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TR 1999/6 - Taxation Ruling on Rewards Received by Frequent Fliers

1. 1) As per the TR 1999/6 taxation ruling if any points or rewards received by any regular fliers from the airline organization, the amount will be included under the assessable income of the receiver. Further, the TR 1999/6 taxation ruling deals with the points or rewards received from the flight that is offered to the loyal customers.  However, the rewards will be dealt as fringe benefit tax if the below mentioned criteria are fulfilled –

  • The rewards or points offered to the employee in consideration with the specific arrangement
  • The reward or point is offered to the employee owing to his job with the company or a family relationship is there between the employee and the employer

If the individual received the reward for offering the service as there is an entitlement for the flight rewards, the rewards will be dealt in as the business expense of the employer.  It is evident from the given circumstances that points or rewards received by the frequent flier of the Webjet from the large business firm in consideration for their work shall not be taxed under regular taxable income and it shall not be included even under the fringe benefit tax.

2) Where any person receives any reimbursement due to the damage of his capital asset that he provided to the customers as part of provision of services, the amount of reimbursement shall not be assessed as income under the income tax of the person. However, to be qualified to get deduction, the below mentioned conditions must be fulfilled 

  • The asset offered under the provision of service must be of capital nature and the asset must be used for the purpose of business solely
  • The amount of reimbursement received from the customer shall be used exclusively for restructuring the part of the capital asset that is damaged.
  • The capital asset must be depreciable asset and the proof of budgeted depreciation must be there in the books of account for the asset.

Taking into consideration the above mentioned conditions, the amount received as reimbursement with regard to damage of the asset while it was used under the provision of service shall not be included as income for the purpose of assessing the taxable income. However, the above mentioned conditions must be complied with for getting the deductions.  

3)  Any amount be it in cash or kind, received as the gift are not qualified as the deductible income or is not included under the exempted income rather, it is included under the assessable income as per the taxation ruling of Australian Tax Office or ATO. The small gifts are not taken into consideration in the period while the person’s tax is assessed. On the contrary, the bigger amounts of the gifts that are convertible into monetary form and the gifts that are received in the form of kind, the total measurable amount with regard to the  gift are assessed as the assessable income as per the  income tax ruling. In the given circumstances, the manager of the night club was offered the holiday package to overseas by the alcohol supplier. This gift shall be included as the taxable income while calculating the assessable income.

TR 95/22 - Taxation Ruling on Allowance and Reimbursement of Employees

4) In the given case, Canoe club fund-raised for buy of extra canoes and in the end the extra monies were returned to the individual from the Canoe club. Under the ATO, the extra cash raised which will eventually returned to the club member will not be taken into account as assessable income while processing the assessable earning. This cash won't be assessed as income while figuring the assessable pay under the taxable income as the additional cash does not qualify as the option of additional reserve. Further, it will be treated as raised for the need only[3].

5) The benefit that is received by the sportsmen with regard to his engagement in the sport is included while assessing his income under income tax. As per the TR 1999/17, Taxation ruling, under the normal concept of income, if the advantage received by the sportsman forms the part of assessable income for the purpose of tax, then the amount will be considered as income. Under the given circumstance, the footballer received the amount from television station as he was selected as fairest and the best player in the AFL. Therefore, the amount shall be assessed as taxable under the taxable ruling while the income of the player will be calculated.

6) TR 95/22 under the Taxation ruling deals with the allowance and reimbursement of the employees. It is mentioned under the ruling that the activities which are qualified for construction and building of the employees are as follows –

  • Labours those are engaged for the purpose of constructing the building
  • Trainees, apprentice and the carpenters
  • Project manager or overseer engaged for the said post for any under construction building
  • The engagement of the project manager in the construction site.

Expenditures made for the apprentice to construct their qualification with regard to building is included under the taxation ruling and are regarded as construction and building of labours and therefore, will be allowed under deduction as compensation.  

7) For the amount spend under the short term course to be qualified as deduction it must be exclusively incurred for the course only. Further, if only a part of the expenses are incurred for the course, then the deduction will be allowed proportionately only and not for the total amount.  If any person spend monies for undertaking short course with regard to the subject of art management in consideration of becoming art director will be qualified as deduction, if the below mentioned conditions are satisfied –

  • Training cost incurred for the software or any module
  • Expenses for the meal that is recommended to be incurred
  • Travelling expenses for up and down travel to the course institution
  • Amount paid for the course as fees under the short term course of art management.

Taking into consideration the above facts, it is presumed that the individual incurred the expenses exclusively for the course as the detail information is not provided related to the head of expenses and therefore will be qualified for deduction.

TR 1999/17 - Taxation Ruling on Benefit Received by Sportsmen

8) Under the Australian Taxation Office ruling, the persons to be regarded as the performing artist must satisfy one of the below mentioned criteria –

  • Any person performing in circus will be performing artist
  • Any person performing as dancer will be performing artist
  • Any person perform as a singer will be performing artist
  • Any person performing as musician will be performing artist
  • Any person performing as an actor will be performing artist
  • Various kinds of artists will be performing artist.

