Tax Law Tutorial 5 - short answer PDF

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Tutorial Week 5 Income I Short Answers 1. ‘Assessable Income’ comprises which types of income? Assessable Income Ordinary Income s6-5 eg. wages, salary

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Statutory Income s6-10 eg. net capital gain Statutory Income is income that is not ORD Income, but you include it in Assessable Income because of a specific rule in the tax legislation

2. What is not included in assessable income? Exempt Income = AI, but you don’t have to pay tax on it (eg. part-time Army reserve income) Non-Assessable Non-Exempt (NANE) Income = income that you don’t need to pay tax on. It doesn’t affect your tax losses. 3. How does the judicial concept of income differ from the economic concept of income? Judicial concept of income → involves case law - income is determined according to ORD concepts (“ordinary concepts and usages of mankind”) - Scott v CT (1935) 35 SR (NSW) 215 - Judicial concept is another word for “ordinary income” Economic concept of income → Henry Simons - Income = Consumption + Change in Wealth Y = C + ΔW 4. Explain the reconciliation rule on s 6-25 ITAA97. s6-25(2) → reconciliation rule → says that if an amount is both ORD and STAT income, the STAT income rules prevail unless the contrary intention is stated. Alternatively, if an employer provides a fringe benefit to an employee the benefit will be non-AI to the employee (s23L ITAA36) and the employer may be liable to FBT on the value of the benefit. If you have > 1 statutory provision that could apply, take the most appropriate provision. 5. In the case of Federal Coke, which taxpayer should the Commissioner have sought to assess? Explain your reasoning. Federal Coke Co Pty Ltd v FCT (1977) 34 FLR 375. Coke was a subsidiary of Bellambi (parent) Decision: judging the character/nature of the amount in the hands of the recipient (Coke), it was just a windfall gain for Coke. Therefore, not AI → but decision has since been criticised; the argument is that the wrong taxpayer had been assessed, taxpayer should have been Bellambi (the parent). Doctrine of Constructive Receipt → ITAA97 s6-5(4) and 6-10(3) → “you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct” o

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