which is passed by the federal court which states that under “section 6 (1), ITAA 1997”, the
resident of Australia is not the taxpayer10. Through a proper investigation it can found that
“permanent place of abode”, the residential status cannot be determined that whether the person
is living permanently or not.
In the above discussion, it is explained that the person cannot be from outside of
Australia “usual place of abode”. For the individuals there should be a test where there is
“permanent place of abode” is outside Australia.
Answer to Question – 3
HECS-HELP: $850
It has stated as per “Sec 26-20 ITAA 1997”, if a person makes any contribution towards
the Australian Government then he/she will not be liable to get any deduction of an Income tax.
While seeing the fact in the case it has noticed that the trainee accountant has made expenses of
$850 while contributing towards the HECS_HELP. Therefore, it is not an appropriate link fir
getting income tax deduction11.
9 Braithwaite, Valerie, Kristina Murphy, and Monika Reinhart. "Taxation threat, motivational
postures, and responsive regulation." Law & Policy 29.1 (2017): 137-158.
10 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).
11 Barkoczy, Stephen. "Foundations of taxation law 2016." OUP Catalogue (2016).

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TRAVEL: $110
Australian Taxation Officer (ATO) has stated that if an employee or a person who is
working somewhere and for the improvement or increasing their skills and production in that
field if he/she is taking any formal course then it will be allow as deduction. For getting the
benefit of deduction, the employee must satisfy the given conditions:
 The course that the person is taking must be for increasing the skills and knowledge in
respect to the current work
 He/she must proof that the course leads to increasing their income from the activities
related to the current job
The deduction is allowing on the expenses of $110 made from a person while travelling
from the work place to home. The trainee accountant travels from university to home. Under
“S8-1, ITTA 1997” the general deduction is allowing to the taxpayer as the course undertaken
is to enhance the skills and knowledge and the taxpayer is travelling regarding that from
University to home place12.
BOOKS- $200
The “Taxation Ruling of TR 98/9” states that the expenses incurred on the self-
education that includes the book cost or the study materials like calculators, stationary and many
more13. Such expenses have been allowing for deduction under “S8-1, ITAA 1997”. The
12 Basu, Subhajit. Global perspectives on e-commerce taxation law. Routledge, 2016.
13 Keyzer, Patrick, Christopher Goff, and Asaf Fisher. Principles of Australian constitutional
law. LexisNexis Butterworths, 2017.

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taxpayer will get the deduction for the expenses done in living and travelling within “FCT v
Studert (1982) ATC 4463” that relates to the scope of increase income in the current work.
Therefore, the trainee accountant within “S8-1, ITAA 1997” has allowed to claim
deduction as the cost incurred of $200 was in the books for the purpose of self-deduction as these
expense helps in increase in the income in the current job.
CHILDCARE DURING COURSE: $80
Within “sec8-1 (2) (b), ITAA 1997” negative limbs does not allow for any deduction for
the expenses made in the childcare. In the case of “Lodge v FCT (1972), the court has rejected
the claim of the taxpayer for the deduction of childcare expenses as the fact is not linked with the
origin of assessable income14. Therefore, the expenses of $80 for the childcare during the
evening classes will not be allow for deduction under “s8-1(2)(b), ITAA 1997” as the fact of the
taxpayer does not meet the criteria for the origin of assessable income.
FRIDGE REPAIRED FOR HOME: $250
The expenses related to the repairs of any depreciating asset that is not for the creation of
an assessable income will not be allow for deduction within the “sec25-10, ITAA 1997”15. In the
fact here, the taxpayer has made an expense of $250 on repairing of the fridge for home as
14 Burton, Hughlene A., and Stewart Karlinsky. "Tax professionals' perception of large and mid-
size business US tax law complexity." eJTR 14 (2016): 61.
15 Sadiq, Kerrie. Australian Taxation Law Cases 2019. Thomson Reuters, 2019.

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private purpose and the asset has not repaired for generating an assessable income thus, not allow
for deduction.
BLACK TROUSERS AND SHIRT FOR OFFICE: $145
As per “sec 8-1, ITAA 1997” on the apparels for the office purpose will not be allow for
deduction. In the case of “Westcott v FCT (1997)” for the purchase of the apparels for the
office purpose, the deduction has not allowed by the court, as it was not for the origin of income.
Hence, considered as an Ordinary article of clothing. The taxpayer has made the expense of $145
in cloth such as black trousers and shirts for use in the office. Hence, it has nondeductible within
“sec 8-1, ITAA 1997” as it has treated as Ordinary Article of apparel
LEGAL EXPENSES FOR NEW EMPLOYMENT: $300
As it has mentioned within the positive limb of “sec 8-1, ITAA 1997” that expenses
made for getting new employment is not the way of generating an income. The case of a
footballer while negotiating contract within Maddalena v FCT (1971)” has not get deduction16.
The trainee has made a legal expense of $300 for writing up a new employment with a new
employer that is treated as non-deductible as it has not made for generating income and soon
within “sec 8-1, ITAA 1997” of positive limbs.
Answer to Question – 4
Answer (a)
On the lease of land, several capital tax gains are existing to be applicable on it. If a
taxpayer has allowed lease to any person or in the case of renewing the earlier permitted lease
16 Butler, Daniel. "Who can provide taxation advice?." Taxation in Australia 53.7 (2019): 381.