RESIDENCY
● S3-5 ITAA97 provides that income tax is payable for each year by each individual and company.
● The income tax financial year is 1 July to 30 June: ss4-10(1) and 995-1 ITAA97.
● If an individual satisfies any one of the four residency tests in s6(1) Income Tax Assessment Act 1936
(ITAA36), s/he will be an Australian resident for tax purposes for the year ended 30 June 2018
(FY2018). Otherwise, s/he will be a foreign resident for tax purposes: s995-1 ITAA97.
● Residency is assessed on a year-by-year basis and a person can be a resident for only part of the
year.

ORT
(COPY)Under this primary common law test of residency, the taxpayer will be a resident if they ‘reside’
in Australia: s6(1)(a). this would be the case if the taxpayer ‘dwelled permanently or for a considerable
period of time in a particular place’: Levene; Miller.
(COPY)This is a question of fact/degree to be determined based on the taxpayer’s individual circumstances:
Lysaght; Joachim; Harding.
The ruling ATO TR98/17 also provides the following factors as guidance.

CHOOSE ONE!
● TP IS AUS CITIZEN, travel overseas to work
Arguments for DOES reside:
✓ Physical presence in Australia
CHOOSE ONE OR MORE
○ (4-5months)Levene suggests that 5 months is a considerable time
○ -(6months)Commissioner suggests six months: TR98/17
○ (1week every month)Lysaght the court found that a taxpayer who was in the UK for 1
week every month ‘resided’ there. However, these cases involve no set end to the
taxpayers’ arrangements  need to see if the taxpayer’s stay in Australia is for a set
period.
(COPY) Therefore, TP resides/not resides because ……...
(COPY)Nevertheless, Joachim indicates that physical presence should not be the only determinant
factor to decide her/his residency.

✓ Frequency, regularity and duration of visits to Australia
CHOOSE
o (Frequency,regularity)Lysaght: the taxpayer living in one jurisdiction but visiting
another with frequency and regularity, i.e. the visit is not ‘casual and uncertain but…
in the ordinary course of life.’
o (Duration)Levene: four or five months considered considerable time for visiting,
and time abroad was temporary in nature.
Therefore, TP resides/not reside because………


✓ The purpose/intention of visits to Australian and abroad
CHOOSE
CHOOSE
o (TREAT AUS HOME)Intention to treat Australia as home: Joachim → suggests reside
o (Future expect return Aus)Presumably expected to return to Australia in the future?
→ suggests reside.
o (leave AUS bc of work related purpose)Travels overseas merely for work-related
purpose shows temporary nature suggest reside: Joachim.

✓ Business or employment ties
CHOOSE
o Business(company/colleague/boss) is based in Australia  suggests resides 
Lysaght
o Business(company/colleague/boss) is overseas→ suggests not reside.
✓ Family ties
o Joachim: Parents, siblings are in Australia-->reside
o Levene: visiting relatives.

✓ Social ties and living arrangements
o New Friends in overseas and/or social activities in overseas  suggest not resides:
Levene.
✓ Accommodation at overseas
CHOOSE
CHOOSE
o (stay employer provided accommodation)The fact of staying at hostels or employer-
provided accommodations at another place may suggest continuing association with
Australia and that absence in that Australia is merely temporary: Levene; Harding.
→ reside
o (purchase house overseas) Establishing/purchasing abodes overseas  suggest not
reside.
✓ Accommodation at Australia
o No sell Australia home/accomodation → suggest reside

✓ Economic ties at overseas
o Have Bank account, share portfolio, superannuation savings? → suggest no reside.
✓ Economic ties at Australia
o Have Bank account, share portfolio, superannuation savings? → suggest reside.

✓ Nationality
o Citizenship→ suggests reside but this is normally not decisive.

Arguments for DOES NOT reside:
…..bla bla bla


Conclusion
Evaluating all factors and the taxpayer’s circumstances, on balance, it would appear that the
taxpayer DOES or DOES NOT reside in Australia under the ORT.
CHOOSE
RESIDE
Under the ORT test, the taxpayer is an Australian resident for tax purposes for the period of date to
date during FY2018. Thus, they will be taxed on ordinary/statutory income from ALL sources: ss6-5
and 6-10 ITAA97. Tax is paid at Australian resident income tax rate.
OR
NOT RESIDE
Since the taxpayer does not satisfy the ORT test, they will foreign resident for the entire FY2018
and will be taxed on ordinary/statutory income sourced in Australia or deemed to be assessable
income on some other basis unless they satisfy the other tests (domicile ,183day and
superannuation test): ss6-5 and 6-10 ITAA97. Tax is paid at foreign tax rates.

THE END!!





























● TP IS NOT AUS CITIZEN, come to Aus to work
Arguments for DOES reside:
✓ Physical presence in Australia
CHOOSE ONE OR MORE
○ (4-5months)Levene suggests that 5 months is a considerable time
○ -(6months)Commissioner suggests six months: TR98/17
○ (1week every month)Lysaght the court found that a taxpayer who was in the UK for 1
week every month ‘resided’ there. However, these cases involve no set end to the
taxpayers’ arrangements  need to see if the taxpayer’s stay in Australia is for a set
period.
(COPY)Therefore, TP resides/not reside because………..
(COPY)Nevertheless, Joachim indicates that physical presence should not be the only determinant
factor to decide Laila’s residency.

✓ Frequency, regularity and duration of visits to Australia
CHOOSE
o (Frequency,regularity)Lysaght: the taxpayer living in one jurisdiction but visiting
another with frequency and regularity, i.e. the visit is not ‘casual and uncertain but…
in the ordinary course of life.’
o (Duration)Levene: four or five months considered considerable time for visiting,
and time abroad was temporary in nature.
(COPY)Therefore, TP resides/not reside because………..

✓ The purpose/intention of visits to Australian and abroad
CHOOSE
o (TREAT AUS HOME)Intention to treat Australia as home: Joachim → suggests reside
o Travel Australia merely for work related purpose --> not reside

✓ Business or employment ties
CHOOSE
o Business(company/colleague/boss) is based in Australia  suggests resides 
Lysaght
o Business(company/colleague/boss) is overseas→ suggests not reside.
✓ Family ties
o Joachim: Parents, siblings are in Australia-->reside
o Levene: visiting relatives.

✓ Social ties and living arrangements
o New Friends in Australia and/or new social activities in Australia  suggest resides:
Levene.

✓ Accommodation at Australia
CHOOSE
o (stay employer provided accommodation)The fact of staying at hostels or employer-
provided accommodations at another place may suggest continuing association with
Australia and that absence in that Australia is merely temporary: Levene; Harding.
→ no reside
o (purchase Australia house) Establishing/purchasing abodes in Australia  suggest
reside.
✓ Accommodation at own country (eg Malaysia)
o No sell own country(egMalaysia) home/accommodation → suggest no reside

✓ Economic ties at own country (eg Malaysia)
o Maintain/have Bank account, share portfolio, superannuation savings? → suggest no
reside.
✓ Economic ties at Australia
o Have Bank account, share portfolio, superannuation savings? → suggest reside.


Arguments for DOES NOT reside:
…..bla bla bla

Conclusion
Evaluating all factors and the taxpayer’s circumstances, on balance, it would appear that the
taxpayer DOES or DOES NOT reside in Australia under the ORT.
CHOOSE
RESIDE
Under the ORT test, the taxpayer is an Australian resident for tax purposes for the period of date to
date during FY2018. Thus, they will be taxed on ordinary/statutory income from ALL sources: ss6-5
and 6-10 ITAA97. Tax is paid at Australian resident income tax rate.
OR
NOT RESIDE
Since the taxpayer does not satisfy the ORT test, they will foreign resident for the entire FY2018
and will be taxed on ordinary/statutory income sourced in Australia or deemed to be assessable
income on some other basis unless they satisfy the other tests (domicile ,183day and
superannuation test): ss6-5 and 6-10 ITAA97. Tax is paid at foreign tax rates.

THE END!!!!






Fringe Benefit Tax (FBT)

All provisions below refer to the Fringe Benefits Tax Assessment Act 1986 (FBTAA) unless otherwise
specified.
(COPY)Fringe benefit tax is imposed on the employer in relation to the provision of benefits to
employees: s66(1) FBTAA.

Step 1: Is there a fringe benefit?
(COPY)s136(1) FBTAA provides the definition of a fringe benefit as a benefit provided during the year
of tax (1 April to 31 March: s136(1)) by an employer to an employee in respect of employment of the
employee.
A) BENEFIT
(COPY)S136(1) provides a broad definition of benefit, including any right, privilege service or facility
provided under an arrangement in relation to the performance of work.