Under the ATO, any expenditure incurred by a performing artist in association with the performance will be qualified as deduction, if the person is qualified as performing artist as per the above mentioned criteria. In the given circumstance, in absence of sufficient information, it will be presumed that the expenses incurred were for the make-up and work dress of the performing artist and will be therefore, allowed under deduction. 

9) Where the travelling expenses is proportionately official and proportionately private, then the official part will only be qualified as deduction. The travel between office and home is regarded as personal expenditure. However, under some particular circumstances, the travelling to office is qualified under deduction. Where the travelling is solely carried out for official purpose, the expenses with regard to travel will be qualified as deduction. Here in the given case study, the expenditure with regard to travel will be presumed as incurred solely for office purpose and thus will be qualified under deduction.

10) As per the taxation ruling of Australian Tax Office, if any individual incur any travel expense for travelling two places of work, will be qualified as the deduction. The deduction will only be allowed if both the workplace falls under the control of same employer. In the given circumstance, the individual travelled two workplaces that were under control of different employers and hence will be disallowed as deduction under the taxation ruling.

2. Any individual can claim deduction for the self education related expenditures if she qualifies to receive taxable scholarship that is bonded or she conduct the study for the purpose of work. To choose the assessable situation of an individual it is essential to work out if an individual is overseas resident or Australian inhabitant for computing the assessable earning under taxation ruling. A foreign student admitted for a course in Australian foundation, term for which is over a half year will be represented as the Australian inhabitant for computing the expense. It is likewise a vital factor that the course should be impressively connected with current employment. As appreciated from the current circumstance Manpreet will be represented as the Australian inhabitant with the true objective of assessment gathering since he is chosen in a course that has the term of more than six months period in Australian institution. In addition, Manpreet additionally connected with himself as part time office assistant under an Australian firm from where he got month to month compensation added up to $45,000. Further, Manpreet spend some costs associated with education that are not permitted as deduction under assessable income. Moreover, the expenses with regard to self-education amounted to $ 18,000 spend by Manpreet will likewise not qualify as deductible costs. Further, to qualify for deduction, following conditions must be satisfied –

  • The study will enhance or at least will maintain the necessary knowledge and the skills pre-requisite for the present work
  • The study is likely to enhance or will enhance the income of the person from the present work.

ITAA 1997 Section 8-1 - Taxation Ruling on Self-Education and Other Expenditures

 One more notable fact is that to be qualified for the deduction, the course are bound to be related to the current employment, else the expenses will not qualify for deduction even if –

  • It assisted the person for the opportunity of new job
  • It is related to the current employment in general terms

As to ITAA 1997, Section 8-1, the expenses incurred for obtaining the new mobile phone is connected with procuring the assessable pay and in this way, Manpreet's expenses will be reasonable deduction under the income tax ruling. Further, it is recognized from FC of T versus M I Roberts 92 ATC 4787 that the use of Maddalena standards to the government court enabled the mine director to be qualified for deductible expenses as to study under MBA.

Simultaneously, Manpreet incurred some money towards printer and computer and buy of another mobile phone, which was related with the prerequisite of work. According to the general ruling, the expenses qualified for deduction under the ITAA 1997, Section 8-1, if there is noteworthy connection among the limit of gaining and uses and it frames required character for the relationship of work and it is not in the local or private nature. As per the case study of Ronpibon Tin NL vs FC of T (1949), there must exist a correlation between the taxable income and the incurred expenses for the calculation of assessable income. Therefore, Manpreet’s expenditures for self education will be disallowed for deduction as it was not incurred for getting new income.

Manpreet’s Assessable Income Computation 

Reference

Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/

Bankman, Joseph, et al. Federal Income Taxation. Wolters Kluwer Law & Business, 2017.

Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data matching." Proctor, The 37.6 (2017): 18.

Chartered Accountants Australia & New Zealand (2017) CAANZ https://www.charteredaccountantsanz.com/

CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/

Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting Review 91.1 (2015): 47-68.

Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At Cquniversity (2017) Libguides.library.cqu.edu.au https://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174

Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’ view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.

The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/

Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).

[1] Karin Simon, Sara McDonald, Accident Investigation - Databases - Library Guides At Cquniversity (2017) Libguides.library.cqu.edu.au https://libguides.library.cqu.edu.au/content.php?pid=166733&sid=2668174

[2] The Tax Institute (2017) Taxinstitute.com.au https://www.taxinstitute.com.au/

[3] Bankman, Joseph, et al. Federal Income Taxation. Wolters Kluwer Law & Business, 2017.

[4] Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data matching." Proctor, The 37.6 (2017): 18.

[5] Saad, Natrah. "Tax knowledge, tax complexity and tax compliance: Taxpayers’ view." Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.

[6] Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting Review 91.1 (2015): 47-68.

[7] Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).

[8] CPA Australia (2017) Cpaaustralia.com.au https://www.cpaaustralia.com.au/

[9] Ato.Gov.Au/ (2017) Ato.gov.au https://www.ato.gov.au/

[10] Chartered Accountants Australia & New Zealand (2017) CAANZ https://www.charteredaccountantsanz.com/

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