Taxation Law: Deductions, Assessable Income, and Tax Implications

This taxation law assignment provides a comprehensive analysis of various tax scenarios under Australian law. The document examines the treatment of frequent flier benefits, compensation for damaged capital assets, gifts, additional funds, and income from sports. It also addresses deductions for construction expenses, short-term art courses, performing artists' expenses, and travel expenses. The assignment further explores the tax implications for an individual, Manpreet, focusing on assessable income, self-education expenses, and the deductibility of work-related expenses such as computer, printer, and phone costs. The solution references relevant taxation rulings and legislation to support its conclusions. Overall, the assignment provides a thorough understanding of key taxation concepts and their application in real-world scenarios.

Running head: TAXATION LAW
Taxation law
Name of the student
Name of the university
Author note

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Table of Contents
Answer I.................................................................................................................................2
Answer II................................................................................................................................2
Answer III..............................................................................................................................3
Answer IV..............................................................................................................................3
Answer V...............................................................................................................................4
Answer VI..............................................................................................................................4
Answer VII.............................................................................................................................5
Answer VIII...........................................................................................................................5
Answer IX..............................................................................................................................6
Answer X...............................................................................................................................6
Answer 2....................................................................................................................................7
References................................................................................................................................10

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Answer I
Under Taxation Ruling under TR 1996/6, benefits accrue under the standard program
of frequent flier are not added with the assessable income of the member as the benefits
accrue from the personal relationship that is contractual that is not the productive under the
assessable income. The deductions is subjected to the following provisions –
 The membership is restricted exclusively for the natural persons
 Points can be redeemed only for services or goods1
However, as per the ruling, the amount shall be treated and will be taxable as Fringe
benefit tax if the following conditions are satisfied –
 The employees are entitled to the rewards owing to some special arrangements
 The employer and employee is related as family member and he is entitled to the
point owing to his employment with the airline company
As per the given situation the employees are getting the points with regard to their
employment with the company and therefore the amount will be treated as business expense
for the employer. Therefore, the reward points received by the employees will be allowed for
deduction as it will not come under fringe benefit tax
Answer II
Compensation paid on account of damaging the capital asset of the service provider
the amount will not be added to the assessable income of the service provider who will
receive the amount. However, the received amount to be qualified as deduction some specific
conditions are required to be met. These conditions are –
1 Chartered Accountants Australia & New Zealand (2017) CAANZ https://www.charteredaccountantsanz.com/

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 The asset offered for providing service shall be of capital nature and exclusively used
by the service provider for business purpose only
 Depreciation must be provided for the asset and the depreciation must be recorded in
the books of accounts
 The amount received for damage must be used solely for repairing the part that was
damaged2
 The asset must be damaged during the time period under which the asset was using
for providing the service
From the above discussion, it can be concluded that the amount received by crane
Hire Company on account of damage of their asset shall not be included as assessable income
for tax if the above mentions conditions are satisfied.
Answer III
As per TR 1999/10, Para 71 to 78, gifts received by any person will not form part of
the assessable income for tax if the gift is received due to personal reasons and it is no way
connected with the person’s work related activities. However, if the gift is received with
respect to or in consideration with the work-related activities of the person, the gift will be
added under the assessable income for tax. Further, the gift can be transformed into money or
kind or cash, however the assessable nature of gift will not alter3. Therefore, holiday package
offered by alcohol supplier to the night club manager will be treated as income under the
assessable income for tax.
2 CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/
3 Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At Cquniversity (2017)
Libguides.library.cqu.edu.au http://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174

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Answer IV
Additional fund if raised and then returned to the persons from whom the money were
received will not be treated as taxable in the hand of the recipient as the amount were raised
for a specific purpose and it was never been the income in hands of the receiver. It is just the
error in forecasting the requirement4. Therefore, extra amount raised from purchasing
additional canoes that were subsequently returned to the members will not be treated as
income.
Answer V
Any amount received by any sportsman on account of his involvement in any sport
will be treated as income for the purpose of calculating the assessable income. Here in the
given case the Australian sportsman received money from a television channel for performing
as the best and the fairest player in AFL5. As per the TR 1999/17 of Taxation ruling, the
amount will not be qualified for deduction and will be included under income as the money
received in connection with the sports.
Answer VI
When the employer incurs any expenses with regard to construction of the apprentice
or trainees, the amount will be qualified as deduction. The TR 95/22 of Taxation ruling deals
with the treatment of reimbursement and allowance by the employer for building the
4 Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax avoidance structures:
Evidence from Australian firms." Journal of International Accounting, Auditing and Taxation 22.1 (2013): 12-
25.
5 Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major Australian
taxes." Treasury WP 1 (2015).

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employees. However, the below mentioned persons will be regarded as building of the
employees –
 Trainees, carpenter and apprentice
 Overseer or the project administrator for any under construction building
 Labours who are engaged for building construction
 The project administrator or supervisor engaged under the site of construction
Therefore, expenses with regard to construction of qualification or the apprentice will
be considered as construction of the employees and thus will be qualified for deduction.
Answer VII
While the taxable income is calculated some specific expenses that are spend for the
purpose of undertaking any short-term course related to art the amount will be qualified for
deduction. However, the deduction allowance is limited with the following conditions –
 Any expenses required to be incurred on food
 Training cost incurred for various modules and software
 Course fee paid for undertaking the course
 Cost spend for going to and coming back from the institution
Further, the above mentioned cost will be allowed if and only if the expenses incurred
for the course exclusively. Moreover, if out of the total expenses only a part is spend for the
course, that part only will be considered for deduction. In absence of sufficient information, it
is assumed that the expenses incurred for the course only and will therefore be allowed for
deduction.