In respect of the employee’s employment
(COPY)Defined in s136(1) as ‘by reason of… that employment’
(COPY)According to J&G Knowles, Starrim and Slade Bloodstock, ‘in respect of employment’ requires
a ‘sufficient and material relationship’ between the employment and the provision of the benefit.
CHOOSE ONE
(COPY) On the facts, it is obvious that the benefit arises purely from the employment relationship as the
employee would not have received the employee but for said relationship.
OR
(COPY) There are other relationships between the employer and the employee. Thus, we ask whether the
benefit would have been received by the employee without the employment relationship: FBT: Guide for
Employers (NAT 1054). On the facts, the employee would not/would have received the benefit without
their capacity as an employee. Therefore, the benefit is/is not in respect of the employment

Conclusion
(COPY) The FBT liability of each item will be assessed on a case-by-case basis as below.
………………………………………………………………………………………………………………
1)SALARY
Expressly excluded under s136(1)(f) → no consequences

2)ALLOWANCE OR REIMBURSEMENT
Step 2: Allowance or reimbursement?
(COPY)An allowance is determined in Roads & Traffic and TR92/15 as a predetermined amount made to
cover an estimated expense which is paid regardless of whether that expense is incurred; meanwhile,
reimbursements are compensation for the actual amount of expenditure incurred by an employee.
CHOOSE ONE
Allowance(predetermined amount)
(COPY)On balance, it is more likely that the benefit received is an allowance rather than reimbursement.
(COPY)Therefore, allowance is assessed as ordinary income (s6-5 ITAA97) or by specific inclusion as
statutory income under s15-2 ITAA97 and is not subject to FBT.
(THE END!don’t move on to following steps)
OR
Reimbursement(compensate actual amount)
(COPY)On balance, it is more likely that that the benefit received is a reimbursement rather than
allowance. Therefore, there are FBT consequences.
(move on to following steps)


Step 3:
CHOOSE

(OPTIONAL; not car fringe benefit and not for work related purpose) Reimbursement is an expense
payment FB under s20b

(OPTIONAL; in relation to car fringe benefit) Generally, reimbursement of the employee’s motor vehicle
expenses would be qualified as an expense payment FB. However, it is exempt under s53.

(OPTIONAL; for work-related purpose) Reimbursement of ____(eg. Phone bill) is an expense payment
under s20. However, since the employee uses the _____(eg. phone) for work-related purpose only;
therefore, if the employer provides a ‘no-private-use declaration’, the expense payment will be an exempt
benefit under s20A. Besides, the taxable value of the expense payment FB will be reduced to 0 due to
otherwise deductible rule under s24 as the expenses would have be deductible to the employee if s/he had
incurred them himself/herself. (END HERE).

Step 4: Exemption
CHOOSE ONE:
(COPY;satisfy exemption)The reimbursement benefit is an exempt benefit as it falls under the
exemption of:
CHOOSE ONE
-(COPY;<300)Minor benefit under s58P which states that a benefit with a notional taxable value of less
than $300 will be exempt.
-(COPY) work-related item under s58X which states that a benefit that is primarily for use in the
employee’s employment is exempted. Example of work-related item: A portable electronic device (see
ATO ID2008/133 definition, including mobile phones, laptop computers)
-(COPY;taxi single trip) single-trip taxi travel under s58Z which states that the provision of single-trip
taxi journeys beginning or ending at the employee’s workplace is an exempt benefit.
OR
(COPY;no fall any exception)The reimbursement benefit does not fall under any of the exemptions.


Step 5: Prima facie, taxable value is: $________
CHOOSE ONE:
In house
-(COPY)An expense payment fringe benefit is in-house where the expense relates to goods or services
provided by the employer to outsiders in the ordinary course of their business: s136(1). Under s22A,
Taxable Value = taxable value of the fringe benefit as if it was a property or residual fringe benefit (i.e.
assume the employer did not reimburse the employee but provided the property or services directly)
OR
External
-(COPY)An expense payment fringe benefit is external if it is not an in-house expense payment fringe
benefit: s136(1). Under s23,
Taxable Value = Amount of the expense or reimbursement incurred by the employer


Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.

-(COPY)Recipient's contribution- this doesn’t apply as it is reimbursed.

-(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she
get deductions?
CHOOSE ONE
● __xx_ Expense (Deductible- fulfills positive limb)
(COPY; fall under general deduction)The employee could have received deduction if s/he incurred the
expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in
gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is
reduced by _______. THE END!

OR
● __xx__Expense (Deductible- falls under specific deduction)
(COPY; falls under specific deduction) The employee could have received deduction if s/he incurred
the expense himself/herself as the expense is specifically deductible under s_____
CHOOSE:
Repairs- s25-10
Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5
Bad debts- s25-35
Payment to associations- s25-55
Travel between two workplaces- s25-100 (home to client/work to client)
Gift to deductible gift recipient- Div30
Therefore, the taxable value of fringe benefit is reduced by _______.THE END!

OR
● __xx__Expense (Not deductible- falls under negative limbs) (egwork to home)
(COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the
expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the
TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not
reduced and remains the same. (move on)
Generally denied:
- HECS (s26-20)
- Relative’ travel expenses (s26-30)
- Payment to related entities (s26-35)
- Recreational club expenses (s26-45)
- Entertainment expenses (s32-5)
- Gifts or donations (s26-22)

Step 7: Type 1 or type 2?
Type 1: Where the employer is entitled to ITC
Type 2: Where the employer is not entitled to ITC
Is this a creditable acquisition (s11-5) for the employer?
-Acquisition (s11-10)- yes, there is acquisition
-Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a
creditable purpose
-Taxable supply
CHOOSE ONE
- It is clear that the supply is taxable as the amount includes GST. (type1)
OR
-As it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the
supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and
Div 40. (refer GST notes)
-Consideration (s11-5(c)) - yes, reimbursement is treated as a consideration for an acquisition that the
employer makes from the employee: s111-5, GSTR2001/3
-Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____
which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST
Regulations 1999. This shows that the employer must register for GST.

CHOOSE ONE:
Here, there is creditable acquisition. Therefore, it is type 1: ss5C(3) and 149A
Here, there is no creditable acquisition. Therefore, it is type 2: s5C(4)

Step 8: FB Taxable amount
CHOOSE ONE:
(COPY;TYPE 1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe
Benefits 2.0802
OR
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868














3)OTHER EXPENSE PAYMENTS FB (NOT REIMBURSEMENT-eg. HECS payment, residential
rent, accountant cost, employee’s children school fees)
Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.

Step 3: XXX is an expense payment FB under s20A because an employer pays an expense incurred by the
employee.

(OPTIONAL; IF CAN ONLY USE FOR WORK RELATED,THEN EXEMPT!;) However, since the
employee uses the _____(eg. phone) for work-related purpose only; therefore, if the employer provides a
‘no-private-use declaration’, the expense payment will be an exempt benefit under s20A. Besides, the
taxable value of the expense payment FB will be reduced to 0 due to otherwise deductible rule under s24
as the expenses would have be deductible to the employee if s/he had incurred them himself/herself.
(END HERE).


Step 4: Exemption
CHOOSE ONE:
● (COPY;satisfy exemption)The expense is an exempt benefit as it falls under the exemption of:
CHOOSE ONE
-(COPY;<300)Minor benefit under s58P which states that a benefit with a notional taxable value of less
than $300 will be exempt.
-(COPY) work-related item under s58X which states that a benefit that is primarily for use in the
employee’s employment is exempted. Example of work-related item: A portable electronic device (see
ATO ID2008/133 definition, including mobile phones, laptop computers)
-(COPY;taxi single trip) single-trip taxi travel under s58Z which states that the provision of single-trip
taxi journeys beginning or ending at the employee’s workplace is an exempt benefit.
OR
● (COPY;no fall any exception)The expense does not fall under any of the exemptions.


Step 5: Prima facie, taxable value is: $________
CHOOSE ONE:
● In house
-(COPY)An expense payment fringe benefit is in-house where the expense relates to goods or services
provided by the employer to outsiders in the ordinary course of their business: s136(1). Under s22A,
Taxable Value = taxable value of the fringe benefit as if it was a property or residual fringe benefit (i.e.
assume the employer did not reimburse the employee but provided the property or services directly)
OR
● External
-(COPY)An expense payment fringe benefit is external if it is not an in-house expense payment fringe
benefit: s136(1). Under s23,
Taxable Value = Amount of the expense or reimbursement incurred by the employer


Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.
-(COPY)Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she
get deductions?
CHOOSE ONE
● __xx_ Expense (Deductible- fulfills positive limb)
(COPY; fall under general deduction)The employee could have received deduction if s/he incurred the
expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in
gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is
reduced by _______. (END HERE)

OR
● __xx__Expense (Deductible- falls under specific deduction)
(COPY; falls under specific deduction) The employee could have received deduction if s/he incurred
the expense himself/herself as the expense is specifically deductible under s_____
CHOOSE:
Repairs- s25-10
Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5
Bad debts- s25-35
Payment to associations- s25-55
Travel between two workplaces-s25-100 (home to client/work to client)
Gift to deductible gift recipient- Div30
Therefore, the taxable value of fringe benefit is reduced by _______ THE END!

OR
● __xx__Expense (Not deductible- falls under negative limbs)
(COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the
expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the
TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not
reduced and remains the same.(MOVE ON)
Generally denied:
- HECS (s26-20)
- Relative’ travel expenses (s26-30)
- Payment to related entities (s26-35)
- Recreational club expenses (s26-45)
- Entertainment expenses (s32-5)
- Gifts or donations (s26-22)


Step 7: Type 1 or type 2?
Type 1: Where the employer is entitled to ITC
Type 2: Where the employer is not entitled to ITC
Is this a creditable acquisition (s11-5) for the employer? (refer to GST notes)
CHOOSE A/B/C:

(A) It falls under input taxed supply as _____________(see the list). Thus, the entity is not entitled to ITC
on such acquisition as it is not for a creditable purpose and it is not a creditable acquisition: s11-15(2)(a)
and Rio Tinto. Therefore, it is type 2.
Input taxed supply:
- Financial supplies-s40-5
-Residential rent- s40-35(1)
-Residential premises- s40-65 and s40-70


(B) It falls under GST-free supply as ___________ (see the list). Thus, it is not a creditable acquisition:
s38-1.Therefore, it is type 2
GST- free supply:
-Food- Subdiv 38-A
-Health- Subdiv38-B
-Education-Subdiv38-C
-Childcare-Subdiv38-D
-Exports-Subdiv38-E
-Supplies of going concerns- subdiv38-J
-International mail- subdiv38-Q
(OPTIONAL) A creditable acquisition in relation to the supply/making of GST-free items, supplier could
still be entitled to input tax credits.

