University Taxation Law and Income Tax Assessment Assignment

This assignment delves into the complexities of taxation law and income tax assessment, analyzing various case studies to illustrate key concepts. It examines scenarios involving business expenses, such as flight rewards, damaged property, and free business trips, determining their tax implications based on relevant legislation. The assignment also covers personal income tax issues, including deductions for educational expenses, work-related clothing, and travel costs. Furthermore, it explores the tax treatment of international students, addressing income from trusts, student assistance, and the application of double taxation avoidance agreements. The assignment also considers the tax implications of expenses related to higher education, including the purchase of computers and mobile expenses. Through these case studies, the assignment provides a comprehensive overview of taxation principles and their practical application.

By student name
Professor
University
Date: 29 August 2017.

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Contents
Question no 1…………………………………………………………………...2
Question no 2…………………………………………………………………...7
Refrences.....……………………………………………………………….......13
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Question 1
1. Facts of the case
The business analyst have received certain flying points, in relation of his work from a large
consultancy business. It is received free of cost for the work that he has done for the company ,
which is like a reward and not specifically a part of his employement salary.
Application of the law
As per the TR 1999/6 of the Income Tax Assessment Act 1997, if any individual is
receiving flying points from a consultancy firms in relation to work related purpose.It
provides that flight rewards received under consumer loyalty programs are generally
not taxable. However, it also notes that FBT may apply where a flight reward is
provided to an employee, or the employee's associate, under an 'arrangement' for the
purposes of the FBTAA, that results from business expenditure.
The flight reward might also be subject to income tax if they are received by an
individual who receives the flight reward as a result of business expenditure
2. Facts of the case
Amount is received from a crane hiring company from its customer for a damaged crane.
Application of the law
As per the Income tax assessment act 1997, if any income is received by a company in lieu of any
insurance then same shall be taxable as business income. In the given case the amount received from a
crane company will be taxable as its is just like the amount that it recives from the insurance company in
case of any damage to the property of the company. Hence the amount received will be taxable as
business income.
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3. Facts of the case
Free business trip that is received by an individual from an alcohol supplier. The person is a
nightclub manager.
Application of the law
As per the specific provisions of the law, any business trip that is received by an individual is not
taxable, but the individual cannot claim any deduction on the same as well. For example if the
individual is spending $1000 on the trip from his own end, he cannot clai any deduction on the
same. Therefore in the given case, the overseas holiday is a free business trip, because the
alchol supplier and the night club manager have work relations but the manager cannot claim
any deduction on the trip, and the trip will not be taxable by the IT act.
4. Facts of the case
In the given case, the assesse has received certain extra funds for the purchase of canoes, from
its members and then the club returned the same.
Application of the law
As per the ITAA 1997, any amount of excess amount that is received by a company and that is
eventually returned is not taxable. If the excess amount was not returned and was kept by the
individuals in that case that amount would have been taxable. Hence in the given case, the
excess amount that was received by the canoe club will not be taxable.
5. Facts of the case
In the given case, the assesse has received certain amount from a teelvsion station, being
named the best footballer and the amount was paid as a price was playing well in AFL.
Application of the law
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This case is assessable as per the TR 1999/17, if any amount is received by a sports person in
relation to any services provided or any amount of revenue nature or any amount that is
received as gits or awars or pizes, then that amount will be taxable. This includes the
exploitation of the commercialization of the personal skills of the individuals in order to get the
reaward. Hence in the given case, the amount that was paid to the sports person for his
performance will be taxable by the company.
6. Facts of the case
In the given case the expenses are done in lieu of getting the building qualifications that are
needed by a building apprentice.
Application of the law.
As per the ITAA 1997, if any expense is done in connection with getting higher education, that
eventually helps in development of the skills set of theindividual, helps in development of his
commercial viability and also helps in his future studies, in that case those expenses can be
claimed as deduction. In the given case, the apprentice is doing an expense for development of
a skill set that will help in development of his commercial viability. In that case those expenses
cane be claimed as deduction.
