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Federal Taxation of Legal Education

Question:

Discuss about the Federal Taxation of Legal Education.

Answer:

Introduction

In this case between Mr Walker Vs Federal commission. Mr Walker makes an appeal to the objections that were raised on 12 November 2015. It was related to the dedications that were made on his income for the fiscal year 2013 and 2014. The client claimed deduction in respect of the expenses made in respect of the meals, groceries and accommodation expenses.  He also did expenses on mobile services and phone and internet services, for the same also he claimed deductions.  When an audit of Mr Walker book of accounts was done, it was seen that there were some loopholes in the same, and the commissioner disallowed all the deductions that Mr Walker claimed.  Fresh amendments were issued by the commissioner and also penalty was imposed on Mr Walker for his work.  But later on the objections that were raised on the deductions were disallowed, and also all the penalties that were imposed, were remitted to walker.  In a detailed analysis we will see why the objections that were raised by the commissioner were correct in this regard. (Law.ato.gov.au, 2017)

Cases Breached/ Case Analysis

In this case, Mr Walker made two principal assertions, one that since he was an inherent worker, travelling was a part of his job primitively, and he deserves a deduction on the same, along with it he is entitled to deduction on all the other deductions that were for his travel, accommodations and meals and overall groceries. It was stated that since Mr Walker was not an inherent worker, he is not entitled to all these deductions, to which he claimed that since he was an itieranant worker, who was staying away from home, for work purposes, he is entitled to all these deductions, and also for the travel expenses as they are deductible in relation for travel between work and home.  Also he claimed that the phone and the other expenses are claimed because he was using the same for work purpose and he deserves deductions for the same (Hekerling, 1966)

Mr Walker provided a written statement explanation and various documents that supported his contention that he was entitled to get the benefits of deductions , he state documents that showed his term of employment between him and the employer and also details about the various travelling that he needed to do for the purpose.  Mr Walker was a worker in afar ,and he was associated with production of different products in the farm , for his work related activities, he travelled different farm lands in the city , and claimed deduction for all the travel expenses that he bore in the course of his employment.  He was working for three employer for a period of two years under consideration and he was also working for the same employer at three different locations in the course of his employment, his world required him to travel a lot between the farm land and he wanted compensation in respect of the same (Walker, 1998)

From the total assessable income of the assess he can deduct such expenses that were incurred in gaining or producing that income, However in this section it is also stated that one cannot deduct the overall loss incurred, if the loss is of a capital nature or the loss is of domestic or private nature.  Any loss that can be deducted under this section is known as the general deduction. Also the Act states that there must be a proper relationship between the overall expenses incurred and the income in respect of which it has been incurred. The basic principle which is to applied in the aforesaid case is the total amount of deductions that can be availed that was incurred in relation to the expenses that were directly related to the income of the assess (Klien, 1965).

Travelling was a fixed component of anyone job, In cases where the employee has no fixed place of work, the employee after travelling from one place to another must return to his usual place of residence. The several other factors that indicate itinerancy are-  there must be a certain degree of uncertainty in the location of employment, and there must not be any long working hours in a particular location. The residence of the employee formed the basis of his operations; the employee was required to carry bulk equipment’s from the residence to the work place. And the employer is providing travel allowance to the employee for travelling between the various locations (Rogers Jr, 1967)

The claims submitted by Mr Walker for the same was that he had regular web of work places and he had to constantly travel for work related activities. Travelling was a fundamental part of his job which was seasonal, and also he maintains a base in his residence for his work, and he was working in temporary conditions, therefore he was entitled to deductions for his travel expenses. The claims that Mr Walker made was not right in this respect , he dint deserved any compensation for the same (Eicholz, 1938)

But the claims against the same can be made in such a way that Mr Walker never travelled between different locations a part of his employment, or because of any compulsion from his employer, he travelled between these location as a matter of choice, because he wanted to learn new tricks for his business and learn new skills for his produce. It was his choice to travel a nota compulsion; he could have carried forward with his work, without travelling also.  Also over year, he was working in three locations, so each, location may be considered as part of his permanent stay for a long period of time.  Taking all the arguments it can say that Mr Walker was not an itinerant worker, and therefore he cannot claim deductions in respect of the same by stating that he is an itinerant worker.  Following this, all the other claims made by Mr Walker for being an itinerant worker must be denied, and he should not be allowed to claim for the same.  (dermott, 2017).

