Discuss About The Australian Intellectual Property Law Cambridge University Press.

Economic Expansion and Government Policies

Economic Expansion: The government endeavours to stop the unwarranted fluctuations in the economy. For economic development the government implements price controls, introduces policy wage indexation to enable faster development of wages but not faster than the consumer price. The responsibility of the government includes economic, financial and monetary policy.

Employment generation: The tax policy in Australian can be used to administer the demand relating to goods and services in Australia. Reducing the instances of taxes may lead to rise in demand with rise in employment as well.

Price Stability: In Australia, estimations reflect that the multiplier of the government expenses is positive and greater than the one whereas the multiplier of taxes is negative. When there is a downturn of price in the economy a rise in expenses and fall in taxation will help in boosting recovery. Equally, during the boom, lower expenses and higher tax would avert the economy from overheating. 

Taxation ruling can be defined as binding of statement or instructions that is made by the taxation commissioner. The taxation commissioner is bounded by the rulings. This represents that taxpayers that relies on the rulings shall not be penalised in future despite it is later found incorrect by the court. The below listed are some of the ATO bindings;

1. Public Rulings: This includes implementation of taxation laws on the taxpayers such as TR, ITR, GSTR, TD, GSTD, CR and PR.
2. Private Rulings: This includes implementation of taxation laws associated to particular arrangement where only specific taxpayers are required to rely on.
3. Oral Rulings: This includes the advice relating to implementation of law for individual taxpayers.

The “taxation ruling of TR 98/7” provides the explanation of situations where packaging items that are held by manufacturer, wholesaler or the retailer are considered as trading stock under the “section 70-10 of the ITAA 1997”. The ruling is applicable to items manufactured or purchased to indulge the business of taxpayer.

1. An individual must be minimum of 18 years of age
2. Should be fit and proper individual
3. Should meet the qualification and experience
4. Should maintain professional indemnity insurance to satisfy its requirements
5. Complete the online application and offer all supporting documents.

The two divisions of the ITAA 1997 that provides deductions relating to capital expenditure are Division 250 of the ITAA 1997 and Division 150 of the ITAA 1997.

“Section 25-5 (1) of the ITAA 1997” that relates to specific deduction are as follows;

1. Repairs
2. Sum paid for lease obligations related to repair
3. Borrowing expenditure
4. Expenditure on discharging mortgage
5. Bad debts
6. Payments made to pensions, gratuities or retiring allowances
7. Parliament election expenditure
8. Local government expenditure related to election
9. Payments to associations
10. Deductions relating to W-I-P amounts

The high court by majority held that the legal expenditure that were incurred by the taxpayer in defending the charges of extraneous in the performance of respondent’s income generating activities and it was not incurred in the course of deriving assessable income under “section 8-1 (1) of the ITAA 1997”. The court in “FC of T v Day (2008)” held that the expenses were private in nature and non-deductible.

An individual receiving the sum of compensation relating to loss of trading stock the acquisition cost of the trading stock is lowered by the amount of compensation. There will be no capital gains unless the trading stock is disposed by the taxpayer.

Employment Generation and Tax Policies

The applicable tax rate for taxpayer having $75,000 assessable income in 2017/18 includes $3572 plus 32.5 cents for every dollar over $37,000.

The formula provided in “section 4-10 (3) of the ITAA 1997” are as follows

Income Tax = (Taxable Income x Rate) – Tax Offsets)

“Section 25-10 of the ITAA 1997” an individual is allowed to claim deductions that they incur on the premises or the depreciating assets that is held by them entirely for the purpose of generating assessable income. Under “Section 8-1 of the ITAA 1997” An individual is allowed to claim deductions relating to the losses or outgoings that are incurred in gaining and producing taxable income. However, under “section 8-1 (2)(b) of the ITAA 1997” an individual is not allowed to claim deductions relating expenses that are private or domestic in nature since it does not meet the criteria of positive limbs. The court of law in “Lunney v Federal Commissioner of Taxation (1958)” stated that it is necessary to determine the necessary characteristics of the outgoings that are essential prerequisite in the derivation of the taxable income.