7. Facts of the case
In the given case, the assesse has made certain expenditure for getting knwolegde in art
management to eventually work as a art director.
Application of the law.
As per the ITAA 1997, if any expense is done in connection with getting higher education, that
eventually helps in development of the skills set of theindividual, helps in development of his
commercial viability and also helps in his future studies, in that case those expenses can be
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claimed as deduction. In the given case, the expenses are done to get knolwdege about a
specific skill set that is related to the job of the assesse. There is a connection between the
education and the job, thus the expenses that are done in the art course can be claimed as
deduction by the assesse.
8. Facts of the case
The case is in regard to the expenses that are done in relation to the work make up and
dresses , that is done to make one look presentable at the job.
Application of the law.
As per the ITAA 1997, if any expenses are doen by an individual that is related to the work of the
individual, then that amount can be claimed as deduction. Some unique clothing ahs been stated on
which deduction can be claimed like the – protective clothing that is not everyday wear, Clothes that
helps in identification of the occupation one belongs to, Clothing or footwear that are specifically worn
to protect the individuals from any kind of injury at the work place. For all these type of clothing any
expenditure done is allowed as deduction. The same is stated in the above case, if the clothes are
specifically related to the work then expenses can be claimed else it cannot be claimed. For make up no
expenses can be claimed by the assesse.
9. Facts of the case
This case is in relation to the overall expenses that are done while travelling between work and
home.
Application of the law.
As per the section 8-1 of ITAA97, for any kind of expenses that are incurred while travelling
between work and home, will be taxable only when the total amount is related to the work
related purposes.The travel must be direct and there must not be any stop in between. In the
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given case the assesse can claim the specific deduction, if he is travelling directly between the
office and the home for work related purposes only.
10. Facts of the case
This is in relation to the expenses that are related while travelling between work from one
employer to another employer.
Application of the law.
As per the section 8-1 of ITAA97, for any kind of expenses that are incurred while travelling
between will be taxable because the expenses are relation to the second job of the employee.
As per the Laurence Fox v Commissioner of Taxation [2013] AATA 471, when a person is
travelling between one employer to the employer the expenses are born in the course of
employment and there are no personal benefits involved. Hence in that case the amount that
the assesse incurs while travelling between one employer and the second employer will be
taxable as per the given case laws.
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QUESTION 2
Facts on case 2
 Manpreet is an international student who is pursuing a degree of accountancy from the CQU,
Sydney and is also working as an office assistant to get some practical exposure that will help
her in her studies for $45000.
 She also receive some amount from her parents to help her in her living expenses and also
received some amount from a trust that has been set up in India by her grandmother, on the
same she paid $1000 of foreign taxation.
 Apart from the above, she spent certain amount of money on her studies $18,500 and for
computer and printer that she required in the course of her education she spent $2000 and for
the mobile expenses she spent $500.
 Manpreet is doing the job in connection to her studies that will help in enhancing her skill set
and is part of her education curriculm
Applicable Case law
 Income received from the trust
As per the Income Tax Act 1997, section 99B, if any amount is received from a trust that is not
previously taxable, then total amount that was paid to any beneficiary who at any point of time
was a resident during any time of the year, then such amount shall be taxable and will not be
deductable from the taxable income of the beneficiary(Sadiq et al.2017).
 Case law applicable
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TD 2016/D4
As per the applicable case law, if any amount attributable from a trust is applied for the benefit
of an individual, who is a resident beneficiary, then such amount may be included in the
beneficiary taxable income as per the Income Tax Assessment Act 1936.
TD 2016/D5
As per the applicable case law, if any amount is received by a beneficiary from the trust then
that amount is not taxable as capital gain or loss and not subjected to the CGT discount
purposes.
Applying the same to the given case study, as per the Bamford v. FCT [2010] HCA 10, we see that
the total amount of moeny that Manpreet is getting from her grandmothers trust will be taxable
as her income and she will not get any CGT discount on the same. Manpreet is a beneficiary to
the trust and hence the given amount of money will be taxable as per her income.
