Taxation means governments finance their expenditure by imposing charges on citizens and corporate entities. Few Questions on Taxation are arranged in the slides for better learning.

1. INDIVIDUAL ASSIGNMENT 1
Taxation

2. Questions
INDIVIDUAL ASSIGNMENT 1
Assessment Value: 20%
Instructions:
• This assignment is to be submitted in accordance with assessment policy stated in the
Subject Outline and Student Handbook.
• It is the responsibility of the student who is submitting the work, to ensure that the work is
in fact her/his own work. Incorporating another’s work or ideas into one’s own work without
appropriate acknowledgement is an academic offence. Students should submit all
assignments for plagiarism checking on Blackboard before final submission in the subject.
For further details, please refer to the Subject Outline and Student Handbook.
• Answer all questions.
• Maximum marks available: 20 marks.
Question 1 (5 Marks)
Fred, an executive of a British corporation specialising in management consultancy, comes
to Australia to set up a branch of his company. Although the length of his stay is not
certain, he leases a residence in Melbourne for 12 months. His wife accompanies him on
the trip but his teenage sons, having just commenced college, stay in London. Fred rents
out the family home. Apart from the absence of his children, Fred’s daily behaviour
is relatively similar to his behaviour before entering Australia. As well as the rent on the
UK property, Fred earns interest from investments he has in France. Because of ill health
Fred returns to the UK 11 months after arriving in Australia.
Requirement
Discuss whether Fred is a resident of Australia for taxation
purposes.
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3. Questions
Question 2 (5 marks)
Explain why the receipts in Egerton-Warburton & Ors v DFC of T (1934) 51 CLR
568were assessable, but the receipts in IRC v Ramsay (1935) 1 All ER 847
were treated as capital amounts.
Question 2 (10 Marks)
Angelina is married to Bradley. They each have two houses: ‘house A’ and
‘house B’. Angelina and Bradley each own a 50% interest in house A. Bradley
owns an 80% interest in house B and Angelina
owns a 20% interest in house B. As Angelina and Bradley are both busy actors
who lead their own lives, they quite often live apart. This year the sold both
house A and house B. Angelina wants to
nominate house A as her main residence and Bradley wants to nominate house
B as his main residence. Advise Angelina and Bradley as to how the main
residence exemption will apply to them
assuming that (ignoring the exemption) a capital gain of $1m was made on the
sale of each house.
REQUIRED: Advise Angelina and Bradley on the capital gains tax
consequences regarding the above mentioned transactions
for the 2014/2015 income year.
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4. ANSWER 1
Section 6(1) of ITTA 1936 says, an individual
has to comply with certain criteria to be
treated as the resident of Australia. In this
regard the rate of taxation and exemption
relies on the circumstances and position of
the individual that includes Reside Test,
Domicile tes, 183 days, Superannuation test.
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5. Mr. Fred stayed in Australia for 11
months which is more than 183
days and leased out his house
before leaving for health issues.
He would be considered as the
resident of Australia and would be
taxed.
Medical Levy is applicable for him
and he would be require to pay the
same along with the other tax
liabilities.

6. Answer 2
The ITAA clearly explains that only the revenue expenses are
considered in the current year in which no capital expenses
reduction are done in the assessment year. The ITAA also
describes the conditions through which the capital works are
eligible for deduction of expenses.
Edgerton Warburton & ORS
Case:
The court decided that the
amount was obtained from sale
of capital asset and thus it is a
capital receipt but it was
considered to be an income
receipt acquired in the form of
annuity. So it was called
revenue receipt and hence it
was chargeable to tax
IRC vs Ramsay (1935) 1 All
ER 847:
The payment commenced in
this case was done on the
behalf of capital assert and it
was calculated at 25% on the
net profits of the business.
Hence it was considered to be a
capital receipt and was not
chargeable to tax and not liable
for deduction.

7. Answer 3
 According to the Australian taxation law, the
capital gains are chargeable on the sale of capital
assets that are owned by the taxpayer.
 The main residence exemption is provided on
fulfilling certain conditions like taxpayer living in
the house or his belongings are still there in the
house.
 In this case there would be partial exemption as
the partners live in separate homes.
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8. Capital gains on both the houses A & B is 1 million
dollars.
Taxable portion for house A is 0.5 million dollars as
Angelina owns by 50% and pay tax on the half portion.
House B is considered to pay 20% of the income
earned as tax under the income tax provision.
Total Income chargeable to capital gains tax is 0.7
million dollars.
So the couple experiences partial exemption rather
than full exemption as they don’t stay together but live
separate.
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9. References
 Government, A 2012, ato.gov.au,
<https://www.ato.gov.au/General/Property/Your-home/Buying-and-selling-
your-home/>.
 Government, A, austlii.edu.au,
<http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s21a.html>.
 Governmnt, A 2014, law.ato.gov.au,
<http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR977/NAT/ATO/00001
>.
 Office, AT 2014, www.ato.gov.au, <https://www.ato.gov.au/Business/GST/In-
detail/Rules-for-specific-transactions/Barter-transactions/Bartering-and-
barter-exchanges/>.
 https://www.ato.gov.au/Business/Employers/Preparing-to-engage-
workers/Fringe-benefits-tax-(FBT)/
 https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-
can-claim/Vehicle-and-travel-expenses/Car-expenses/When-you-can-claim-
car-expenses/
 https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-
can-claim/Vehicle-and-travel-expenses/Car-expenses/
 http://workplaceinfo.com.au/payroll/payments-and-expenses/expenses
 https://www.ato.gov.au/individuals/income-and-deductions/in-
detail/deductions-for-specific-industries-and-occupations/building-and-
construction-employees---claiming-work-related-expenses/?page=13
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10. Thank
You