Taxation

3416 WordsJan 27, 201414 Pages
Taxation Requirement 1 Part 1 (a) Explain what is meant by “income by ordinary concepts”. a) Ordinary income (s6-5) is an element of Assessable income. In the context of the Income Tax Assessment Act 1936 and ITAA 1997 assessable income is made up of Ordinary Income and Statutory Income. Assessable income includes income according to ordinary concepts which is called ordinary income s6-5(1). Legislatures and courts have consistently declined to define the limits of the term “Income” and have referred to “income according to ordinary concept and usages”. Numerous tests have been defined by the courts, but “income” is not a term of art and there is no single…show more content…
Tax Consequences that arise in respect of the payments to “Schubert” “Schubert was offered $10,000 for his OA medal. He was in poor health at the time and required medical treatment so accepted the payment.” The amount received by Schubert will be assessable under sec6-5 of ITAA 1997 as Ordinary income in the hands of the recipient. In this case his income is ordinary because the medal is convertible into money . Tax Consequences that arise in respect of the payments to “Mahler” Issue 2 Mahler entered into a contract to write an article for a magazine. He was paid $20,000 and an additional $10,000 for signing an agreement not to give interviews on television or to journalists. Issue 2 (i) “Mahler entered into a contract to write an article for a magazine. He was paid $20,000” Issue The primary issue is whether the consideration received by Mahler is capital or income. If the amount is income then it will be assessable under s 6-5(1) of ITAA 1997, but if it is capital the application of the general capital gain tax provision must be considered. Rule

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