Issue I:
The companies often provide reward to their consumers for showing loyalty. Whether the benefits received by consumers for showing loyalty are taxable or not is a matter to be discussed here. PS LA 2004/4 (GA) of practice statements by Law Administration will help us to understand the tax implications for consumer loyalty programs of companies and institutions that reward loyal consumers. The above practice statement, i.e. PS LA 2004/4 (GA), is to discuss the tax implications on consumer loyalty programs that reward consumers for their loyalties.
The views of Australian Tax Office on whether or not the rewards received by consumers for their loyalties are to be assessed as taxable income or fringe benefit are detailed in TR 1999/6 and TD 1999/34. The rulings in Payne v. FC of T (1996) 66 FCR 299; 96 ATC 4407; (1996) 32 ATR 516 ( Payne ) have also influenced the views to treat loyalty rewards. The general principles in relation to the consumer loyalty rewards benefits are mainly as following:
The reward received by a loyal consumer / customer would be included in the scope of fringe benefit tax under Fringe Benefits Tax Assessments Act, 1986 if there is an agreement between the employee and the employer to establish substantial connection between the employment and the reward.
TR 1999/6:
The above ruling, i.e. TR 1999/6, is specifically on flight rewards that are extended to the loyal consumes by Airlines companies. The ruling provides that the rewards received from airlines companies are generally not taxable as income though fringe benefits tax can be imposed on the rewards if the following conditions are met:
The ruling further states that the rewards received by the frequent fliers from airlines companies will be subjected to income tax if the individual, who has received the reward, has rendered the services on the basis that there will be flight rewards entitlement that will accrue with the services and flight rewards are part of business expenditures of the employer.
Taking into consideration the discussion above it can be said that the Webjet frequent flier points received by the business analyst employed by a large business consultancy firm in relation to work related travel will neither be assessed as taxable income nor will FBT be imposed on such rewards.
Issue II:
In case of compensation received from the customers for damaged to a capital asset that has been damaged while services were rendered to such customers then such receipts will not be taxable in the hands of the recipient. However, following points are worth noting in this regard:
Thus, in case of amounts received by a Crane Hire Company for the damaged crane from its customers such amount will not be assessed as taxable income of the crane hire company provided the above conditions have been satisfied.
Issue III:
While discussing about the incomes that are not to be included in calculating the assessable incomes of tax payers in the country Australian Tax Office has broadly classified these incomes under exempt income, non-assessable non-exempt income and other amounts that are not to be included in calculating taxable income of an individual tax payer in the country. Gifts received from customers are not part of exempt income neither these are part of non-assessable non-exempt income. Gifts from customers to employees are part of other amounts that are not taxable. However, even under other amounts that are not taxable, ATO has specifically mentioned that rewards or small gifts such as cash gifts in birthdays and other small gifts.
The website has also specifically mentioned that only small gifts are to be excluded from calculating the taxable income of an individual thus, in case of large amount of cash gifts or gifts that can be converted into money or money’s worth directly is given to an employee by a customer then such amount will have to be included in calculating the taxable income of the recipient of such gifts.
Free overseas holiday packaged received by the nightclub manager from an alcohol supplier is not a small gift and also the fact that the gift has been provided by the supplier of alcohol is enough to include the amount of gifts in calculating the taxable income of the nightclub manager.
Issue IV:
The return to the member of a canoe club of additional funds that were raised for purchase of canoes will not be taxable in the hands of the recipient members since, the funds received by them were not income rather it’s the additional funds that were contributed by them to purchase canoes but not required as the funds collected were more than the requirements for such purchase.
Issue V:
TR 1999/17 has been made to deal with benefits received by sportsman due to involvement with sports. Any benefits received by a sportsman will be assessed as taxable income if such receipts are his income in the ordinary sense.
In this case the an Australian footballer has received certain payment from a television company for being the best and fairest player will be assessed as taxable income since a sportsman plays the game to perform to his highest level and in case any amounts are received for being the best then such receipts will be considered as income to such sportsman in ordinary sense.