(C)
-Acquisition (s11-10)- yes, there is acquisition
-Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a
creditable purpose
-Taxable supply-
CHOOSE:
it is clear that the supply is taxable as the amount includes GST.
OR
as it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the
supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and
Div 40. (refer GST notes)

-Consideration (s11-5(c)) - yes, reimbursement is treated as a consideration for an acquisition that the
employer makes from the employee: s111-5, GSTR2001/3
-Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____
which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST
Regulations 1999. This shows that the employer must register for GST. (TYPE1)

CHOOSE ONE:
Here, there is creditable acquisition. Therefore, it is type 1.
Here, there is no creditable acquisition. Therefore, it is type 2.

Step 8: FB Taxable amount
CHOOSE ONE:
(COPY;TYPE1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe
Benefits 2.0802
OR
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868

4)MEAL ENTERTAINMENT EXPENSE
Step 2: The benefit falls under none of the exclusions(e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.
Step 3:-Meal entertainment fringe benefits can be captured by expense payment fringe (Div 5) benefits,
property fringe benefits (Div 11) and meal entertainment fringe benefits (Div 9A). The following assumes
that the employer elected for Div 9A to apply, in which case the relevant fringe benefits will be taxed
under this Division and not another: ss37AA; 37AF.
● Under s37AD, a meal entertainment fringe benefit arises (regardless of whether or not the meal
entertainment relates to business purposes) where an employer provides its employees with:
o (a) Entertainment by way of food or drink; or
● Determining whether food or drink is provided as ‘entertainment’ will be a question of fact, and
the ATO provides some guiding factors in TR97/17:
o Why the food/drink is provided? → On the facts, the food was provided in a social situation,
e.g. lunch at restaurant (as refreshment, e.g. morning tea for employees). Therefore, it will be
classified as entertainment (not entertainment).
o What type of food/drink is provided? → a three course meal will constitute entertainment;
morning or afternoon tea, sandwiches or light meals are unlikely to constitute entertainment.
o When the food/drink is provided? → On the facts, the food was not/was provided during work
hours, during overtime or while the employee is travelling for work purposes. Therefore, the food was
likely/unlikely to constitute entertainment.
o Where the food/drink is provided? → food or drink provided at a hotel, restaurant or café
is more likely to constitute entertainment; food or drink provided at the employer’s premises is
unlikely to be entertainment.
● Although no single factor is determinative, the ATO suggests the first two factors carry the most
weight. On balance, the food/drink provided is (is not) meal entertainment and is therefore (is therefore
not) subject to FBT.

Conclusion
CHOOSE ONE
(COPY) On balance,it is an meal entertainment expense FB under Div9A because …..(MOVE ON)
OR
(COPY)On balance,it is not an meal entertainment expense FB under Div9A because ….(THE END!)



Step 4: Exemption

CHOOSE ONE:

-(COPY; applied 50/50 split method, benefit<$300) As stated in the facts, the employer chooses to use a
50/50 split method. Using 50/50 split method and divide the taxable value by the number of
employee/associate, prima facie, the benefit to each employee/associate is _____ which is <$300; s37BA,
s58P. However, the exemption is not available for taxable value calculated under 50/50 split method:
s37BA, TR2017/12.

OR
- (COPY; applied 50/50 split method, benefit>$300) As stated in the facts, the employer chooses to use a
50/50 split method. Using 50/50 split method and divide the taxable value by the number of
employee/associate, prima facie, the benefit to each employee/associate is _____ which is >$300; s37BA,
s58P. Therefore, it does not fall under minor benefit exemptions: s58P and is not an exempt benefit.
Besides, even if the benefit is <$300, the exemption is not available for TV calculated under 50/50 split
method: s37BA, TR2017/12.

OR
(COPY;no fall any exception)The expense does not fall under any of the exemptions.

Step 5: Prima facie, taxable value is: $________
50/50 Split Method
● The 50/50 split method will apply automatically unless the employer elects for the 12-week
register method to apply: s37B.

o 50/50 split method → under s37BA,
Taxable Value = 0.5 the expenses incurred by the employer during the FBT year in providing
meal entertainment

OR

12-week register method
o Alternatively, the employer can elect for the 12-week register method to apply: s37CA.
o In this case the employer must maintain a register of all meal entertainment expenditure over a
representative 12-week period and determine the percentage of that expenditure which relates to the
provision of meal entertainment as fringe benefits (i.e. to employees/associates, not clients), i.e. the
‘register percentage’: s37CB.
o The 12-week period chosen and validity of the register are determined in accordance with ss37CC,
37CD (especially (2) & (3)).
o The 12-week register method will generally provide a lower taxable value (and therefore a lower
FBT liability) where less than 50% of meal entertainment expenditure is provided as fringe benefits (i.e.
to employees/associates).
o 12-week register method → under s37CB
Taxable Value = total meal entertainment expenditure incurred in the FBT year Register
percentage

Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.

-(COPY)Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she
get deductions?
CHOOSE ONE
● __xx_ Expense (Deductible- fulfills positive limb)
(COPY; fall under general deduction)The employee could have received deduction if s/he incurred the
expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in
gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is
reduced by _______.

OR
● __xx__Expense (Not deductible- falls under negative limbs)
(COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the
expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the
TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not
reduced and remains the same.
Generally denied:
- HECS (s26-20)
- Relative’ travel expenses (s26-30)
- Payment to related entities (s26-35)
- Recreational club expenses (s26-45)
- Entertainment expenses (s32-5)
- Gifts or donations (s26-22)

Step 7: Type 1 or type 2?
Type 1: Where the employer is entitled to ITC
Type 2: Where the employer is not entitled to ITC
Is this a creditable acquisition (s11-5) for the employer? (refer to GST notes)
-Acquisition (s11-10)- yes, there is acquisition
-Creditable purpose (s11-15)- yes, the acquisition is for a creditable purpose and not private or domestic
in nature.
-Taxable supply-
Food is a GST-free supply and not a taxable supply under s38-2. However, s38-3(1) states that a supply is
NOT GST-free under s38-2 if it is a supply of: (a) food for consumption on the premises (see s38-5) from
which it is supplied, e.g. café/restaurant food.
Therefore, the mean entertainment expense is not a creditable acquisition and it is type 2.

Step 8: FB Taxable amount
CHOOSE ONE:
(COPY;TYPE 1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe
Benefits 2.0802
OR
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868









5) CAR FRINGE BENEFIT

Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.
Step 3:
The benefit here is a car fringe benefit under s7(1) as the car is for the employee’s private use.
(Optional; exempt benefit) The car provided by the employer to employee is an exempt car benefit as the
car is only used for work-related travel and any private use by the employee is minor, infrequent and
irregular or there is no private use. s7(1), s8(2)(END)
(Optional; if overseas) Even though the employee parked his/her car at airport, where s/he or his/her
associate has custody or control over the car(eg. Possessing the car key), there is still a car fringe benefit:
s7(3), TD94/16

Step 4: Exemption
The benefit does not fall under any of the exemptions.

Step 5: Taxable value
CHOOSE:
(COPY; statutory formula method) The employer chooses to use statutory formula method
(COPY; statutory formula method) In the absence of an election to use the cost basis method (and further
information), the statutory formula method is used (s9): s10(1)


Base value= cost of the car
No. of days car provided as FB= ____ because days when car scheduled for ______(eg. annual repairs),
car is not available for private use.
Recipient’s contribution- there is no recipient’s contribution in this case

Therefore, TV= $______

OR

(COPY; Cost basis method) The employer chooses cost basis method. However, note that the employer’s
election of cost basis method is automatically disregarded if the statutory formula method results in a
lower taxable value: s10(5).

C= operating cost of the car during the holding period incurred by the provider or any other person during
the holding period
BP= Business use % of car (s136(1) → any use of the car other than private use by employee or associate)
during the holding period.
Recipient’s contribution- there is no recipient’s contribution in this case

Therefore, TV= $______

Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.
-(COPY)Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- ODR is not applicable to car FB.

Step 7: Type 1 or type 2?
Type 1: Where the employer is entitled to ITC
Type 2: Where the employer is not entitled to ITC
Is this a creditable acquisition (s11-5) for the employer? (refer to GST notes)
-Acquisition (s11-10)- yes, there is acquisition
-Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a
creditable purpose
-Taxable supply
CHOOSE:
it is clear that the supply is taxable as the amount includes GST.
OR
as it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the
supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and
Div 40. (refer GST notes)
-Consideration (s11-5(c)) - yes
-Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____
which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST
Regulations 1999. This shows that the employer must register for GST.