 Assistance to Students
As per the Income Tax assessment act 1997, section 26.20, any amount that is paid to a student
to support him for his higher education shall not be taxable as per the income tax act and the
payment can be in any form either in cash or in kind. If any amount or any property is used by
the student for his higher education, then the student is not required to pay any tax on the
same.
In the given case we see that Manpreet is getting every year $20,000, to assist her in her
education and support her overall living expenses, and hence that amount will not be taxable as
her income because she is using the same to support her higher education
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 Double Taxation Avoidance Agreements
As per the Income Tax Assessment Act 1936, if there is any income is double taxed in two
countries, then the tax amount that is paid in the home country will be allowed as deduction in
cases where there is a double taxation avoidance agreement between the nations. This is done
to prevent the scope of double taxation of foreign income (Mitchelson, 2011).
In the given case, we see that the money that Manpreet receives from her grandmother trust,
has already been taxed, and on the same she has paid $1000 in foreign tax, so when the same
income will be taxable in this country, she will get a deduction of $1000. It is assumed that there
is a DTAA between the two countries and on the basis of the same, Manpreet will get exemption
on the foreign taxation that is paid on the trust income that she receives as a beneficiary from
her grandmother.
 Expenses on Higher Education
As per the Income tax assessment act 1997, if any student is spending certain amount of money
for education purpose that is important-
 For development of the necessary skill set for his studies
 For improving the salary of his employment
 For benefiting him in his higher education
In that case the student will get necessary deduction for all kind of such expenses made.
In the given case, Manpreet is spending money on her education, and also, $2,000 on a
computer and printer for educational purposes, and $500 for use in his work. All these
have connection with her education, will help her in further studies and development of
her specific skill set that will be beneficial for her to get better job. Hence this amount
will not be deductable and she will get exemption on the same as per the taxation rules.
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Applicable rate of taxation as per the Income tax assessment act 1997 for resident individuals.
Taxable
income Tax on this income Effective tax
rate
$1 – $18,200 Nil 0%
$18,201 –
$37,000
19c for each $1 over
$18,200 0 – 9.65%
$37,001 –
$87,000
$3,572 plus 32.5c for
each $1 over $37,000
9.65 –
22.78%
$87,001 –
$180,000
$19,822 plus 37c for
each $1 over $87,000
22.78 –
30.13%
Calculation of the Taxable Income of Manpreet for the financial year 2016/2017
Particulars Amount $
Total income from the Job
Amount received from the trust
Total taxable amount
Deduction allowed-
Money spent on studies
Money spent on computer and printer for
educational purposes
Money spent on new mobile phone for business
use
Net Taxable Amount
$45000
$10000
$55000
$18500
$2000
$500
$34000
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Total Amount of tax payable by Manpreet as per the applicable rate of taxation
Up to $18200- Nil
For the remaining amount - $34000-$18200 = $15800
Tax = 19 c for every $ above $18200 = $15800*19C = $3002
Gross tax payable by Manpreet = $3002
Less: Foreign tax paid on trust income = $1000
Therefore net tax payable = $2002
Thus after applying all the necessary provisions, the total amount of taxable income for Manpreet for
the financial year 2016/2017 is $2002. All the necessary explanation and assumptions related to the case
study have been explained in details, in the above paragraphs.
Refrences
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Mitchelson, P. (2011). Tax Law. Sydney, Australia: Thomson Reuters.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., . . . Ting, A. (2017). Principles of
Taxation Law. Sydney: Thomson Reuters.
Websites
https://www.ato.gov.au
Statutes:
ATO Ruling TR 1999/17
ATO Ruling TD 2016/D4
ATO Ruling TD 2016/D5
ATO Ruling TR 1999/6
Income Tax Assessment Act (ITAA) 1997
Income Tax Assessment Act (ITAA) 1936
Case laws
Bamford v. FCT [2010] HCA 10
Laurence Fox v Commissioner of Taxation [2013] AATA 471.
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