200019: Revenue Law
Peter’s Advice for Taxable Income and Tax Liability
In Australia everyone is entitled to pay tax on their income based on Income Tax Assessment Act 1997 (ITAA 1997), ‘Income tax is payable by each individual and company’ and so forth. Peter has fallen under the category of paying the tax on his income and assets. Peter is liable for his receipts for 2014/2015 and 2015/2016 and will need to calculate your taxable income and tax liability.
Based on the assessment, Peter’s taxable income will include his assessable income, consisting of his ordinary income and statutory income. Furthermore, if he has any deductions, it will be deducted. The calculation of the ‘taxable income’ formula is found in s4-15 of the ITAA 1997, (Taxable income = Assessable Income – Deductions). This calculation will determine what Peter’s taxable income will be on 2014/2015 and 2015/2016.
Income in Australia is considered and includes income according to ordinary concepts and statutory income that is defined in tax legislation. Based on Federal Commissioner of Taxation v Stone (2005) , incomes which are of ordinary concepts clearly includes income from employment, running a business and performing services. Receipts from a one-off prize, such as when we gamble and win would be ordinarily not considered as
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The Court has established three principles which determine whether a payment is an income, these are. First, whether a payment ought to be treated as income must be fixed by the ordinary concepts and usages of humanity. Second, whether the payment received is income will depend on a close examination of the specific facts and by looking at the character of the payment in the hands of the recipient. Thirdly the courts have created an objective test, looking at the income
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Blaise M. Sonnier, J.D., DBA. (2012). Circular 230: Its Day-to-Day Impact on Tax Practices. Retrieved October 12, 2016, from http://www.thetaxadviser.com/issues/2012/feb/tpr-feb12.html
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