Therefore, the car is a creditable acquisition and it is type 1.


Step 8: FB Taxable amount
CHOOSE ONE:
(COPY;TYPE1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe
Benefits 2.0802
OR
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868










6) PROPERTY FB
Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.
Step 3: The employer provides the employee with property under s40. s136(1) defines property as
tangible and intangible. (MOVE ON)
(OPTIONAL) However, it is an exempt benefit as the property, ______ (biscuit or fruits) is provided to
and consumed by a current employee on a working day and on the business premises: s41. (END HERE)

Step 4: Exemption
CHOOSE ONE:
● (COPY;satisfy exemption)The expense is an exempt benefit as it falls under the exemption of:
CHOOSE ONE
-(COPY;<300) Minor benefit under s58P which states that a benefit with a notional taxable value of less
than $300 will be exempt.
(OPTIONAL; infrequent) As it is infrequent, it falls under minor benefit and is exempted: s58P(1)(f),
TR2007/12. (END HERE)
(OPTIONAL, frequent) As it is frequent, so it does not fall under minor benefit and is not exempted:
s58P(1)(f), TR2007/12. (MOVE ON)
-(COPY) work-related item under s58X which states that a benefit that is primarily for use in the
employee’s employment is exempted. Example of work-related item: A portable electronic device (see
ATO ID2008/133 definition, including mobile phones, laptop computers)
-(COPY;taxi single trip) single-trip taxi travel under s58Z which states that the provision of single-trip
taxi journeys beginning or ending at the employee’s workplace is an exempt benefit.
OR
● (COPY;no fall any exception)The expense does not fall under any of the exemptions.




Step 5: Prima facie, taxable value is: $________
CHOOSE ONE:
● External
A property fringe benefit is external if it is not an in-house property fringe benefit: s136(1). Under s43,
Taxable value of external property fringe benefit = cost to the employer, or expenditure incurred
by the employer to provide the property


Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.

-(COPY)Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she
get deductions?
CHOOSE ONE
● __xx_ Expense (Deductible- fulfills positive limb)
(COPY; fall under general deduction)The employee could have received deduction if s/he incurred the
expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in
gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is
reduced by _______.(END)

OR
● __xx__Expense (Deductible- falls under specific deduction)
(COPY; falls under specific deduction) The employee could have received deduction if s/he incurred
the expense himself/herself as the expense is specifically deductible under s_____
CHOOSE:
Repairs- s25-10
Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5
Bad debts- s25-35
Payment to associations- s25-55
Travel between two workplaces-s25-100 (home to client/work to client)
Gift to deductible gift recipient- Div30
Therefore, the taxable value of fringe benefit is reduced by _______
THE END!

OR
● __xx__Expense (Not deductible- falls under negative limbs)
(COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the
expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the
TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not
reduced and remains the same.(MOVE ON)
Generally denied:
- HECS (s26-20)
- Relative’ travel expenses (s26-30)
- Payment to related entities (s26-35)
- Recreational club expenses (s26-45)
- Entertainment expenses (s32-5)
- Gifts or donations (s26-22)

Step 7: Type 1 or type 2?
Type 1: Where the employer is entitled to ITC
Type 2: Where the employer is not entitled to ITC
Is this a creditable acquisition (s11-5) for the employer? (refer to GST notes)
CHOOSE:

(A) It falls under input taxed supply as _____________(see the list). Thus, the entity is not entitled to ITC
on such acquisition as it is not for a creditable purpose and it is not a creditable acquisition: s11-15(2)(a)
and Rio Tinto. Therefore, it is type 2.
Input taxed supply:
- Financial supplies-s40-5
-Residential rent- s40-35(1)
-Residential premises- s40-65 and s40-70

(B) It falls under GST-free supply as ___________ (see the list). Thus, it is not a creditable acquisition:
s38-1.Therefore, it is type 2.
GST- free supply:
-Food- Subdiv 38-A
-Health- Subdiv38-B
-Education-Subdiv38-C
-Childcare-Subdiv38-D
-Exports-Subdiv38-E
-Supplies of going concerns- subdiv38-J
-International mail- subdiv38-Q
(OPTIONAL) A creditable acquisition in relation to the supply/making of GST-free items, supplier could
still be entitled to input tax credits.

(C)
-Acquisition (s11-10)- yes, there is acquisition
-Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a
creditable purpose
-Taxable supply-
CHOOSE:
it is clear that the supply is taxable as the amount includes GST.
OR
as it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the
supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and
Div 40. (refer GST notes)

-Consideration (s11-5(c)) - yes, reimbursement is treated as a consideration for an acquisition that the
employer makes from the employee: s111-5, GSTR2001/3
-Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____
which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST
Regulations 1999. This shows that the employer must register for GST. (Type 1)

CHOOSE ONE:
Here, there is creditable acquisition. Therefore, it is type 1.
Here, there is no creditable acquisition. Therefore, it is type 2.


Step 8: FB Taxable amount
CHOOSE ONE:
(COPY;TYPE1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe
Benefits 2.0802
OR
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868







7) DEBT WAIVER FB
Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.
Step 3
The debt provided by the employer to the employee is waived partially/completely due to their
employment relationship: s14.

Step 4: Exemption
CHOOSE ONE:
● (COPY;satisfy exemption)The expense is an exempt benefit as it falls under the exemption of:
CHOOSE ONE
-(COPY;<300)Minor benefit under s58P which states that a benefit with a notional taxable value of less
than $300 will be exempt.

OR
● (COPY;no fall any exception)The expense does not fall under any of the exemptions.


Step 5: Prima facie, taxable value is: $________
Taxable value=amount of the loan that no longer needs to be repaid → s15


Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.

-(COPY)Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- ODR is not applicable to debt waiver FB.

Step 7: Type 1 or type 2?
Debt waiver fringe benefits is always Type 2 fringe benefits because they are financial supplies, i.e. input-
taxed under Subdiv 40-A of the GST Act 1999.

Step 8: FB Taxable amount
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868









8) LOAN FB
Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits
under employee share scheme) in s136(1), and hence we can now move on.
Step 3:
Employer provides the employee a loan: s16 and it does not fall the exemptions of ss17(1), 17(2), 17(3),
17(4).

Step 4: Exemption
● The expense does not fall under any of the exemptions.


Step 5: Prima facie, taxable value is: $________
(COPY) For the FBT year commencing on 1 April 2017, the applicable statutory interest rate is 5.25%
per annum: TD2017/3.
CHOOSE:
● (COPY) As the loan is provided at an interest rate that is equal to or higher than the statutory
interest rate, NO FBT liability arises because the taxable value is nil (0).
● (COPY) The loan is provided at an interest rate lower than the statutory interest rate, therefore, it
is FBT liability arises. Under s18,
The taxable value represents the interest ‘saved’ by the employee in obtaining a loan
through the employer rather than at commercial market rates.

Step 6: Reduction in taxable value
-(COPY)In-house FB- this doesn’t apply in this case.

-(COPY) Recipient's contribution- this doesn’t apply in this case.

-(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she
get deductions?

CHOOSE ONE
● __xx_ Expense (Deductible- fulfills positive limb)
(COPY; fall under general deduction)The employee could have received deduction if s/he incurred the
expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in
gaining or producing AY and not the negative limbs, eg. purchase shares or purchase income-producing
asset). Therefore, the taxable value of fringe benefit is reduced by _______.(END HERE)

OR
● __xx__Expense (Deductible- falls under specific deduction)
(COPY; falls under specific deduction) The employee could have received deduction if s/he incurred
the expense himself/herself as the expense is specifically deductible under s_____
CHOOSE:
Repairs- s25-10
Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5
Bad debts- s25-35
Payment to associations- s25-55
Travel between two workplaces-s25-100 (home to client/work to client)
Gift to deductible gift recipient- Div30
Therefore, the taxable value of fringe benefit is reduced by _______
THE END!

OR
● __xx__Expense (Not deductible- falls under negative limbs)
(COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the
expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the
TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not
reduced and remains the same.(MOVE ON)
Generally denied:
- HECS (s26-20)
- Relative’ travel expenses (s26-30)
- Payment to related entities (s26-35)
- Recreational club expenses (s26-45)
- Entertainment expenses (s32-5)
- Gifts or donations (s26-22)
Step 7: Type 1 or type 2?
Loan fringe benefits is always Type 2 fringe benefits because they are financial supplies, i.e. input-taxed
under Subdiv 40-A of the GST Act 1999.

Step 8: FB Taxable amount
(COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe
Benefits 1.8868

Step 9: Fringe benefit tax liability
The final step is to determine the employer’s fringe benefits tax liability: ss5B(1A) and 66,
FBT Liability = Total FB taxable amounts (Type 1 + Type 2) 0.47

(COPY) Therefore, the employer must pay FBT of $________ in relation to the above items.
(Optional;>2000;add all step5TV and see) Where the taxable value of an employee’s fringe benefits
exceeds $2,000, the employer must report the fringe benefits on the employee’s Payment Summary
(subject to certain exceptions) and the employee must report these fringe benefits on their income tax
return.



INCOME


Ss3-5 and 4-1 provides that income tax is payable for each year by each individual and company and
certain other entities
The income tax financial year is 1 July to 30 June: ss4-10(1) and 995-1

………………………………………………………………………………………………………………
AI (OI+SI)
RECEIPTS
(Income from personal services)
(COPY)All provisions below refer to the Income Tax Assessment Act 1997 unless otherwise specified.



