Tax Treatment Of Various Items Under Australian Tax Law

Rewards for repeated flier

1. i. It is clearly mentioned under the Taxation ruling for TR 1999/6 that the rewards or the points received by the clients from the airline business organizations are not treated as income under taxation. However, these rewards or points may attract the fringe benefit tax if the below mentioned conditions are satisfied –

• The rewards or the flight points are allocated to the customers under some specific arrangement
• There exists a family relationship among the employer and employee or the rewards and points received by the employees with regard to his employment

From the above discussion, it is clear that the reward for repeated flier of Webjet received from the large business entity by the employees with regard to their travel related to work that is paid by the company shall not be included under the taxable income, nor it shall be taxed as the fringe benefit tax.

ii. If any person receives any compensation from the customer owing to the damages of the capital asset while providing service to that customer with that capital asset, the damage compensation shall not be included under the assessable income for tax. However, to get the benefit followings factors must be taken into account –

• The compensation amount received for the damage must be used for refurbishing the damaged part of the asset.
• The asset shall be a depreciable asset and the forecasted depreciation must be accounted for in the record with regard to the asset.
• The assets shall be in the nature of capital asset and shall be exclusively used for the business purpose of the receiver.

Therefore, the compensation received for the damaged goods while providing services by the company that hires crane will not be included under the taxable income, provided the conditions mentioned above are fulfilled.

iii. As per the ATO (Australian Taxation Office), any gifts received in for form of cash or kind by any individual are treated as part of the assessable income for taxation and not included under the non-assessable income or exempted income. With regard to the receipt of big gifts that can be transferred into cash or money and the cash gifts or gifts received in kind that are offered to the employee, the sum of gifts are included under the taxable income of the receiver. However, the small amount of gift is not included under the period when the tax of the person is calculated. Here in the given case, the supplier of alcohol offered free overseas holiday package to the night club manager. This gift will be considered and included under the assessable income of the night club manager.

iv. A per the ATO, the additional money raised that will be refunded to the member will not be considered as income while computing the assessable income. In the given case, Canoe club raised money for purchase of additional canoes and eventually the additional monies were refunded to the member of the Canoe club. This money will not be considered as income while computing the assessable income under income tax as the extra money does not qualify as the alternative extra fund. Rather the money was collected as per the requirement only.

Compensation for damaged goods

v. Any benefit received by any sportsman owing to his connection with the sport is treated under as per the Taxation ruling for TR 1999/17. With regard to the ruling, any benefits or any sum that is received by the sportsman will be treated as income while calculating the assessable income under taxation if the receipt forms part of the assessable income under the general concept. Here in the given case, the Australian footballer received the money for being the fairest and best player in AFL from the television station will be included under the assessable income of the player while computation the income for the purpose of taxation.

vi. The reimbursement, allowance for employees building is dealt with under the Taxation Ruling for TR 95/22. According the said ruling the below mentioned activities are considered as building and construction of the employees –

• Apprentice, trainees and carpenters
• The site of the construction where the project managers work
• Supervisor or the project manager for the building which is under construction
• Labours employed for the building construction

Expenses incur with regard to the construction of apprentice for the qualification of the building is clearly stated under the ruling as building and construction of the labours as allowance and the compensation.

vii. With regard to the expenses incurred for the purpose of short course under art management with the expectation of becoming the art director will be allowed as deduction provided the following conditions are fulfilled –

• The expenses incurred with regard to the travelling to and from the institution of the course
• Training expenses with regard to the modules and any software
• Recommended expenses incurred for meal
• Expenses towards payment of fees for the short term course under art management

Further, the expenses shall be qualified for deductions if and only if the expenses incurred in association with the short term curse on art. Moreover, if the expenses cannot be proportionately related to the expenses associated with the course, the amount will be disallowed as deduction. In the given case, as all the details are not provided, it can be assumed that the expenses incurred were in association with the course only and therefore, will be allowed as deduction.

viii. As per the ATO, any artist performing and the expenses incurred with regard to the performance will be allowed as deduction provided that the person is regarded as the performing artist. As per the ATO taxation ruling the below mentioned persons will be considered as the performing artists.