As evident in the current situation of Lisa being a self-employed market consultant incurred certain expenditure on her office. She incurred expenditure on repairs of leaking roof signifies that work is done to prevent further deterioration and involves restoration of efficiency. Therefore, repairs expenses of $2,400 will be held as allowable deductions. Additionally, the painting expenditure for $5,200 was incurred by Lisa that involves restoring to the former appearance of the property which will be allowed as deductions.

Lisa reported costs on replacement of wooden flooring and resurfacing of car parking. “Section 25-10 of the ITAA 1997” states that expenses of capital nature are not allowed deductions. Citing the reference of “FC of T v Western Suburbs Cinemas Ltd (1952)” held that cost was an improvement and the deductions was not allowed. Similarly, the cost of replacement of wooden flooring and resurfacing of car parking is a capital expenditure that involves significant improvement. However, Lisa under “section 8-1 of the ITAA 1997” can claim immediate deductions for expenses on gardening.

The “taxation ruling of IT 2650” is associated to offer guidelines in the determination of whether the individuals that leave Australian temporarily to stay in overseas nation. This includes temporary overseas job assignments and ceases to be an Australian resident for income tax purpose during their stay in overseas nation. According to “section 995-1 of the ITAA 1997” or under “section 6-1 of the ITAA 1936” Australian residents includes those that have their domicile in Australia unless it is content by the commissioner that the individuals permanent place of abode is out of Australia. As evident in the present situation of Satya was transferred to Hong Kong by her company for five-year period. During her stay in Hong Kong Satya leased her Sydney home and derived a rental income of $40,000.

Price Stability and Multiplier Effect

Domicile is regarded as the lawful concept that is used determining the residential status of an individual. As held in “Bell v Kennedy (1868)” an individual retains the domicile of the origin unless an individual obtains the domicile of their own choice in another nation. In ascertaining the domicile of Satya within the meaning of “resident” under “subsection 6 (1)” it is necessary to take account of Satya intention as to where he intends to make his indefinitely. An individual with Australian domicile but residing out of Australia would retain the domicile if the person intends to return to Australia based on entirely foreseeable reason or following the end of employment. As evident in the present situation of Satya, he has not abandoned his residence in Sydney and nor has established home out of Australia. It is assumed that the intention of returning to Australia at certain point of time is prominent. Therefore, Satya can be held as Australian resident for taxation purpose. As held in “Applegate v FC of T (1979)” the liability to tax arises when the person is held as resident for income tax purpose. The receipt of rental income by Satya would be held as assessable income under the ordinary concepts.

According to the “section 6 of the ITAA 1936” income from personal exertion or income derived from the personal exertion represents income from salaries, wages, bonus, superannuation’s, gratuities or proceeds from the business. “Section 6-5 of the ITAA 1997” includes income from ordinary concepts. As held in “Scott v Commissioner of Taxation (1935)” relevant principles are applied to determine how the most of receipts are to be treated as income in terms of the ordinary concepts and use of mankind. An item that has the character of income when it comes home to the taxpayer. An item that has the character of income which has been derived by the taxpayer in its realisable value.

As evident in the case of Jane she is employed in nurse hospital and the income derived from the working of hospital is held as income from personal exertion. The sum will be held as ordinary income under the “section 6-5 of the ITAA 1997” and would be included in the taxable income.

A mere windfall gain does not have the character of income. This includes winning from gambling’s unless an individual is not carrying on the business of gambling’s. As evident in the case of Jane she reported receipts in the form of winning from the horse race betting. The sum represents mere windfall gain and does not holds the character income. The court of law in the case of “Moore v Griffiths (1972)” stated that mere prize is cannot be held income and cannot be included in assessable income.  