1)SALARY received from employer (ASSESSABLE OI)
-(COPY)Salary and wages are assessable as ordinary income under s6-5 as they are clearly a product or
incident of employment or reward for services rendered: Hayes v FCT.
-(COPY) While salary and wages may prima facie be caught under s15-2, s15-2(3)(d) expressly gives
precedence to s6-5.

-(OPTIONAL; constructive receipt rule) As a portion of salary is paid into _____(eg. TP’s child bank
account) as per TP’s instruction, it is a constructive receipt for OI: s6-5(4).

2) Fringe benefit (eg. reimbursement, education payment- HECS)
-(COPY)Gain in this case is a fringe benefit and fringe benefit will not be included in assessable income,
as it constitutes non-assessable non-exempt income under s23L(1) ITAA36.


3) Allowance (ASSESSABLE OI)
(COPY) Gain in this case is an allowance and an allowance is assessable as OI under s6-5 according to
Hochstrasser.
(OPTIONAL) It can also be captured by s15-2 provided they are provided to the taxpayer in respect of
any employment or services rendered. However, s15-2(3)(d) expressly gives precedence to s6-5 if the
allowance is assessable as ordinary income.


4) Something not convertible: (STATUTORY INCOME)
Even though the ______ received will not be assessable as OI under s6-5 because it does not fulfill the
prerequisites of OI as cash-convertible, it can be assessable under s15-2 as statutory income as they are
provided to the taxpayer in respect of any employment or services rendered.

5) Restrictive covenant (people pay me to restrict me on doing something)

CHOOSE:
(COPY; Capital) Receipt from entering restrictive covenant to _____ (not recommence its picture framing
business, give up right to play for a club, enter termination of employment) is capital and not ordinary
income under capital gain tax event D1 as it arises from a separate agreement to give up valuable rights:
Higgs v Olivier, Brent. TP makes a capital gain as capital proceeds> incidental cost (s110-35). There is no
incidental cost in this case. Therefore, capital gain will be included in AI under s102-5(1).
OR
(COPY; OI) Receipt from entering restrictive covenant is assessable as OI under s6-5, as it arises from the
employment or service contract and has nexus with the earning activity: Higgs v Olivier, Reuter.

6) Gift vs income: (Refer to income from services notes)
Even though gift is not assessable as OI under s6-5, it can be assessable under s15-2 as statutory income




………………………………………………………………………………………………………………
(Income from property- interest, dividend, royalties, rent
(COPY)All provisions below refer to the Income Tax Assessment Act 1997 unless otherwise specified.


1) DIVIDEND
(COPY)Since dividends flow from the ownership of shares, they are assessable as ordinary income under
s6-5.
(COPY)However, dividends are also specifically made assessable as statutory income under s44(1)
ITAA36:(a) If the shareholder is a resident: (i) dividends that are paid to the shareholder out of profits
derived by the company
(COPY)S6-25(2) gives precedence to the statutory provision of s44 (which does not contain contrary
intention) over the general provision of s6-5
●
(COPY):s202-5
(COPY)In this case, TP as a shareholder receives a franked distribution, he/she has to “gross up” its AI
by the amount of franking credit attached to the distribution: s207-20 ITAA97 and is entitled to a tax
offset equal to the same amount of the “gross up”

2) INTEREST

3) ROYALTIES
TP received royalty (s6(1) ITAA36) as it is a payment that is calculated based on the usage or exploitation
of his/her tangible /intangible property.
CHOOSE:
(ordinary royalty;count one by one -charge) The royalty TP received is an ordinary royalty as TP is paid
for an amount based on the extent it is utilized. It is assessable as OI under s6-5, to which s15-20(1) gives
precedence.
OR
(capital royalty；lump sum-charge) The royalty TP received is a capital royalty as the amount was a
predetermined lump sum amount. It is assessable as SI under s15-20(1) and not OI under s6-5.


4) RENT(ASSESSABLE OI)
The receipt is rent as it is a periodic payments made by a tenant for the exclusive use of premises/ goods:
United Scientific Holdings. It is generally assessable as OI under s6-5 as it is income that flows from an
investment in property: Adelaide Fruit v DCT.


………………………………………………………………………………………………………………
(Income from business)
-(COPY)All provisions below refer to the Income Tax Assessment Act 1997 unless otherwise specified.

(COPY) Business VS Hobby issue:
-(COPY)To ascertain whether a business exists, which is a question of degree, an accumulative approach
based on the factors considered in Ferguson and Walker will be adopted. No one factor is decisive; it is
necessary to examine overall circumstances: Evans:

A)(COPY)PROFIT MAKING INTENT
-(COPY)Strong determinant, but not decisive: Ferguson; Walker. Yet, if there is such intent, it is hard to
argue otherwise that there is no business.
-(COPY)In Stone v FCT, the High Court stated the profit-making intention is an objective test, meaning
we consider what the TP actually did and what happened rather than the TP’s subjective intention.

CHOOSE ONE OR MORE
-(OPTIONAL;make profit)In this case, TP actually makes profit, that is good evidence of profit-making
intent.
-(OPTIONAL;charge for time)In this case, TP charges for their cost, it does not necessarily mean intent
exists. However, if TP charges for time, it is evidence of profit-making intent, because the TP is turning
their skill into profit in this case.
-(OPTIONAL:Make loss) In this case, TP makes a loss, it does not necessarily mean no intent, but just
means TP is not good at what they do: Thomas; Walker.

B) (COPY)SIZE AND SCALE OF ACTIVITIES
-(COPY)The larger the business turnover, size of investment and capital assets, the more likely it would
be held to be a business, but this does not exclude small activities from being held to be a business;
context of the type of activity must be considered: Walker; Ferguson; Thomas.
-(COPY)In this case, TP has xxxinvestment in equipment (eg. camera)xxx which shows increasing in size
and scale. This therefore indicates carrying on a business instead of hobby.

C)(COPY)NATURE OF ACTIVITY
CHOOSE ONE
Sell for family/friends Only!
(COPY)In this case, TP’s clients are his/her xxxfamily, friends, relativesxxx and not to the public. Thus, it
is more likely that this is a hobby under this factor. However, this factor is not determinative.
OR
Sell for public!
(COPY)In this case, TP’s clients are the public which shows the higher likelihood that this is a business
and not hobby.
(Optional) Besides, TP has taken actions to advertise and market his products which further indicates that
there is business.


D) (COPY)SYSTEM AND ORGANIZATION OF ACTIVITIES
(COPY)The degree of planning; the amount of time devoted to the activity (not determinative according
to Thomas); whether records are kept: Ferguson; Walker
(COPY)In this case, TP has bought xxxbooks, attended coursesxxx to improve his/her skills and
knowledge. Therefore, it is more likely that there is business.

E)(COPY)REPETITION AND REGULARITY
-(COPY)Regularity and frequency of activity would indicate business: Walker.
-(COPY)In this case, TP’s activity is regular and not a one-off transaction. Thus, showing business and
not hobby.

F) (OPTIONAL)COMMERCIAL APPROACH IS TAKEN?
CHOOSE ONE OR MORE
-(OPTIONAL;seek advice expert)In this case, professional advice been sought to increase
knowledge/skills or a manager/professional been hired which indicates business rather than hobby:
Ferguson; Walker; Thomas.
-(OPTIONAL;market research on demand) Besides, markets for produce have been explored which
shows business: Ferguson; Walker.
-(OPTIONAL;Commercial premises) Since there is commercial premises to carry out TP’s activities, it
is more likely that there is business.

(COPY)CONCLUSION
CHOOSE:
Activity in ordinary course of business
(COPY) On balance, the taxpayers’ activities appear to constitute a business. Therefore, anything
received would likely be OI under 6-5 and anything they spend money on is more likely to be deductible
under s8-1.
(COPY) s/he can still have a business source despite TP has another full-time job as ___, : Ferguson;
Walker; Thomas.
(COPY) However, in the event of not carrying a business, receipts could still be assessable as OI under
income from services (s6-5) and s15-2.

………………………………………………………………………………………………………………
(COPY)BUSINESS COMMENCEMENT
(COPY)Whether or not the business has commenced, is a question of fact based on the intention of the
taxpayer at the relevant point in time: Softwood Pulp. Here, it is more likely that business has commenced
on _____ because he/she has profit intention making at that time.
(COPY)Expenses incurred before the business starts will not be deductible under s8-1, although it may be
possible to obtain a deduction under statutory provisions such as s40-880.





………………………………………………………………………………………………………………
Isolated PERSONAL; without having a business (one off transaction)
Intro
(COPY) In this case, it’s highly unlikely that there is business vs hobby issue as this is only a one-off
transaction.
Even though the transaction is outside the ordinary course of business, the transaction could still
constitute assessable income if it is an incidental and relevant transaction or isolated/ extraordinary
transaction.

Body
Here, it is unlikely that the sale of______ is something that the TP would ordinarily receive in his course
as an ____(eg. engineer) and not something that is incidental to his/her ordinary course as it is one-off.
Therefore, it is unlikely to come under ordinary income under incidental and relevant transactions rule:
Memorex
We then consider isolated transactions which makes a distinction between mere realisation of asset
(which is subject to capital gain) and gain made from carrying on a business (which is subject to OI):
Californian Copper Syndicate.

