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Is Bridget a resident for tax purposes for 2016/17?
Applying the ‘residency test’ (Miller
), it can be ascertained from the facts that Bridget’s intention to
1
reside is derived from her permanent residency in the suburb of Epping. Furthermore, her social
2
arrangements, business ties and assets are also located in Epping where she works full time as an
accountant and casually as a bookkeeper. Thus, she has satisfied the residency test and is therefore a
resident for tax purposes.
3
How much is Bridget’s taxable income?
4
S 4-1 of the Income Tax Assessment Act (ITAA)
1997 states that income tax is payable by each individual
and is calculated by minusing deductions from the assessable income (s6-1 ITAA
97). As income is not
specifically defined in legislations, it takes the ordinary meaning of the return that is received
periodically/annually from one’s work, such as a salary.
Salaries and Rental Income: Is it assessable income?
The facts state that Bridget earns an annual salary of $100,000 as an accountant, $60,000 as a book-leeper
and $30,000 from her rental property (Adelaide Fruit
). These qualify as income derived from personal
5
exertions (Stanton
). (s 6-5 ITAA
36)
6
The abovementioned remuneration constitutes as ordinary income pursuant to s 6-5 ITAA
97. Thus, the
total income of $190,000 is assessable income.
$3000 Prize Money: Is it assessable income?
On 1 January, the prize money Bridget won is not assessable as it is deemed as a ‘one-off’ transaction of a
gift.
The prize money is Bridget’s award for winning a competition which is unrelated to her profession. Thus,
in accordance with Parson’s Proposition 9, this mere windfall gain is simply a gift is neither statutory nor
ordinary income pursuant to s 6-5, 6-10 ITAA
97. It is a non-assessable windfall gain (Moore
).
7
Taxi fare: Is it Fringe Benefit Tax (FBT)?
The taxi fare incurred by Bridget which is paid by her employer can be classified as FBT. It is likely that
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the employer will not be taxed on this FBT due to the ‘otherwise deductible’ rule and s 58z Fringe Benefit
Tax Assessment Act 1986 which exempts taxi fares if it is a single trip starting from or ending at the
taxpayer’s workplace.
1
FC of T v. Miller
(1946) 73 CLR 93; ss 6-5(2); 6-10(4) ITAA
97.
2 FC of T v. Miller
(1946) 73 CLR 93; FC of T v. Applegate
79 ATC 4307.
3 S 995-1 ITAA
97; s6(1) ITAA
36.
4 S 4-15 ITAA
97.
5
Adelaide Fruit and Produce Exchange Co Ltd v Adelaide Corporation
[1961] HCA 20.
6
Stanton v. Federal Commissioner of Taxation
(1955) 92 CLR 630.
7 Moore v Griffiths
(1972) 48 TC 388.
8 S 20 Fringe Benefits Tax Assessment Act
(1986) (FBTAA).
9 S 136 FBTAA
1986.
According to the facts, Bridget’s employees pay for her taxi fare from the accounting firm to her home.
Hence, this single trip beginning from her workplace is considered an exempt benefit.
This issue is not included when determining taxable income. (s 23L ITAA
36)
Daily commute from casual to full-time work: Is it deductible?
Previously, the case of FCT v Payne accentuated that travel expenses between two unrelated work
10
places were not deductible. However, that has now been overruled by s 25-100 ITAA
97, which states that
a taxpayer may have their travel expenses deducted if the travel is between two workplaces the taxpayer is
engaged in to produce assessable income.
It can be ascertained from the facts that Bridget commutes from her casual bookkeeping job to her
full-time job at an accounting firm. Both workplaces produce assessable income as discussed in the above
paragraphs. Hence, Bridget’s travel expense between these two workplaces is specifically deductible.
Value of Bridget’s birthday cake: Is it assessable income?
Bridget’s own consumption of her self-made birthday cake is is not assessable as it has no relation with
any employment or income-producing activity. (s6-1 ITAA
97)
TV Station Agreement 1: Is it assessable income?
In accordance to TR IT167, if a taxpayer makes regular appearances in a television program, the reward
received for appearing on the program would form part of the taxpayer’s assessable income. From the
facts, Bridget has agreed to appear on “Delectable Desserts” in consideration of $30,000. Hence, this
amount will form part of Bridget’s assessable income. (Stone
; s 51 ITAA
97; TR IT167)
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