The issue introduces here the questions relating to the tax consequences that originates from the private exertion and taxability of the amount received under section 6-5 of the ITAA 1997?
An amount that is derived from the personal exertion might be included for assessment in the form of income as the statutory income or the ordinary income.
It is worth mentioning that the assessable earnings that an individual earns usually ranges from benefits, allowances or compensation that originates from the employment or where the taxpayers provides the service. The description of “S-6-1 of the ITA Act 1997” states that a person that obtains income from the personal exertion usually signifies income from the wages or salaries (Bankman et al. 2017). The description of the ordinary income is explained under “S-6-5 of the ITA Act 1997”
The commissioner of taxation law in “Scott v CT (1935)” provided a well-defined explanation that income should be treated in compliance with the ordinary concepts of the mankind (McGee 2014). The definition that is explained in S-6-5 of the ITA Act 1997” where a person that is obtaining money through the television interview is liable for tax purpose (Gordon and Keuschnigg 2017). The income are generally classified as the ordinary income. Any kind of payment that is received by providing a media interview might or might not be held taxable based on the facts of the particular case. This includes the criteria such as quantum of payment is significant it is not simply the nominal sum that paid to the taxpayer so that the taxpayer can cover the cost of the inconvenience (Ramsey 2015). The obligation of offering service becomes vital in obtaining the money. Furthermore, the taxpayer is motivated to offer the service on receiving the payment. The authority of tax lend the support in “Brent v F.C of T (1971)” where the imbursement was categorized as earnings. In the above stated case the wife of the train robber obtained money for narrating the story of her life for its exclusive publications (Mares and Queralt 2015). In compliance with the elucidation explained in “S-5 of the ITAA 1997” the personal service reward is chargeable and constitutes a part of assessable income relating to the ordinary meaning.
The explanation necessarily explained in “Housden v Marshall (1958)” that making the rights of jockey and photographs available and receiving payment in return for the same is taxable income (McGee 2014). Under “section 6-5 of the ITAA 1997” the money that is received from the selling the photographs and the cuttings of the newspaper was included into the taxpayer’s income for assessment.
The sum of money that was obtained in “Hobbs v Hussy (1942)” through selling autobiographies rights is taxable (Mumford 2017). The income was accordingly in agreement “S-6-5 of the ITAA 1997” therefore these amounts would be taxable. An individual taxpayer that is earning money through the sale of the autobiography must be viewed as the royalty. Taking into the consideration the decision that is made in the instances of “Hobbs v Hussy (1942) TC 153)” the amount that was obtained by the taxpayer from the sale of the rights to his autobiographies which was published in the news article would be regarded as the taxable income under “section 6-5 of the ITAA 1997” (Piketty, Saez and Stantcheva 2014).
By taking into the consideration the above stated rule it can be applied in the case of Hilary where she was the renowned mountain climber. It was found that a newspaper company approached her to narrate the story of her life where the newspaper would be paying the money for narrating the experience (Ramsey 2015). The taxpayer earned the money when the rights and copyrights of the story assigned to the newspaper company in exchange of money. Referring to the reference made in “Scott v Commissioner of Taxation (1935)” the money that is received by Hilary should be viewed in accordance “Federal Commissioner of Taxation v Brent (1971)” with the ordinary receipts (Svoboda 2016). As it has been explained in “S-15-2 of the ITAA 1997” these private exertion monies of $10,000 that was received is taxable as ordinary concepts.
Hilary in the current circumstances was required to render the service to the newspaper company prior so that she can receive the payment. As per the decision that was made in “Brent v F.C of T (1971)” the personal service reward of $10,000 is taxable (Svoboda 2016). The amount is income as per the ordinary concepts of “S-6-5 of the ITAA 1997”.
The latter part of the events unfolded where the Hilary was found to have sold the manuscripts of the book to the Hitcher library and also the photographs that was sold by the taxpayer in exchange of money. Taking into the consideration the situation that is highlighted in the case of “Housden (Inspector of Taxes) v Marshall (1958)” the sale of the photographs and manuscripts would be considered as the taxable income (Bankman et al. 2017). The money that was received from selling is classified as private exertion income and chargeable in accordance with “S-6-5 of the ITAA 1997”.
