law case study Essay

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LIU WenXin

42799676 Question 1:

Determine which receipts are assessable incomes for the client for the year ended 30 June 2013.


The main issue to consider with this case is whether the loss of licence insurance payment $250,000, long service leave payment $30,000 and the loss of income insurance payments $60,000 are assessable income?

LAWS: S 6 -­‐ 1(1) ITAA 1997 Assessable Income = Ordinary income + Statutory Income S 6 -­‐ 5(1) ITAA 1997 Ordinary income

An amount is assessable income if it is income according to ordinary concepts. In determining whether an amount is ordinary income, the following 3 broad tests should be considered: 1. Income receipts take the form of anticipated, periodic payment. 2. There is a clear nexus between the receipts and a source that generated them, for example, the provision of services, a business activity or from property. 3. Receipts are income when they are derived in substitution for income or as compensation for lost income. S 6-­‐10(2) ITAA 1997 Statuary income Includes in assessable income amounts that are not ordinary income; these amounts are statutory income. The relevant several provisions of the S 15-­‐2 ITAA 1997 are below: 1. Allowance & other things provided in respect of employment or services.

Conditions required for s15-­‐2 a) There must be an allowance, gratuity, compensation, benefit, bonus or premium.

b) The benefit must be allowed, given or granted to the taxpayer; and

c) The benefit must be in respect of, or for, or in relation directly or indirectly to, any employment of or services rendered by the taxpayer. S 15 -­‐ 30 ITAA 1997 Insurance or indemnity for loss of assessable income Your assessable income includes an amount you receive by way of insurance or indemnity for the loss of an amount (the lost amount ) if:

(a) the lost amount would have been included in your assessable income; S 83 -­‐ 15 ITAA 1997 Entitlement to tax offset
are entitled to a tax offset to ensure that the rate of tax on an unused annual leave payment does not exceed 30%, to the extent that:

(b) the payment was made in respect of employment before 18 August 1993.


LAWS7012 Assignment. Semester 1-2013

LIU WenXin

42799676 S 83-­‐ 130 ITAA 1997 ETP (Employment termination payment)

1. A payment is an employment termination payment if:

(a) it is received by you:

(i) in consequence of the termination of