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Answer VIII
The expenses in association with the performing of an artist will be allowed as
deduction under the ATO ruling provided the expenses incurred by the person can be
considered as performing artist. ATO mentioned following persons as performing artist –
 The musician who performs music will be considered as performing artist
 The actor who acts will be considered as performing artist
 The singer who sings will be considered as performing artist
 A person who dance will be considered as performing artist
 A person who performs in circus will be considered as performing artist
In absence of sufficient information, it will be assumed that the expenses are incurred
with regard to the performing artist’s dresses and make-up and therefore will be allowed as
deduction.
Answer IX
As per the Australian Tax Office the amount of expenses incurred for going to the
office and coming back from the office is not allowed as deduction. However, the amount is
allowed for deduction if the expenditure is incurred solely for travelling for official
purposes6. Further, if out of the total expenses only a part is spend for the office purpose
travel, that part only will be considered for deduction. In absence of sufficient information, it
will be assumed that the expenses are incurred with regard to the travelling of official
purpose and therefore will be allowed as deduction.
6 Berg, Chris, and Sinclair Davidson. "Submission to the House of Representatives Standing Committee on Tax
and Revenue Inquiry into the External Scrutiny of the Australian Taxation Office." (2016).

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Answer X
The amounts of travelling expenses are allowed for deduction if the expenditure is
incurred solely for travelling for official purposes. Further, deduction is allowable for
travelling to two workplaces, provided both the workplaces are under the control of one
employer7. Therefore, in the present situation, travelling to tow workplaces will not be
allowed as deduction as the two workplaces belong to two different employers.
7 Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University
Press, 2016.

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Answer 2
The taxable scenario of an individual is determined on the basis of the nature of the
citizenship of an individual that is whether the concerned individual is foreign resident or
Australian. For taxation purpose, a foreign student, enrolled in any Australian institution’s
course, of more than six months duration, is considered tobe a resident of the country. In this
context, Manpreet also will e considered as an Australian resident. Manpreet had a part time
job as an office assistant in an Australian firm, with a salary of $45000 per month. The self-
educational expenses, which are of worth o $18000 cannot be allowed for deductions, as
deductions can only be claimed in this context, if the concerned individual gets a bonded
scholarship which is taxable. The courses, in this case should be related to the current
employment and:
 Lead to or is expected to lead to an increase in the income of the individual from the
present employment.
 Improve or at least maintain the level of necessary knowledge and skills that the
individual needs to have in the current employment8.
Deductions cannot be claimed by the individuals, for expenses on self –education for
a course with no substantial connection to the current employment of the individual even
though the course:
 May allow the individual to get new job, or,
 Maybe associated in general with it.
8 Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data matching." Proctor, The 37.6
(2017): 18.

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As stated in Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478; (1958), to
meet test under section 8-1 of the ITAA 1997, an expenditure should mandatorily have the
characteristic of an outgoing one, which is incurred to gain accessible income. As held under
section 8-1 of the ITAA 1997 for an expenditure to be deductible, there should be adequate
relation between the activities that generate income and the expenses, such that its feature is
not domestic in nature and is related to the work9.
Ronpibon Tin NL v. FC of T (1949) supports this, where it is stated that there should
be a nexus between taxable and outgoing income such that outgoing is important to gain an
accessible income. Deduction for self-education expenditures are not allowed if the course
helps in opening up new avenues for employment or income generating activity. This implies
that the expenses of Manpreet shall not be allowed for deductions.
The expense should not only be considered as a pre-requirement for generation of
assessable income, they should also have relevance to the activities resulting in generation of
income. Manpreet has incurred expenses on computer, printer and a new phone, which is
related to her work purpose10. This can be considered under section 8-1 of the ITAA 1997,
where a sufficient nexus is present between the income generating capacity and the expenses,
such that it has the characteristics of work essentially. Referring to section 8-1 of the ITAA
1997 the expenses on new phone is relevant t gain assessable income which implies Manpreet
is allowed to claim deductions. The FC of T v. M I Roberts 92 ATC 4787 shows that by the
principles of Maddalena, the federal court gave allowance to deduct MBA related
expenditure to a mine manager.
9 The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/
10 Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/

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Assessable income of Manpreet

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References
Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/
Berg, Chris, and Sinclair Davidson. "Submission to the House of Representatives Standing
Committee on Tax and Revenue Inquiry into the External Scrutiny of the Australian Taxation
Office." (2016).
Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data
matching." Proctor, The 37.6 (2017): 18.
Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major
Australian taxes." Treasury WP 1 (2015).
Chartered Accountants Australia & New Zealand (2017) CAANZ
https://www.charteredaccountantsanz.com/
CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/
Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At
Cquniversity (2017) Libguides.library.cqu.edu.au
http://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174
Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax
avoidance structures: Evidence from Australian firms." Journal of International Accounting,
Auditing and Taxation 22.1 (2013): 12-25.
The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/
Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016.
Oxford University Press, 2016.