CHOOSE ONE OR MORE
1) (OPTIONAL; minor- mere realisation/ major development-OI)
Minor: A relatively minor development with not much capital/effort involved would generally not have
sufficient of the characteristics of a business and is therefore unlikely to generate ordinary income:
Scottish Australian Mining; Casimaty v FCT.
Major: An extensive development requiring considerable effort/capital, although only involves a one-off
isolated transaction, would have enough characteristics of a business and therefore is likely to generate
ordinary income: FCT v Whitfords Beach with reference to Scottish Australian Mining.

2) (OPTIONAL; TP’s delegation- mere realisation/participation in decision making and process- OI)
Delegation: the taxpayer was not engaged in the decision-making/development/sales process but rather
delegated those activities. Therefore, it is less likely that the sale would generate OI: Statham v FCT;
Casimaty v FCT.
Participation: the taxpayer was greatly engaged in the decision-making/development/sales process (rather
than delegating those activities), therefore, the sale would more likely to generate ordinary income: FCT v
Whitfords Beach; Stevenson v FCT.

3) (OPTIONAL; merely complying regulation- mere realisation, more than just complying regulations-
OI)
Merely complying: The taxpayer had done nothing more than the minimum requirements so as to comply
with regulation standards. Therefore, it would more likely be mere realisation: Casimaty v FCT.
More than complying: The taxpayer had done something more than the minimum requirements of
regulation standards. Threfore, it would more likely be ordinary income: Casimaty v FCT.
4) (OPTIONAL; no profit making intention from beginning but suddenly sell because of irresistible
offer- mere realisation, got profit making intention since beginning- OI)
(No profit making intention in the beginning but sell it suddenly)- As per Whitfords Beach, it is difficult
to prove profit making intention and still apply objective test. In this case, the TP had no profit making
intention in the beginning but has a sudden change rather than a gradual change due to an irresistible offer.
This more likely appears as a mere realisation.
(No profit making intention in the beginning but intention gradually change)- As per Whitfords Beach, it
is difficult to prove profit making intention and still apply objective test. The TP has a progressive change
of profit-making intention from the acquisition to sale of asset. Therefore, it is more likely to be an OI.
(Profit making intention since beginning) TP had profit making intention since the acquisition of asset.
Therefore, it is more likely to be an OI.

CONCLUSION:
CHOOSE
(COPY; mere realisation) On balance, it is more likely that it is a mere realisation rather than OI. It will
fall under CGT event A1 and be included in AI: s102-5.
(OPTIONAL) However, _______ (eg. car or CHOOSE BELOW) is an exempt asset and any capital gain
or loss is disregarded: s118. (move on to *)
Car (s118-5)
Asset used to produce exempt income (s118-12)
Shares in a pooled development fund (s118-13)
Depreciating asset (s118-24(1))
Trading stock (s118-25)
Compensation for personal injury (s118-37)
Gambling, competition, prizes (s118-37)
Main residence (s118-110)
(COPY) TP makes a capital gain if the capital proceeds from the disposal> the asset’s cost base, TP
makes a capital loss if those proceeds< the asset’s reduced cost base: s104-10(4). In this case, the capital
proceed is $_______ and the cost base is $______ from _______(which element, refer to notes) and
$______ from ________(which element, refer to notes). Since capital proceeds> cost base, capital gain
will be included in AI under s102-5.

*In the event of being an OI, it will be assessable under OI.
OR
(COPY; OI) On balance, it is more likely that it is an OI rather than mere realisation. In the event of mere
realisation, we need to consider capital gains/ loss and if it falls under any exempted assets under s118. It
is CGT event A1and be included in AI: s102-5.
(OPTIONAL) However, _______ (eg. car or CHOOSE BELOW) is an exempt asset and any capital gain
or loss is disregarded: s118. (END HERE)
Car (s118-5)
Asset used to produce exempt income (s118-12)
Shares in a pooled development fund (s118-13)
Depreciating asset (s118-24(1))
Trading stock (s118-25)
Compensation for personal injury (s118-37)
Gambling, competition, prizes (s118-37)
Main residence (s118-110)


(COPY) TP makes a capital gain if the capital proceeds from the disposal> the asset’s cost base, TP
makes a capital loss if those proceeds< the asset’s reduced cost base: s104-10(4). In this case, the capital
proceed is $_______ and the cost base is $______ from _______(which element, refer to notes) and
$______ from ________(which element, refer to notes). Since capital proceeds> cost base, capital gain
will be included in AI under s102-5.

………………………………………………………………………………………………………………
ExtraordinaryBUSINESS, but sell something different (eg. modern cars VS classic car)
Intro
(COPY) In this case, it’s highly unlikely that there is business vs hobby issue as this is only a one-off
transaction.
(COPY)Even though the transaction is outside the ordinary course of business, the transaction could still
constitute assessable income if it is an incidental and relevant transaction or isolated/ extraordinary
transaction.
Body
(COPY)Here, it is unlikely that the sale of______ is something that the TP would ordinarily receive in his
course as an ____(eg. engineer) and not something that is incidental to his/her ordinary course as it is one-
off. Therefore, it is unlikely to come under ordinary income under incidental and relevant transactions
rule: Memorex
(COPY)However, even though the proceeds are not within the ordinary course of TP’s business, it might
be an extraordinary transaction. It will be OI if the requirements of either the first strand or second strand
of Myer are satisfied.
CHOOSE:(1st strand OR 2nd strand myer!!!!)
(First strand Myer)
● (COPY) According to Myer, any gains are more likely to be income if the extraordinary
transaction is entered by a taxpayer with the purpose of profit-making, even if it is not part of the
taxpayer’s ordinary business.
(CHOOSE)
(got profit making intention when entered) TP in this case comes under under extraordinary transaction as
s/he has profit-making intention when s/he first ______ (eg. bought/ leased) the _____ (eg. car, asset)
OR
(no profit making intention when entered) However, TP in this case does not come under extraordinary
transaction as s/he does not have profit-making intention when s/he first ______ (eg. bought/ leased) the
_____ (eg. car, asset). Therefore, it is not OI.

● (COPY) Besides, Westfield requires that profit be derived by means consistent with the original
intention (e.g. in the manner contemplated) when entering the transaction for it to be income
(CHOOSE):
(got profit making intention when entered) In this case, this is fulfilled and it is OI.
OR
(no profit making intention when entered) TP did not even have profit making intention. Therefore, the
receipt will not be assessed as ordinary income. Consider CGT?
OR
(Second strand of Myer) sell off the rights of received income
The TP sells the right to income from an asset without selling the underlying asset, therefore, the proceeds
will be OI: FCT v Myer Emporium; Henry Jones.
………………………………………………………………………………………………………………
Receipts:
1)COMPETITION PRIZES（business wins prizes）
(COPY; business)According to Stone, all cash receipts from such business constitute ordinary income
under s6-5: In this case, the TP’s receipt on competition prizes is assessable as OI under s6-5.
(OPTIONAL;non-cash convertible) TP also received ____ (E.g.“free press”- free publicity) which is not
cash convertible and thus does not fulfill the prerequisites of an income: Cooke, Sherden. However, s21A
ITAA36 might be useful to deem the non-cash benefits as cash convertible.
CHOOSE:
In this case, since there is no business relationship between the taxpayer and say an competition
organisation, the non cash benefit is not assessable as OI.
OR
In this case, there is a business relationship between the taxpayer and say an competition organisation,
the non cash benefit is assessable as OI.
Conclusion
(COPY; no business) However, in the event of not carrying on a business, receipt is windfall gains in the
form of chance winnings and prizes, which primarily depend on luck rather than earned as a result of
personal services, and are generally not ordinary income under s6-5: Babka.

2)ANNUAL INCOME
Since there is a business in this case, the annual income will be assessable under s6-5












































DEDUCTION
………………………………………………………………………………………………………………
Deductions (GD+SD)
Payments:
CHOOSE!!

1) SALARY TO EMPLOYEE (from employer’s persepctive)
1a)SALARY TO EMPLOYEE WHO IS NOT A RELATED PARTY (I- the comployer pays
salary to employee)(DEDUCTIBLE)
(COPY)This salary payment to employee is deductible as it satisfies one of the positive limbs under s8-
1(1) (have sufficient nexus between the expense and the production of AY) and does not fall under any of
the negative limbs under s8-1(2): s8-5

1b) SALARY TO EMPLOYEE WHO IS A RELATED ENTITY(e.g. I pay my daughter
salary) (DEDUCTIBLE)
(COPY)This salary payment to employee who is a relative _______ under s995-1, s26-35(2) (s995-1- i.e.
spouse, parent, grandparent, siblings, uncle, aunt, nephew, niece) satisfies positive limbs as the recipient
works which shows that it is necessarily incurred in carrying on a business for the purpose of gaining or
producing AI. However, it falls under negative limbs and is denied by other provision of the act (s26-35(2)
related entity). Therefore, the expense is only deductible up to the amount the Commissioner considers
reasonable, i.e. market value: s26-35.

