Allocated Between Fiduciary And Beneficiary Essay

Question:

Discuss About The Allocated Between Fiduciary And Beneficiary?

Answer:

Introducation

As held in the “section 6 of the ITAA 1936” income from personal exertion includes the income that is generated from the personal exertion[1]. This represents the income that originates from the earnings, salaries and wages, fees, bonus etc. that is received in capacity to the employee in respect of the services rendered. An amount that is generated from the personal exertion might be included in the assessable income in the form of statutory income or ordinary income. An instance of remuneration has been provided in the case of “Dean v FCT (1997)” where retention payment made in considerations of the employees will be considered as assessable income[2].

Rent refers to the price that is paid to make use of the another person’s property such as the land, building, equipment would be held assessable. As held in “Adelaide Fruit and Produce Exchange Co Ltd (1932) 2 ATD 1” rent money that is received would be considered as the assessable income. Spending that is occurred in letting out the property would be considered as allowable expenditure.

According to the interpretative decision of “ATO ID 2002/644” the prize is not regarded as the ordinary or statutory revenue and hence it would not be considered as the reckonable earnings under either of the “section 6-5 or section 6-10 of the ITAA 1997”[3]. Instead, it is measured as the non-taxable bonus gain. The court has considered that the prize or gift will be considered as the ordinary income in capacity of the decision held in “Squatting Investment Co Ltd v FCT (1953)”. Usually, a gift or reward is considered as the individual bonus and it is not regarded as the ordinary revenue given the taxpayer has received the reward or gift in respect of the revenue generating making activity of the taxpayer.

Mere prizes are not an income however it may be a income if there is an adequate connection with the taxpayer’s income generating activities. As held in “Kelly v FCT” the amount received by professional footballer for best player is an income since it is incidental to his work.

The character of an article will be regarded as the revenue and must be arbitrated under the conditions of its origin by the taxpayer and devoid of such character it may been derived by alternative individual[4]. As held in the case of “Federal Coke Co Pty Ltd v FCT (1977)” the character of the proceeds must be arbitrated under the conditions of the derivation by the taxpayer.

Payments that are received for relinquishing or restricting rights cannot be considered as income. For example, a payment received by taxpayer for agreeing not do something does not constitute an assessable income. Similarly, the judgement held in the case of “Higgs v Olivier (1951)”, states that the payment received by the actor for not producing, directing or acting in another film for a period of 18 months cannot be regarded as income[5].

According to the “taxation ruling of TR 98/9”, self-education expenditure is generally considered to be deductible expenditure where it is occurred to maintain or increase the taxpayers skills in the occupation in which the taxpayer is presently employed[6]. According to the judgement stated in the case of “FCT v Highfield (1982)” the judgement of the court stated that the expenditure incurred by the taxpayer was for carrying on his business and the objective of undergoing the degree was to make use of the knowledge obtained by the taxpayer in advancing his practice.

According to section, “8-1 of the ITAA 1997” cost that is incurred by the taxpayer in acquiring the ordinary items of the clothing such as suit is not considered allowable deduction. As held in the case of “Mansfield v FCT (1996)” the judgment of the court allowed the flight attendant to claim an allowable deduction for the cost of shoes since it was a compulsory uniform.

According to the legislative response of “section 25-100 of the ITAA 1997” deductions is allowable for the cost of travel between workplace. Travel should be related directly between the place of work and income generating place and none of the place should be taxpayer’s home [7]. The court of law in “FCT v Payne (2001) ATC 4027” denied the taxpayer allowable deductions for the cost incurred from the place of home and place of employment. Travelling between two unconnected places of work cannot be considered allowable under “section 8-1”.

Application:

As evident from the case study, Bridget received income from her employment with both part-time and full time employments. Therefore, these income forms the part of personal exertion income since it is generated in respected of services rendered by Bridget. Citing the reference of “Dean v FCT (1997)” Bridget income from personal exertion would be assessable in respect of “section 6 of the ITAA 1936” [8].

The evidences from the case study suggest that the rental income of $30,000 received in the income year of 2016/17 will be considered as the assessable and would be included in the assessable income. However, Bridget also reported that she had incurred an allowable deductions relating to the rental property. This is because under “section 8-1” the expenses on rental property was related in deriving her assessable income and would be considered allowable deductions.

Bridget received a cash prize of $3000 that is regarded as the ordinary or statutory pay and therefore it is not considered as taxable income under “section 6-5 or Section 6-10 of the act” [9]. This is because the cash prize is observed as the bonus gain and cannot be regarded as ordinary gain since it is not related to the revenue making activity of Bridget.

In the present case of Bridget, it is noticed that she received a payment consideration of $30,000 from the TV station for appearing in the cooking show and had additionally received a new cake-mixing equipment having valued $10,000. Therefore, the amount of payment considerations that is received by Bridget will be included in the chargeable pay in respect of the “section 6-5 of the act”[10].

In the later instances of the case study, it is found that Bridget received a sum of $20,000 with the TV station for agreeing not to appear on any similar TV cooking shows for two years’ period would not be regarded as income. Similarly, in reference to the judgement stated in the case of “Higgs v Olivier (1951)” the payments that is received by Bridget is for relinquishing the right of not appearing in any identical cooking shows. Additionally, the legal expenses will not allowable since it is not related to Bridget income producing activity.

Bridget incurred a self-education expenditure with the hope of obtaining promotion in the division of accounting firm. The self-education expenditure that is incurred by Bridget was entirely deductible. The expenses were occurred for increasing the skills with the prospect of gaining promotion where she is presently working. Citing the case of “FCT v Highfield (1982), Bridget will be able to entitlement for a permissible deductions under “section 8-1 of the act”.

Bridget reported that she received a cash award for being the best accountant in Sydney. With reference to “Kelly v FCT”, the award is an income for Bridget since it is related to her work and related to her exercise of skill [11].

Bridget reported an expenditure on contemporary suits and it can be said the she will not be allowed to claim deductions on the ordinary articles of apparel nevertheless that such expenses was necessary in ensuring a appropriate appearance in a job or profession. According to the decision in the case of “Morris v FCT 2002”, deductions can be allowable if the taxpayer occupations compulsorily requires using occupation specific clothing[12].

Bridget incurred expenditure on airfares and accommodations for attending a job interview in Melbourne accounting firm. Agreeing with section 25-100 the expenses incurred by Bridget is not directly related to the place of work. Referring to “FCT v Payne (2001)” Bridget will be denied deductions for the cost incurred between two unconnected places of work “section 8-1 of the ITAA 1997”.

Conclusion:

Conclusively Bridget income from salaries, rental income, cash award and payment considerations would be considered assessable under “section 6-5” whereas she will be entitled to deductions relating to self-education and rental property expenses under “section 8-1” for education expenses.

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