Unit Code Essay Example

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Unit Code

The issue of law is to determine whether (a) the internet allowance and (b) the storage space allowance in regard to the 2015-16 income year constitute assessable income for Bec.

According to section 6 of the ITAA 19971, assessable income in Australia constitutes ordinary income and statutory income. Ordinary income is the ordinary amount paid to an employee or that is generated as per the common law. This relates to salary, wages, interest, and rent. Statutory income is specified under section 10 of the ITAA 19972. This is the income that is not ordinary, such as includes dividends and capital gain. However, not all ordinary income or statutory income is assessable.

Internet allowance and storage space allowance are paid to Bec by her employer to facilitate her work duties. The amount is paid on top of other ordinary receipts to help Bec meet her expenses pertaining to the internet to send correspondences to her fellow employees and the space for storing books. Therefore, this allowances are assessable.

The issue of law is to determine Bec’s income tax deductibility of the apartment rent in regard to the 2015-16 income year.

In Australia, the law allows for an individual to claim a tax deduction for expenses incurred in a working area. According to TR 93/303, a taxpayer can claim for expenses relating to a home office can be made if the taxpayer can prove that part of the home is used for income generating purposes and is more or less like a place of business, or is used in connection with income producing activities, but is not a place of business. However, in general, expenses relating to a person’s home are of a private nature, and so no tax deduction is allowable4. A deduction can only be claimed where the person incurs extra running costs because of income generating activities. In Case Q92 83 ATC 4615, the judges found that the taxpayer, a schools inspector, could not claim for a deduction for the use of a den at home as an office because no extra expenditure was incurred as relates to the property.

There are various tests used to determine whether a home is a place of business. It should be clearly identified as a place of business; is used fully for carrying on a business, is not readily available for private use as part of the home; or is used on a regular basis for customer visits. Expenses incurred at home to carry out office duties are generally called home office expenses6. They can be broadly classified into occupancy expenses (expenses relating to home ownership) and running expenses (expenses relating to the use of facilities within the home).

In this case, Bec uses one of the three bedrooms in her house to carry out some office duties. She still uses the room to store some equipment and the daughter also uses the room to do some studies. This shows that Bec does not incur extra costs in terms of rent. Therefore she cannot claim any deduction as occupancy expenses.

1 Income Tax Assessment Act 1997

2 Income Tax Assessment Act 1997

3 Taxation Ruling TR 93/30

4Case U65 87 ATC 415

5Case Q92 83 ATC 461

6Case T48 86 ATC 389