2) Fringe benefit to employee
2a) FB that does not fall under general denied deduction (DEDUCTIBLE)
The expenditure, _________ (eg. reimbursement, meal, etc) is provided as a FB and is an ordinary
business expense which satisfies the positive limbs and not the negative limbs. Therefore, it is deductible
under s8-1

2b) Other FB that fall under general denied deduction (DEDUCTIBLE)
Prima facie, expense of ______ (eg. CHOOSE below) is not deductible as it is a general denied deduction.
CHOOSE:
- HECS (s26-20). However, the expenditure here is provided as a fringe benefit which would be
deductible: s26-20(2).
- Relative’ travel expenses (s26-30). However, the expenditure here is provided as a fringe benefit
which would be deductible: s26-30(3)
- Payment to related entities(e.g.daughter) (s26-35). However, the
expenditure here is provided as a fringe benefit which would be deductible
- Recreational club expenses (s26-45). However, the expenditure here is provided as a fringe
benefit which would be deductible: s26-45(3)
- Entertainment expenses (s32-5). However, the expenditure here is provided as a fringe benefit
which would be deductible: s32-20
- Gifts or donations（e.g. for school etc.) (s26-22). However, the expenditure
here is provided as a fringe benefit which would be deductible
3)RECREATIONAL CLUB EXPENSES(eg. membership fees for sports club, recreational club)(to
em-DEDUCTIBLE;to client-not DEDUCTIBLE))
(COPY)Membership fees (or other related payment) in this case satisfies positive limb as it is for
business purpose. However, it falls under negative limb as a general denied deduction under s26-45.
(IF GOT TIME, COPY) ‘Recreational clubs’ are defined in s26-45(2) as companies providing their
members with facilities or drinking, dining, recreation or entertainment.
(COPY) Such expenses would be deductible where provided as a fringe benefit: s26-45(3).
CHOOSE
(COPY;expense to client) Since the expense is provided to clients and not to employees, the expense is
not a fringe benefit and remains not deductible.
OR
(COPY;expense to employee) Since the expense is provided to employees, the expense is a fringe
benefit and is deductible.

4) ENTERTAINMENT EXPENSE(eg. meal expenses, accommodation,travel,food,drink)(to em-
DEDUCTIBLE;to client-not DEDUCTIBLE))
(COPY) the expenses here is ________(eg. entertainment by way of food, drink or recreation, or
accommodation or travel) which is included in the definition of entertainment under s32-10(1).
(IF GOT TIME, COPY) The expenses are still considered to be ‘entertainment’ even if business
discussions or transactions take place: s32-10(2).
(COPY) However, Entertainment expenses are deductible if provided by way of a fringe benefit: s32-20.
CHOOSE
(COPY; not to employee) since it is provided to clients and not employee, it is not a fringe benefit and is
not deductible under s8-1: s32-5. Though it satisfies positive limbs, it also satisfies negative limbs as it is
specifically denied by another provision of the Act.
OR
(COPY; to employee) since it is provided to employee, it is a fringe benefit and the expense is
deductible.

5)SELF EDUCATION EXPENSE:(eg buy books/stationary, attend course fees,travel expense attend
seminar)
-(COPY)Examples of self-education expenses that may be deductible under s8-1 include course fees,
books, stationary and travel to attend conferences or seminars: Finn; TR98/9.
-(COPY)Self-education expenses must satisfy the positive limbs of s8-1 and not fall within any of the
negative limbs of s8-1 to be deductible.
CHOOSE ONE (BUT ARGUE BOTH SIDE IF GOT TIME/SEE MARK ALLOCATION)
Expenses incurred Before commencement (NOT DEDUCTIBLE)
-(COPY) In this case, the items are bought before the commencement of business. Therefore, in the
business context, expenses incurred in anticipation of future AY may not be deductible on the basis that
the business has not actually commenced at the time. If it is income from services, the expenses are
incurred to put the tp in a position to gain or produce AY, rather than being incurred in the production of
AY. Thus, self education expenses not deductible as it satisfies private or domestic expenses second
negative limb of s8-1.
OR
Expenses incurred after commencement of business
CHOOSE ONE
-(COPY) In this case, the education expenses does not have sufficient nexus to current income-producing
activity.
OR
-(COPY)In this case, the education will improve the (tp’s prospects of promotion or earning a higher
income in the tp’s current income-earning activity): Hatchett; Studdert; TR98/9 and there is sufficient
nexus to current income-producing activity. Thus, positive limbs is satisfied and none of the negative
limbs apply.
-(Optional) The tp works in an occupation that requires them to be constantly up to date and the expense
was incurred for that purpose: TR98/9, e.g. accountant, doctors, lawyers etc.

6) PURCHASE OF EQUIPMENT/TECHNOLOGY (NOT IMMEDIATE DEDUCTIBLE)
-(COPY)Under s8-1(2), an expense may nonetheless not be deductible under s8-1 if it satisfies the
element of capital or capital in nature: s8-1(2)(a).
-(COPY) According to Sun Newspapers (and subsequently BP Australia and Strick v Regent) three
factors should be considered together (i.e. no single determinative factor) in applying the distinction
between business structure and business process:

a)(COPY)Character of the advantage sought
CHOOSE ONE
(COPY;lasting benefit-more than 1yr)Expense resulting in a lasting benefit (e.g. more than 1 year)
more likely to be capital
OR
(COPY;temporary benefit)whereas expense resulting in temporary benefit will more likely be revenue.

b) (COPY)Manner in which the benefit is to be used
CHOOSE ONE
(COPY)A single, substantial, enduring benefit upon which the tp relies in a constant way is more likely
to be capital expense
OR
(COPY)A benefit relied on in a short-term sense and recurrently is more likely to be a revenue expense.

c)(COPY) Means adopted to obtain the benefit (muss less useful as capital assets can be purchased
through instalment payments rather than lump sum amounts)
(CHOOSE ONE)
(COPY;1off/lump sum payment) A one-off or lump sum payment is more likely to be capital expense
OR
(COPY;recurrent payment)Whereas a recurrent, frequent payment is more likely to be a revenue
expense.

Conclusion:(ALWAYS SUPPORT IS CAPITAL EXPENSE)
(COPY)On balance, it is more likely that the purchase of ____ is a capital expense and are not
immediately deductible under s8-1. However, the expenses may be deductible over a period of years
under Div 40 as depreciating asset deduction or taken into account when an event happens to the relevant
asset (CGT provisions).



7)HOME OFFICE EXPENSE
Home for genuine use VS convenience only
(COPY) TR93/30 suggest some factors to determine whether the home is a ‘genuine home office’:The
area is clearly identifiable as a place of business
CHOOSE ONE OR MORE
▪ The area is not readily suitable or adaptable for private/domestic use
▪ The area is used (almost) exclusively for carrying on a business
▪ The area is used regularly for visits from clients or customers
▪ The absence of an alternative place for conducting income-producing activities: Swinford v FCT.

CHOOSE:
(COPY; genuine home office)In this case, it is more likely that TP’s home office is a genuine home
office, (i.e. a part of the home is set aside for use in the tp’s income-producing activities only), a portion
of both running and occupancy expenses will be deductible under s8-1.
OR
(COPY; convenience only) In this case, it is more likely that the TP has an alternative workplace and the
home office is for convenience only, some portion of the tp’s running expenses (e.g. electricity,
cleaning costs, depreciation)
will be deductible as they relate to the tp’s production of AY, but any occupancy-related expenses
(e.g.fixed cost like rent, interest on mortgage, insurance, rates) will NOT be deductible as they remain
private or domestic expenses: Faichney; Handley; Forsyth, TR93/30.

8)RELOCATION EXPENSES (NOT DEDUCTIBLE)
(COPY)Expenses incurred in relocating the tp’s home (even if required by employer) are non-deductible
under s8-1 as they are incurred in putting the tp in a position to produce AY, rather than incurred in
gaining/producing AY: Fullerton v FCT. They would not satisfy the positive limbs of s8-1, and are likely
to fall foul of the second negative limb of s8-1 in that they are private or domestic expenses.

9)EXPENSES INCURRED IN GAINING EMPLOYMENT ( e.g. travel expenses to get interview,
acquire legal services to review employment contract)
(COPY)These expenses are not deductible as they are incurred to put the tp in a position to gain/produce
AY, not in gaining/producing AY: Maddalena.
(COPY)Exception
CHOOSE ONE:
(COPY;not carrying on business, NO sponsorship)The expenses incurred in gaining employment is
not deductible as the TP is not carrying on a business and it is not employment contract that contributes
towards the production of business income: Spriggs Riddell.
OR
(COPY;carrying on business, GOT sponsorship)The expenses incurred in gaining employment is
deductible as the TP is not carrying on a business and it is employment contract that contributes towards
the production of business income: Spriggs Riddell.



10)CLOTHING AND DRY CLEANING EXPENSES (CLOTHES, SUNSCREEN)
(COPY)The deductibility of expenses on clothing and dry-cleaning depends on the type of clothing worn
by the tp in relation to their income-producing activities: TR97/12.

10a) CONVENTIONAL CLOTHING(NOT DEDUCTIBLE)
(COPY)In this case, the clothing is conventional ordinary clothing that is not a uniform or specific to the
TP’s occupation as they could be worn outside the tp’s employment. Therefore, expense is not deductible
under s8-1, as they do not satisfy both positive limbs, and the second negative limb operates to deny a
deduction as the expenses are private or domestic in nature
(COPY)Besides, it is unlikely that there is abnormal expenditure on clothing expenses nor is it caused by
TP’s work condition/environment: Edwards, Mansfield, Morris, TR2003/16; TR97/12
(Optional) Even she wants to look good, it is not caused by TP’s work condition.