Issue VI:
TR 95/22 provides necessary ruling in relation to allowances, reimbursements etc. in relation to building employee. According to this ruling a building and construction employee includes the following:
Thus, expenses relation to a building qualification for a building apprentice as an apprentice has been defined as a building and construction worker for the purpose of reimbursements and other allowances.
Issue VII:
Following expenses relating to short course in relation to an art to be an artist are allowed as deduction while computing the table income:
It is to be noted that the above expenditures shall only be allowed as deduction if these expenses are related to such short course. Thus, even if any of the above expenditures are incurred but the same are not essential and necessary for such course then such expenditures shall not be allowed as deduction for taxation purposes.
Thus, the expenses in this case are allowed as deduction assuming that the short course related expenses are within the above ambit.
Issue VIII:
Performing artists related expenses are allowed as tax deduction as long as the individuals are recognized as performing artists. Performing artists are the following persons according to the ruling made by the Australian Taxation Office:
In this case assuming that the expenses relating to work make up and work dresses are of performing artists then such expenses are allowed for tax deduction in computing taxable incomes of the performing artists.
Issue IX:
Generally the travel between the workplace and home is considered private travel though there are certain provisions that allow deductions for such travelling expenses. Provided the travel is strictly for official use and in case the travel is party official and partly private then only the part that is related to the official travel will be allowed as deduction.
Accordingly, in this case assuming the travel was strictly for work purpose the amount can be deducted while computing the taxable income.
Issue X:
Expenses of travelling between two workplaces are allowed as tax deduction however, in case of travelling from one workplace under an employer to another workplace under a different employer then such expenses will not be allowed as tax deduction.
Hence, in this case expenses relating to travel between two employers are not allowed as tax deduction.
Any person if has enrolled in any educational course in Australia and the course is of 6 months and more of duration then the student will be regarded as an Australian resident and will have to pay tax at normal rates as applicable to the citizens of the country. Since, Manpreet has enrolled into a course that supposed to last for more than six months she is an Australian resident for tax purposes and thus, liable to pay tax at normal rates as are applicable to any other citizens of the country. Accordingly. Let us calculate the taxable income of Manpreet first to assess her tax liability for the financial year 2016 /17. Based on the information provided about the incomes of Manpreet the assessable income of her for the financial year 2016/17 has been calculated in the following table keeping in mind the tax provisions of the country.
In Australia a resident individual will have to pay taxed according to the Income Tax Assessment Act 1997 if the assessable income a resident individual crosses the threshold limit of exemption. According to Income Tax Assessment Act, 1997 for the current financial year 2016-17 the threshold limit is $18200.00 in a year. Thus, those individuals with income less than or equal to $18200.00 for the current financial year will not have to pay any taxes to the Govt. of Australia. However, individuals with income in excess of $18200 in a year will be liable to pay taxes according to the rates provided in the Act.
Particulars |
Amount ($) |
Amount ($) |
Amount ($) |
Salary from the work experience job of an accountant |
45,000.00 |
||
Living expenses received from parents |
20,000.00 |
||
Less: Exemption of living income received from parents |
20,000.00 |
||
Distribution from trust account in India |
10,000.00 |
||
Gross Total Income |
55,000.00 |
||
Less: Deductions: |
|||
Educational expenses: |
|||
Expenses for studies |
18,500.00 |
||
Computer |
2,000.00 |
||
20,500.00 |
|||
Work related deduction |
500.00 |
||
21,000.00 |
|||
Taxable income |
34,000.00 |
Table 1: Taxable Income
(Source: Created by Author)
The tax rates in the country is as following for individuals considered as Australian residents:
Since Manpreet is a normal resident for tax purposes in the country as the course she has enrolled in will last for more than 6 months the amount of tax she will have to pay on her assessable income is calculated in the table below:
Particulars |
Amount ($) |
Up-to $18200.00 |
Nil |
From $18201.00 to $34000.00 |
3,002.00 |
References:
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Barone, A., 2015. A new economic theory of public support for the arts: evolution, Veblen and the predatory arts (Vol. 28). Routledge.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2), pp.181-205.
Burnett, C., 2015. Income according to ordinary concepts–the jurisprudence of Justice Graham Hill.
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