The other decision of writing the book for her own satisfaction by Hilary and later selling the book in market then it would result in royalties. In this situation the judgement of “Hussy v Hobbs (1942)” is relevant in this situation since the autobiographies sale accounting to royalty (Tanzi 2014). The money obtained from selling the autobiographies is chargeable under “Section 6-5”.
Hilary has obtained personal service income from the transactions that has been reported above. Decisively, the amounts Hilary received accounts as personal exertion earnings.
An item which has the nature of the home coming to the taxpayer will be viewed as the income irrespective of the existence of the illegality, immorality and does not takes into the consideration its derivation. An item of having the nature of income character that has been derived will be accounted as income till the realisable value. The taxation commissioner in “Hochstrasser v Mayes (1960)” held that it is necessary for the taxpayer to determine the nature of the income that derives it (Mares and Queralt 2015). The authority of tax in “FCT v Countess Bective (1947)” explained that no gains is classified as income until it is attained beneficially. The character of the income should be judged based on the circumstances in which it was obtained by the taxpayer.
Considering the applications of the above stated rule it can be stated that the amount that was received from the interest that was made to the son for the purpose of short term housing finance should be considered as income (Bankman et al. 2017). The evidences that has been obtained from the case study provides that the interest free loan was made by the taxpayer to their son for the period of five years. the later instances provide that the taxpayer paid the amount inside the span of two years and also paid the interest.
Citing the statement of “Hochstrasser v Mayes (1960)” it can be stated that the nature of the interest income that is earned should be determined in accordance with the circumstances of the derivation by the parent (Mares and Queralt 2015). Quoting the reference of judgement made in “Countess of Bective v Federal Commssioner of Taxation (1947)” it can be stated that the interest that was received by the taxpayer constituted gain and should be considered in accordance with the ordinary concept of the “section 6-5 of the ITAA 1997”. The repayment of loan amount represents capital however it is not considered taxable.
Decisively the interest was income since it was obtained as gain and the interest money is the element of taxable return.
Under the capital gains tax, net capital gains represent the net capital gain that has accrued to the taxpayer in the particular income year and the gain is included into the assessable income of the taxpayer. Assets purchased after 20th September 1985 is a CGT asset. (Mares and Queralt 2015). Consequently, the terms of pre-cgt and the pre-cgt are regularly used to determine the assessable income of the taxpayer. The study shows that the Scott bought a vacant plot of land on 1st September 1980 and commenced construction on 1st October 1986. The disposal of property was Post CGT asset in context of S-100-55 (2). The sale of land would be classified as the CGT event A1.
If Scott sold the building to the daughter then he makes a capital gains of $50,000.
Another situation advocates that if the titleholders of the possessions was company as a substitute of person than the sum of amortization of and the levies should be detracted.
Reference List:
Bankman, J., Shaviro, D.N., Stark, K.J. and Kleinbard, E.D., 2017. Federal Income Taxation. Wolters Kluwer Law & Business.
Becker, J., Reimer, E. and Rust, A., 2015. Klaus Vogel on Double Taxation Conventions. Kluwer Law International.
Gordon, Economics. and Keuschnigg, C., 2017. Introduction on Trans-Atlantic Public Economics Seminar: Personal income taxation and household behavior.
Mares, I. and Queralt, D., 2015. The non-democratic origins of income taxation. Comparative Political Studies, 48(14), pp.1974-2009.
McGee, R.W., 2014. The Ethics of Tax Evasion: A Case Study of Brazil. In Handbook of Research on Economic Growth and Technological Change in Latin America (pp. 374-393). IGI Global.
Mumford, A., 2017. Taxing culture: towards a theory of tax collection law. Routledge.
Piketty, T., Saez, E. and Stantcheva, S., 2014. Optimal taxation of top labor incomes: A tale of three elasticities. American economic journal: economic policy, 6(1), pp.230-71.
Ramsey, F.P., 2015. A CONTRIBUTION TO THE THEORY OF TAXATION. ECONOMIC JOURNAL, 125(583), pp.254-268.
Svoboda, V., 2016. Libertarianism, slavery and just taxation. Humanomics, 32(1), pp.69-79.
Tanzi, V., 2014. Inflation, indexation and interest income taxation. PSL Quarterly Review, 29(116).
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