10b)SUNSCREEN (DEDUCTIBLE)
Sun-protection item expenses are deductible if they arose out of constant outdoor sunny working
condition: Morris. Here, this is likely to be deductible because it is caused by working condition.
10c) Other expenditure caused by working condition (eg. protective clothing, hard hats, helmet)
(DEDUCTIBLE)
Expenses incurred on conventional clothing are deductible where the need for the items is caused by the
tp’s working conditions: Mansfield, Morris, TR2003/16, TR97/12. Here, _____ (eg. helmet, hard hats..) is
a protective clothing which will be sufficiently connected to the tp’s production of AY as there is a real
risk of them being exposed to illness/injury in the course of carrying out their income-producing activities:
s34-20(2); TR2003/16. Therefore, positive limb of s8-1 is satisfied.


11)TRAVEL EXPENSES (eg. lease on car)
11a)Travel between home and work (ps:or private travel)(NOT DEDUCTIBLE)
-(COPY) Expenses incurred in travelling between a tp’s ordinary home and their regular work location
are generally not deductible under s8-1: Lunney v FCT; Hayley v FCT; TR2017/D6, as they are incurred
in putting the tp in a position to produce AY, rather than in the production of AY. As such, they do not
satisfy the positive limbs of s8-1 and are further prevented from being deductible under the second
negative limb as private or domestic expenses.
-(optional; exception) Where the tp was subject to their employer’s direction and control during the
period of travel: John Holland; TR2017/D6. In determining whether a travel arrangement is genuine or
contrived, it is necessary to consider whether the work involves special demands as in John Holland

11b)Travel to clients (DEDUCTIBLE)
(COPY)Taxpayers are permitted a deduction under s8-1 for expenses incurred on travel between home
and an alternative workplace (e.g. client’s premises), as the travel is incurred in gaining/producing AY:
FCT v Ballesty; TR2017/D6.

11c) Travel between two workplaces
(CHOOSE)
(COPY; same income-producing activity) As the two places of work relate to the same income-producing
activity, any expenses incurred in travelling between the two places of work are deductible under s8-1, as
the travel is undertaken in gaining or producing AY.
OR
(COPY; different income-producing activity) As the two places of work relate to different income-
producing activities, expenses incurred on such travel are not deductible under s8-1, as the expenses are
incurred in putting the tp in a position to produce AY, rather than in gaining/producing AY: Payne. As
such, the positive limbs are not satisfied. However, it is deductible under specific deduction, s25-100.
12)LEGAL EXPENSE
12a) Legal expense to defend correct boundary of property
In order for this legal expense to be deductible, it must be clear that positive limbs (s8-1(1)) are satisfied
and none of the negative limbs (s8-1(2)) are satisfied.
CHOOSE:
(COPY; TP is living at the property, not renting or gaining AI) Here, it is clear that TP is using the
property for her private or domestic use and not gaining or producing AI. Therefore, positive limbs is not
satisfied and the expense is not deductible under s8-1.
OR
(COPY; TP is renting the property, gaining AI) Here, TP is renting out the property which is to gain or
produce AI. Therefore, positive limbs are satisfied and it is necessary to determine if negative limbs are
fulfilled. As the expense is to _____(eg. Defend title of property), the expense gives lasting and enduring
benefit. Three factors of Sun Newspapers will be considered to determine if it is capital and capital in
nature. On the facts, it is a capital expense which satisfies negative limbs and is not deductible under s8-1.
However, it can be added to fifth element of of cost base for CGT event: s110-25(6)
OR
(COPY; no clear facts living/renting property;not certain if gaining AI or not) Here, no clear facts show if
TP is living in the property or renting the property. In the event of living in the property, property is for
her private or domestic use and not for gaining or producing AI. Therefore, positive limbs is not satisfied
and the expense is not deductible under s8-1. In the event of renting out the investment property, positive
limb (s8-1(1)) is satisfied but negative limbs need to be considered. As the expense is to _____(eg.
Defend title of property), the expense gives lasting and enduring benefit. Three factors of Sun
Newspapers will be considered to determine if it is capital and capital in nature. On the facts, it is a capital
expense which satisfies negative limbs and is not deductible under s8-1.However, it can be added to fifth
element of of cost base for CGT event: s110-25(6)

12b) Legal expense with formation of company(NOT DEDUCTIBLE)
(COPY) Legal expense with formation of company is not deductible under s8-1 as it is capital expense. It
also does not relate to a depreciating asset and would not form part of the cost base of a CGT asset
However, s40-880 provides taxpayer with a deduction for business expenses that are not otherwise taken
into consideration under the income tax legislation. Therefore, TP can deduct qualifying capital expenses
over a period of 5 years in equal proportions where the expense relates to the tp’s business that is carried
on to produce AY: s40-880(2).


13)GIFTS (eg. donation fund)
(COPY)Under Division 30, gifts or contributions made to a ‘deductible gift recipient’ (i.e. an entity that
meets the requirements to be registered as such by the relevant body, e.g. public universities, public
hospitals, charities, or research organisations) are deductible. Here, ____ (eg. school) is a deductible gift
recipient and expenses are deductible.
(COPY)The payment must be a ‘true’ gift made voluntarily with no expectation of material advantage in
return: McPhail. This is a question of fact: TR2005/13.
CHOOSE
-Here, the TP receives utility items such stationary or chocolates in return . Thus there is material
advantage as these items benefit the tp. Therefore, it is not deductible.
-Here, the TP receives token items such as a lapel badge or stickers. Thus there is NO material advantage
as these items primarily serve as promotional or advertising material for the recipient. Therefore, it is
deductible.
-Here, there is public recognition of gift/ donation but it does not constitute material advantage as it is not
used in the donor’s advertising or marketing. Therefore, it is deductible.

14) REPAIRS (eg. recarpeting, painting, repair, install new display)
(COPY)To claim a deduction for repairs under s25-10(1), it is necessary to show that:
(COPY)(i) The expenditure relates to a repair, (ii) The property is used for income-producing purposes
(s25-10(2)), (iii) The expense is not a capital expense (s25-10(3))
(COPY)Repair is defined under Lurcott, Wakely, Case J47. Further, ‘repair involves restoration of a
thing to its former condition without changing its character or efficiency of the property: W Thomas,
Western Suburbs
(COPY)Here, whether or not the expense to ______ is a capital expense is based on the factors outlined
in Sun Newspapers:

(COPY)Here, it is likely that the expense falls under the category of capital expenditure as (CHOOSE:
initial repair/ improvements/ replacement).

CHOOSE ONE:
(COPY)Initial repair: These repairs undertaken to remedy defects that exist at the time the property was
acquired are not deductible as they are capital expenses
OR
(COPY)Improvements: It is a question of fact to determine if the expense is for repair or improvement
depending on the exact work done. Here, the materials used to repair the property are different to the
original materials or where the work done to the property involves technological advancements, therefore,
it is improvement: Western Suburbs. Therefore, it is not deductible under s25-10.
OR
(COPY)Replacements: To know if the replacement is part of an asset or whole of an asset, individual
facts of the case need to be determined.
(CHOOSE)
(COPY;part of asset, repair- deductible)Here, the replacement is part of an asset as it will not be an
asset in itself i.e. repair and therefore revenue) where it is not separately identifiable from the entire asset
and is not capable of independent use: Samual Jones v IRC; Western Suburbs Cinema; W Thomas; Case
58; Case 44; Case 36; TR97/23.
(COPY)Therefore, it is a repair and is deductible: Lindsay (END HERE!)
OR
(COPY;whole of asset, replacement- not deductible)Here, the replacement is whole of an asset as it
will be an asset in itself); where it is separately identifiable from the entire asset and is capable of
independent use: Samual Jones v IRC; Western Suburbs Cinema; W Thomas; Case 58; Case 44; Case 36;
TR97/23.
(COPY)Therefore, it is a replacement and is not deductible: Lindsay

Conclusion
However, even though it is not deductible under s25-10, they may be deductible under the capital
allowances provisions (Div 40) if the asset is a depreciating asset; or it may be added to cost base if the
asset is a CGT asset. In this case, the expense (eg. _______ painting door to attract customer, cost of
renovation) can be added to 4th element




15)TAX RELATED EXPENSES (Payment to accountant for tax affairs)(DEDUCTIBLE)
(COPY)S25-5 provides taxpayers with a deduction for any expenditure incurred in managing their ‘tax
affairs’
(COPY)For tax-related expenses to be deductible, the advice must be provided by a recognised tax
adviser (i.e. a registered tax or GST agent or a legal practitioner under s995-1): s25-5(2)(e).
(COPY)It does not fall under specific provision that denies deduction under s8-1: s25-5(3) and not capital
expenditure: s25-5(4).
(COPY)Therefore, the tax-related expenses are deductible under s25-5.


16)RESTRICTIVE COVENANT (Payment to stop competitor’s business) (e.g. I pay someone to
restrict them from doing something)

(COPY) Here, the payment was paid to competitor to stop their business for_____(e.g. 5 years). It is
likely that this expense satisfy positive limbs. However, it might be a capital expense as it is shutting
down its competitors for a period of time which makes it likely to be related to business structure rather
than business process: Sun Newspaper. Therefore, it is not deductible.