MLC301T1 2018 ANSWERS

Answer 1

In this situation, it’s only fair that we analyze the two friends for their behaviors in the case study presented to answer the question. Susan and Adam are best friends. The reason why Susan loves her job more is that Adam’s son is enrolled in her childcare. On the other hand, Adam takes Susan to dinner on her birthday and on top of that, gives her a gift voucher worth of any flights at any time.

It is therefore only fair to assume that Susan and Adam have a much greater connection that is expected in a relationship between a teacher/ caregiver and a parent. This is because of the symbolic relationship in which Susan tries to express herself by giving Adam’s son extra care. Adam responds by giving her a birthday dinner and present. It is therefore inevitable that Susan will accept the gift and take a holiday, most probably inviting Adam and his child along.

Answer 2

Ordinary income has yet had a clear definition in the tax law. Therefore, the definitions available are obtained from judges’ decisions in court cases. Ordinary income means, (1) rewards for performing services(wages), (2) profits from business, and (3) returns on investments (dividends, shares, rent royalties and so on). (Taxboard.gov.au, 2018)

The difference between an ordinary income and capital gain is important to ordinary income. Capital gain is not ordinary income. Therefore, there is an extensive capital gains tax regime in the Tax Law. (Taxboard.gov.au, 2018)

1. Annuity payment with amounts worth capital components are statutory income.
2. A dividend received by the taxpayer in Australia is an ordinary income.
3. The income she received was ordinary income for services she offered of knowledge to the paper.
4. This was like a sale for interest-bearing security by the lawyer living in Sydney who agreed not to work for any other law firm in Melbourne, therefore a statutory income.

Answer 3

Assessable income is defined as income earned for a tax year. Amounts which are “ordinary” by the meaning of the term and statutory income, stated as so by the Tax Law are inclusive of assessable income. (Taxboard.gov.au, 2018)

1. The incomes include rental property income among others. Therefore, the 50,000 dollar rent received by DM from DS as much as DS is a subsidiary of DM is to be considered assessable income to DM.
2. The second amount, 2,800,000 dollars received by DM from Hope Pty Ltd, being a capital gain, is not taxable income as per the Australia Taxation and Investment 2018. This makes it
3. An assessable income. This is because the DM was paid the amount as capital income on releasing the property to Hope Pty Ltd.

Answer 4

1. A non-profit club for science is bound to be excluded from taxation as its purpose is to help in the advancement of science in Australia. This is provided for under par 4 and Schedule 2 of the Payroll Tax Act 2009.
2. A tourism society that promotes the development of tourism and that which benefits or profits its members will fall under the taxable income category simply because it profits its members.
3. A family assistance payment paid to a Melbourne family also called a back to school bonus is a specifically exempt income from tax as it is considered a gift in which case, gifts are not taxable in Australia. (Dttl-Tax-Australiaguide, 2018)
4. The receipt of a Prime Minister’s Literary Award by a Deakin student will, in this case, be considered connected to the employment as the recipient is a minister and at a position to easily earn the award and therefore will fall under the category of employment income or business profits, therefore taxable. (Taxboard.gov.au, 2018)

Answer 5

The 3-million-dollar receipt from the local council is obtained as a result of the taxpayer’s efforts to purchase the land and develop it. The additional investments by the developer are a strategy to increase the quality of the asset which he intends to sell at a future time. The Tax Board of Australia places the surplus amount, i.e., minus the investment and the original capital, as ordinary income.

i.e. 3,000,000 (final proceeds) – 1,500,000 (investment) = 1,500,000 – 500,000 (original capital) = 1,000,000 (taxable income / ordinary income)

Answer 6

1. The 70 dollars for office supplies paid by the boss are a reimbursement of the money Christine used for the company and therefore are not liable to taxation as it is not paid for her services and does not fall under any taxation categories. The money originally came from her resourcefulness and therefore is rightfully hers under all circumstances.
2. The 5,000 dollars paid to Christine by her boss was an amount supposed to have been included in her pay slip at work. This falls under wages for services in work done for clients hence ordinary income which by the tax laws it is taxable amount after making deductions if any are necessary.
3. The 2,000 dollars paid to her for agreeing to settle the matter out of court by her boss is to be considered a gift or reward, or a token for understanding the mistake done by the boss or company and therefore not liable to taxation as per the Tax Board of Australia, 2018.

Answer 7

The 30,000 dollars paid to River Pty Ltd (River) by Rock Pty Ltd (Rock) is considered a form of lease money which is an assessable income as per the tax laws. It falls under the ordinary income which is taxable by law, and therefore river is liable to the taxes. This makes rocky appear like employees of the river, and therefore they have no tax obligations unless they have to make further constructions which would otherwise prove to be industrial therefore taxation. The amount may also fall in the category of statutory income which is a profit made on the sale of profit-making investments.

Answer 8

1. The fact that Mary lost her job, her source of income and also, the defamation cost her career as a chef makes the lump sum of 300,000 dollars paid to her not taxable. This is also easily understood in the fact that the defamation was found to be untrue and the basis for the article were rather personal than based on the principles of news or media and the code of ethics of the same. The amount of estimation could maybe sum up to her possible income in the time she had been unemployed. Furthermore, it could be that she had obtained a loan which could have cost her a mortgage or other assets she might have had hence prompting her to go to court. Therefore, it would be right for her case to be judged as that of FCT vs. Sydney Refractory Surgery Center Pty Ltd (2008) where the plaintiff was awarded the full amount, non-taxable.
2. The 75,000 dollars paid by Café Pty Ltd was payment for breach of contract. This is because the company canceled the contract before the specified period agreed had been over. The amount is taxable as it is considered profit income or the expected earnings from the contract which in the end would have been taxed.

Answer 9

Unless Lucy is making other sales on the side apart from the sales to the restaurant, her income is assessable. But the income is not taxable. This is because apart from the production of alcohol being unsilenced, she is paid by the restaurant using meal vouchers which are only redeemable by an immediate family member. The lack of licensing makes it impossible for the government to allocate taxes. In a different case where she would have gone through proper channels to register her business enterprise, she would have received advice on how to make the 200 dollar worth vouchers into money and support herself differently as well as expand her entity into a larger scale production firm.

Answer 10

This case refers to two appeals brought to the federal coke company Pty. Limited (federal) against a supreme court of New South Wales ended June 1972 and June 1973. It involved the commissioner giving additional sums in both cases before appeal adding up to almost half million dollars in the case proceedings, increasing both the taxable income and therein the income tax.

If the commissioner had applied the ITAA 1997 earlier in the case, he would have realized that the receipts were assessable income and should have easily passed as of the nature of capital nature. This would have avoided the court hustle which lasted up to February 1977. The ITAA 1997 section 6.5 defines ordinary income for one: for an Australian resident, the assessable income includes the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. For a foreign resident, the assessable income includes direct or indirect ordinary income derived from all Australian sources during the income year and several others. This act would have made the case a lot easier has the commissioner at the time taken his time to analyze the case and find a solution.

References

http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/itaa1997240/s6.5

Iknow.cch.com.au. (2018), CCH iKnow, Australian Tax & Accounting, [online], Available at: https://iknow.cch.com.au/document/atagUio552585sl16870195/the-federal-coke-company-pty-ltd-v-federal-commissioner-of-taxation [Accessed 15 Apr. 2018].

Taxboard.gov.au. (2018). [online] Available at: http://taxboard.gov.au/files/2015/07/tvm_assessment_attachment_h.rtf [Accessed 14 Apr. 2018].