Legt2751 Solution Essay S1 08
SUGGESTED SOLUTION – BUSINESS TAXATION ASSIGNMENT S1 2008
Introductory Notes References to sections are to ITAA 1936 (e.g. s 88) or ITAA 1997 (e.g. s 43-10). Note up-front that this is a fairly comprehensive answer. We are not expecting students to come up with an answer as comprehensive as that attached. We are looking for: a coherent approach to the question, quality of argument, identification of key points, absence of self-contradiction in later part of paper, familiarity with primary sources, absence of heresies (e.g. expenditure is capital under s 8-1 because it purchases something that is a CGT asset), original and logical analysis and engaging with the primary materials. Question 1 Receipt to van owners of $500 1.1 Non-Capital Gains Tax Provisions Students should consider whether the receipt is income under ordinary concepts s6-5. One view would be that the amount is not income on ordinary concepts as it is not a product (comes from) of an income-producing activity. Occupying the van in Snake Gully Pty Ltd’s caravan park is not an income-producing activity. It is a holiday activity, which does not give rise to income. Hayes and Scott are the authorities. More specifically, or another way of looking at it, the question is whether the receipt in all the circumstances is a product of an income producing activity? Reference could be made to some of the factors mentioned in the cases (e.g. receipt is unsolicited, the van owners have met all their obligations to Snake Gully Pty Ltd under the licence). Better answers would raise the question as to whether receipts like this are common or ordinary incidents to van owners. Another way some students might put it is to say that the amount is a “mere gift”. Given that Snake Gully Pty Ltd feels a moral obligation towards the van owners, it may be appropriate for students to refer to some of the mere gift cases. In the end, it doesn’t matter much. Note that the donor’s motives (moral obligation, saving of legal costs)
Introductory Notes References to sections are to ITAA 1936 (e.g. s 88) or ITAA 1997 (e.g. s 43-10). Note up-front that this is a fairly comprehensive answer. We are not expecting students to come up with an answer as comprehensive as that attached. We are looking for: a coherent approach to the question, quality of argument, identification of key points, absence of self-contradiction in later part of paper, familiarity with primary sources, absence of heresies (e.g. expenditure is capital under s 8-1 because it purchases something that is a CGT asset), original and logical analysis and engaging with the primary materials. Question 1 Receipt to van owners of $500 1.1 Non-Capital Gains Tax Provisions Students should consider whether the receipt is income under ordinary concepts s6-5. One view would be that the amount is not income on ordinary concepts as it is not a product (comes from) of an income-producing activity. Occupying the van in Snake Gully Pty Ltd’s caravan park is not an income-producing activity. It is a holiday activity, which does not give rise to income. Hayes and Scott are the authorities. More specifically, or another way of looking at it, the question is whether the receipt in all the circumstances is a product of an income producing activity? Reference could be made to some of the factors mentioned in the cases (e.g. receipt is unsolicited, the van owners have met all their obligations to Snake Gully Pty Ltd under the licence). Better answers would raise the question as to whether receipts like this are common or ordinary incidents to van owners. Another way some students might put it is to say that the amount is a “mere gift”. Given that Snake Gully Pty Ltd feels a moral obligation towards the van owners, it may be appropriate for students to refer to some of the mere gift cases. In the end, it doesn’t matter much. Note that the donor’s motives (moral obligation, saving of legal costs)