• Different types of artists will be regarded as the performing artist
• Any musician is considered as performing artist
• The circus or dance performer will be considered as performing artist
• A singer is considered as performing artist
• An actor is considered as performing artist

Here in the given case the expenses incurred with regard to work dresses and work make-up (Barkoczy, 2016). In absence of information, it is assumed as the expenses incurred with regard to the performing artist and therefore, will be allowable as deduction under the ATO ruling.

ix. As per the general ruling the travel between home and the office is considered as the personal expenses. However, some specific provisions are there where the expenses are allowed as deductions as the travelling expense. If the travel is partly personal and partly official then the official part will be allowed as deduction. However, if the travel is exclusively fr office purpose only then the travelling expenses will be allowed as deduction. In the given circumstance, it is assumed from the scenario that the travelling expenses were exclusively for office purpose only and thus will be allowed as deduction while assessing the income under taxation.

Expenses for construction of apprentice

x. Expenses incurred for the purpose of travelling to two different workplaces qualify for deduction under ATO taxation ruling, provided both the workplaces are under the same employer. However, in the given case this deduction will not be allowed as the person travelling to two different workplaces for two different employers. Therefore, the expenses for travelling will not qualify for deduction as the employers are different.

2. To decide the assessable circumstance of an individual it is important to work out if an individual is foreign resident or Australian resident for calculating the assessable income under tax. A student from abroad taken admission for a course under Australian institution, duration for which is more than six months will be accounted for as the Australian resident for calculating the tax. The deduction can be claimed by any individual for the expenses related to self-education if the student receives any bonded taxable scholarship or her study is related to the work. It is also an important factor that the course must be considerably associated with present employment. As comprehended from the present situation Manpreet will be accounted for as the Australian resident with the end goal of tax collection since he is selected in a course having term of over a half year in Australian institution. Further, Manpreet incurred some education related expenses that are not allowed as deduction under income tax. Moreover, Manpreet also engaged himself as a part time employee under an Australian firm from where he received monthly remuneration amounted to $45,000. Furthermore, the self-education expenditure of $ 18,000 incurred by Manpreet will also not qualify as deductible expense. To get the deduction following factors must be taken into consideration –

• The study will increase or it is expected to increase the earning from their current employment.
• Maintain or enhance the required knowledge or skills of the student necessary for the current employment.

It is also an important factor that the course must be considerably associated with present employment, otherwise the person will not be allowed deductions for the expenses associated with self-education irrespective of the fact that –

• It enable the person to get the opportunity for new employment
• It is generally associated with the present employment

At the same rime Manpreet spend some amount towards printer and computer and purchase of a new mobile phone, which was associated with the requirement of work. As per the general ruling, the expenditures are qualified for deduction under the ITAA 1997, Section 8-1, if there is significant relation among the capacity of earning and expenditures and it forms required character for the association of work and it is not in the domestic or private nature

Expenditures shall be incidental and relevant with regard to the activities for generation of income. It is not enough that the expenditures are pre-requisite for generation of the taxable income. With regard to ITAA 1997, Section 8-1, the expenditures made for purchasing the new mobile phone is related with earning the assessable income and therefore, Manpreet’s expenditure will be allowable deduction under income tax. Further, it can be identified from FC of T vs M I Roberts 92 ATC 4787 that the application of Maddalena principles to the federal court allowed the mine manager to get qualification for the expenses as deductible with regard to study of MBA.

Further, as per the viewpoint of the case study Ronpibon Tin NL vs FC of T (1949), the earning shall have correlation among the taxable income and the outgoing which in turn will associate the outgoing crucially for arriving at the assessable income.  Hence, the expenses by Manpreet on the self-education will not be qualified as deductible expense as the expenses will qualify for deduction only if it is incurred for getting opportunity of new income. Further, as held in the case of Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478; (1958), if the expenditure meets the required criteria under the outgoing incurred for assessing the taxable income. As per the ITAA 1997, Section 8-1 the expenses will be qualified for deduction if there is significant correlation among the activities that generate income and the expenses.

Reference 

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 https://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.

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