Submitted by: Submitted by Bin845663
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Category: Business and Industry
Date Submitted: 08/30/2015 09:38 AM
Ordinary concept of Income
Section 6-5 (ITAA 1997): assessable income includes:
1. Amount come to (realized/derived) during year
Paragraph 4: derived when it is received in any way direct or on behalf.
2. Amount that has nexus with income producing activity
Kelly v FCT (1985)16 ATR 478: prize won not O.I.
Hayes v FCT (1956) and Scott v FCT (1966): gifts not O.I.
Evans v FCT (1989): gambling winnings not O.I.
3. Money/Money’s worth
Income Tax Ruling IT 2668: bartering transaction is A.I.
Payne v FCT (1996): reward tickets not O.I.
FCT v Cooke & Sherden 80 ATC 4140: holiday not O.I because not redeemable
Section 21A (ITAA 1936): arm’s length value of non-cash property/service benefits is A.I.
Section 23L(2) (ITAA 1936): non-cash property/service benefits < $300 not A.I
4. Mutuality principle
ATO ID 2005/98: subscriptions are not O.I.
5. Periodicity, Recurrence and Regularity
FCT v Harris, 80 ATC 4238: unsolicited lump sum not O.I.
Myer Emporium Ltd v FCT, 87 ATC 4363: lump sum received from isolated transaction is A.I.
6. Normal Proceeds of Personal Exertion, Property or Business: wages, salaries, allowances, bonuses, tips for personals; interest, dividends and rent for others.
7. Compensation receipts
Higgs v Oliver (1951), TC 899: compensation for loss, surrender or impairment is capitalized.
8. Illegal, Immoral or Ultra Vires
9. Income does not include Capital Gains
10. Income does not include Winfall Gains: lottery winnings and payments not related to service provided
Section 11-15 (ITAA 1997): Ordinary or statutory income which is exempt.
Section 52-10 (ITAA 1997): How much of a social security payment is exempt.
Section 5-25 (ITAA 1997): prevents tax being paid twice, an amount is included only once.
DERIVATION, SOURCE AND RESIDENCY
Derivation of income under Section 6-5 includes:
1. Timing concept
2. Cash vs Accrual basis: depends on types of income, not types of accounting basis...