Taxation 201 BPS: Tutorial
Tutorial 4 Bullet Point Summary
Question 1-Income Derived from a Business
Is the $10 000 cash rebate income under CB1 of the ITA 2007?
CB1:
* Income of a business is taxable unless it is of capital in nature * Capital Revenue Distinction
Relevant Cases: * Wattie v CIR * Birkdale Service Station Ltd v CIR
Facts to Consider: * No obligation to spend the rebate on anything in particular * Gas n Go already bound to an exclusive agreement with Caltex * Used to repaint and decorate
It would seem the rebate bears the characteristics of income, even though it did end up being used to decorate the toilet facilities.
Similar characteristics to CIR v City Motor Service Limited where payments were made for upgrade of premises however this case was before the petroleum sector reform act 1988.
Similar circumstance to Birkdale case however the Birkdale case represented a reducing liability resulting from a prepayment made by the oil company.
It is likely the Rebate would be treated as taxable income as it results from the sale of gas and is cash in the hands of the service station.
Question 2- Employment Income
Is Karl an Employee or an Independent Contractor? * Distinction not defined in legislation * 5 test system used to determine
Relevant Cases: * Bryson v Three Foot Six Ltd * TNT Worldwide Express v Cunningham * Enterprise Cars ltd v CIR
5 Tests 1. Control Test 2. Independence Test 3. Organisation/Integration Test 4. Intention Test 5. Economic Reality/ Fundamentals Test
Application of 5 Tests 1) Control Test : a) Karl’s schedule is prepared by prison administrative office and is allowed 1 hour for meal breaks. b) Karl is allowed to take 4 weeks holiday, negotiated with the prison which he must provide a replacement locum for and must also arrange his own locum for when he is sick. 2) Independence Test c) The place of work is a security area, controlled
Question 1-Income Derived from a Business
Is the $10 000 cash rebate income under CB1 of the ITA 2007?
CB1:
* Income of a business is taxable unless it is of capital in nature * Capital Revenue Distinction
Relevant Cases: * Wattie v CIR * Birkdale Service Station Ltd v CIR
Facts to Consider: * No obligation to spend the rebate on anything in particular * Gas n Go already bound to an exclusive agreement with Caltex * Used to repaint and decorate
It would seem the rebate bears the characteristics of income, even though it did end up being used to decorate the toilet facilities.
Similar characteristics to CIR v City Motor Service Limited where payments were made for upgrade of premises however this case was before the petroleum sector reform act 1988.
Similar circumstance to Birkdale case however the Birkdale case represented a reducing liability resulting from a prepayment made by the oil company.
It is likely the Rebate would be treated as taxable income as it results from the sale of gas and is cash in the hands of the service station.
Question 2- Employment Income
Is Karl an Employee or an Independent Contractor? * Distinction not defined in legislation * 5 test system used to determine
Relevant Cases: * Bryson v Three Foot Six Ltd * TNT Worldwide Express v Cunningham * Enterprise Cars ltd v CIR
5 Tests 1. Control Test 2. Independence Test 3. Organisation/Integration Test 4. Intention Test 5. Economic Reality/ Fundamentals Test
Application of 5 Tests 1) Control Test : a) Karl’s schedule is prepared by prison administrative office and is allowed 1 hour for meal breaks. b) Karl is allowed to take 4 weeks holiday, negotiated with the prison which he must provide a replacement locum for and must also arrange his own locum for when he is sick. 2) Independence Test c) The place of work is a security area, controlled