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Taxation Law



In the era of global competitiveness, the accuracy in tax details along with accurate payment regime has been the indispensable need for the hour. Accusations and review implications of the task along with diagrammatic presentation of the income statements further help in arriving at the accurate tax amount. The accessibility of the expenses under the regime of tax has been identified as the main subject matter of the research. Accurate advice abided by the governmental regulations has been identified as the main element of the research.

Question 2:

A. Discussing the taxability of the expenses in terms of baseball skills

Identification of the income that is liable for taxation is a complex issue. In this juncture, revenue recognition forms an important element that helps in determining the accurate tax elements that are to be taken within the regime of taxation. In this case, also it has been seen that Andrew is not a permanent resident of the country but during the holiday period he has signed with the contract showing that as the player is a nonresident he will be liable to tax as per the norms of the nonresident taxation. Only the amount of sponsorship contract can be claimed for tax deduction (home.kpmg.com, 2018). The total amount of $ 45000 can be claimed for deduction as it is a part of his income. The income holder who may be resident or nonresident can claim for tax deduction and in this case, also Andrew can claim the amount of $ 45000 as tax deduction.

B. Discussing the taxability of the expenses in terms rental property income

In the second case, Andrew can claim for the rental income also. The player has decided to stay in Australia during the leisure time and apart from that the person also wants to rent out the house for the rest of the period (home.kpmg.com, 2018). Therefore, this is a type of income that is to be earned by the income holder. Therefore, in that case, the accessibility of the income is to be taken into consideration for deciding whether the income is accessible. Andrew being a nonresident can claim for deduction of $45000.

Question 3:

Explaining the principle of Myer Emporium V FCT to determining the accessibility of reception as capital gain and ordinary income

The principle of whether the income is to be treated as an income or capital gain has been decided in an effective manner with the help of MYER Emporium V FCT case (law.ato.gov.au, 2018). The ruling sets further shows that under the Income Tax Assessment Act of 1936 and the rule sets of Australia it has been stated that  as per the case it has been seen that tax bearing interest loans that have been assigned by the taxpayer has been assigned with the right to receive interest. In this juncture, the court has grounded justice by giving 2 grounds of reasoning (2.deloitte.com, 2018).  Firstly one has to determine whether the amount in issue is giving any profit to the business is to be decided at first. Secondly, the transaction that has been entered into profit has been related to the commercial or business operation is to decide at first. Based on the above ruling the decision of whether the amount is accessible as capital gain or ordinary gain. Certain principles are to be accessed while deciding the accessibility of the decision. As per the judgment of Dixon J in Sun newspapers, Ltd VS FC of T has determined the differences that can be used for deciding the accessibility of ordinary income over capital gain (law.ato.gov.au, 2018). The entity of the business structure, organisational setup and earning process of the company serves as the baseline for the distinction process. Mainly the profit and the regular return outlay from the amount have been used as the process for determining the accessibility of the amount (home.kpmg.com, 2018). As per the case law, the principle states that primary test where the determination of the primary recipient along with maligned income flow can be used for determining the difference. Therefore, based on the test and principles the organisations income can be differentiated with the capital gain. 

Question 4:

A: Explaining the rate of deduction in terms of Interest deductibility

In the Softwood Pulp and paper LTD V FCT , the taxpayer company is looking for the start of a paper mill for a Canadian Company but could not proceed with the same due to lack of funds (ato.gov.au, 2018). According to Interest deductibility Act after TR 2003/D8 since the business is in the starting period it becomes obvious that the income earning activities has not started in the business (tved.net.au, 2018). As per the decision was taken under the act it has been seen that whether the interest to be deducted comprises of net profit or not it can be deducted as taxable income. In this case also as the loan amount has been taken for the benefit of the business it has been taken into consideration. The act further states that whether the company has utilised the amount for generating the profit or not the amount can be claimed for deduction.

B. Explaining the relevance of Incidental and Relevant Test

The relevance of Incidental and Relevant Test has been determined in the context of Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 states that the test is used for determining the allow ability of the losses not by taking the likelihood and expectancy but by deciding the natures of the expenses and the character of the business expenses are used. There lies the uniqueness of the law (ato.gov.au/law, 2017). Therefore, in context of the case study, it has been seen that by using this test the interest on the loan has been identified more accurately and based on nature the amount of accessibility has been decided.

C. Explaining the accessibility of interest at the time of business cessation

Under the Taxation rules of ITAA 1997, it has been seen that any interest arising from the cessation of the business are not deductible under the act (law.ato.gov.au, 2018). In context of the FC of T v. Brown 99 ATC 4600; (1999) 43 ATR 1 it has been seen that when any income arises at the time of cessation it could not be included in the ruling list of accessibility the income becomes undetectable and could not be claimed for deduction as per the taxation law. The expenses that could not provide any gain in the business are not deductible. However, in this case, the company has been ceased from the operation process therefore, it can be stated that the company cannot claim any deduction against the expenses that have arisen after the business has stopped its operations. 


The assignment has focused on the norms of the tax regimes that are to be followed for detecting the feasibility of those elements. The amount of expense accessibility along with complete abidance with the law regimes has made assignment rich in content. Furthermore, the content of the research along with the references of the case study has been used for determining the authenticity of their principles from MYER Emporium V FCT where the accessibility of the capital gain has been determined as the main element in the research. References from the Softwood V FCT 1976 have been used for conferring the opinion of the accessibility regarding the advances taken in the loan at the preparatory stages.  

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