Taxation Rulings and Deductions

Accordingly, a gain that is classified as mere gift does not possess the character of income. As evident in the case of Jane she received a cash in the form of gift for her birthday from her brother does not holds the character of income and the same is not assessable. The court of law in “Hayes v Federal Commissioner of Taxation (1956)” held that the receipt of shares by the accountant by the former boss or business owner was not considered as the income. Simultaneously in the case of “Scott v Federal Commissioner of Taxation (1966)” held that receipt of 10,000 pounds by as gifts from the wife of longstanding client out of husband estate was not considered as income. therefore, the gifts received by Jane will not be considered as income. Additionally, Jane reported an income from the sale of painting that will form the part of assessable income and attracts tax liability.

Rental and other forms of rental income represents the entire amount of rent and the related payments that an individual receives or they are considered entitled to when the property is rented out. An individual is required to include the entire amount of such income earned from the rent in their tax return. As evident in the current situation of Jane the receipt of rental income from the property rented out by her will be included in the taxable income for assessment.

The current issues of James is associated in determination of the expenses that would be considered deductions. As evident from the case study it is noticed that James is employed in a school as a teacher has incurs certain expenditure during the tax year of 2016-17. James reported an expenses incurred on traveling to Canberra for employment interview. According to the legislative response of “section 25-100 of the ITAA 1997” it allows an individual to claim allowable deductions relating to the cost incurred on travel between workplaces.

Travel expenses should directly related to the two place of work where income generation activities are carried on and none of the places is taxpayer’s home. The court of law in “Lunney v Federal Commissioner of Taxation” held that the travel between home and an individual usual place of work is not allowed for deductions. Travel between two unrelated works is not considered as allowable deductions under “section 8-1 of the ITAA 1997”. Travelling to Canberra for employment will not be allowed for deductions.

Capital Expenditure and Immediate Deductions

An expenses of $3,000 was incurred for relocating to Canberra by James. According to “section 8-1 (2) (b)” an individual is not allowed to claim deductions for expenses that are private or domestic in nature as they do not satisfy the criteria of both the positive limbs and the second negative limbs. As held in “Fullerton v Federal Commissioner of Taxation” expenses that was incurred by taxpayer to relocate in another city was not allowed as deductions since these expenses are in the nature of domestic or family arrangement. Similarly, the relocation cost incurred by James would not be allowed for deduction.

An individual taxpayer is allowed to claim deductions for expenses that are related to work. Nevertheless, to claim allowable deductions an individual is required to keep the receipt of such expenses. The expenses incurred by James on telephone cost are associated to work and are incurred in the course of deriving assessable income. Therefore, under “section 8-1 of the ITAA 1997” James can claim general deductions for such expenses.

Additionally it has been found that loss or outgoings that are entirely private or domestic purpose may not be held as deductible expenditure since these expenses fails either the positive limbs or fails the deductibility norms under the second negative limbs of “section 8-1 (2) (b)”. An expenses on purchase of lunch from school canteen was reported by James. The expenses incurred are entirely private in nature and no allowable deduction will be allowed in this case.

In later instances it is noticed that James reported expenses related to travel to and from work. For a travel expenses to be allowed for deductions under “section 25-100 of the ITAA 1997” it must be incurred between two places where the income deriving activities are performed neither of the place is the home for the taxpayer. As held in the case of “Federal Commissioner of Taxation v Payne” the court of law denied the taxpayer from deductions relating to the cost that are incurred between his residence and the place work. The judgement of the court held that travelling between two unrelated places of work is usually not allowed for deductions under “section 8-1 of the ITAA 1997”. Similarly in case of James, the travel expenses from to and from work is not allowed for deductions.

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Woellner, Robin, et al. “Australian Taxation Law 2016.” OUP Catalogue (2016).

Barkoczy, Stephen. “Foundations of taxation law 2016.” OUP Catalogue (2016).

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Barkoczy, Stephen, Foundations Of Taxation Law 2014

Brokelind, Ce?cile, Principles Of Law: Function, Status And Impact In EU Tax Law (IBFD, 2014)

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McDaniel, Paul. Federal Income Taxation. Foundation Press, 2017.

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