As per the Act, if any person is required by his employer to stay at a particular place in compulsion as a part of his employment, and that person claims any expenditure in relation to the same., which may be of the same nature which the person would have incurred had he be staying at home, as a private expenditure, in that case also, the employees are incurring expenses in the course of his employment, hence in that case, the employee can claim deduction in respect of the same.  In case of Mr Walker, he is not forced in the course of his employment to work and stay at a particular place and incur any expenses in relation to the same, Mr Walker is thus not entitled to any amount of deduction in relation to the expenses that he bore. (Television Education Network., 2017)

The travel between the two workplaces is directly related when you are at the first place; you are directly related to the activities that contribute in the overall production of assessable income and other produce.  Similarly in case of the second place you are engaged in the activities that give rise to assessable income.  The travel between two workplaces is not between two work places, but there must be a place of residence in between the work places. The person must travel between the work place and the place of residence and vice versa (Epstein, 2015) The travel after two work places, is not considered as travel between two work places, if at the time of travel to the second place, the arrangement under which the person has first gained the income, as ceased to exist and also the business in respect of which the work was done in the first place, then it will not be considered as the travelling between two work places. No deduction under the same is allowed in case of capital expenditure.  In case of Mr walker, the travel between two work places, cannot be considered as the travel between two work places, because when he was at the second place, the total gain that he earned at the first place had ceased to incur, there the second clue was breached, and hence he was not paid the compensation for the same. Also it was not sufficient , that he was submitting  anon binding understanding between the employer from the first place that he was re-employed and also that he would be there to work at some further date.  He placed before the tribunals claims that since he was travelling at his own expense for the work of his employer under the terms of employment, he will be given compensation for the same. However this claim by Mr walker was very vague.  There was also insufficient discrimination bet6ween his place of residence and his place of work and also the travel between the different farm lands in the course of his employment was not very regular.  It was not always in the course of his employment that he travel, sometimes it was also for personal reasons that he to travel like to pick up his wife or buy groceries, and hence in that aces also, Mr Walker was not in sync with the provision so the act for travel related compensation and hence was not entitled to get the same.  Also the claims for deductions in respect of telephone and other expense cannot be given , because he dint incur the same just in the course of his employment, but also on other terms.  Hence it can be said that he was not entitled to any of the compensation that he asked for. He was entitled to pay for the penalties and was not to be given any remittance for the same, if we don detailed analysis of the case. (Ato.gov.au, 2017) (Rosenberg, G , 2004)

Conclusion

As per the provisions of the law, if any person wants to get any deduction in respect of expenses that he bear in the course of his employment, then he can get the same only if he is able to give detailed explanation that the expenses were incurred for his business and in the context of the same,. The assesse if is not bale to establish such relationship between the income and the expenses then he won’t be given any deduction for the same. There are various provisions that are to be followed for establishing ones relationship between the said terms and the same must be followed. If the assesse on any front fails to do so. He won’t be given compensation . Same happened in the case of Mr Walker because he was not able to establish that his travel expenses were burned in the course of his employment and hence he had to pay the penalty that was imposed though the department later verified their claim, it is to be seen that when we do an analysis of the entire scenario we see that the assesse can only get compensation when the expenses are borne while they are travelling just for functions of the business and not for any of his personal use. If there is any personal work done in the course of travelling , the person won’t get the compensation in respect of the same.

References:

Law.ato.gov.au. (2017). TR 97/11 - Income tax: am I carrying on a business of primary production? (As at 16 November 2011). [online] Available at: http://law.ato.gov.au/atolaw/view.htm?DocID=TXR%2FTR9711%2FNAT%2FATO%2F00001 [Accessed 24 May 2017].

Ato.gov.au. (2017). Legal database - View: Cases: Walker v. Federal Commissioner of Taxation - (14 March 2017) (14 March 2017). [online] Available at: http://www.ato.gov.au/law/view/document?src=hs&pit=99991231235958&arc=false&start=11&pageSize=10&total=952&num=4&docid=JUD%2F2017ATC10-449%2F00001&dc=false&tm=and-basic-weeks%20v%20FC%20of%20T [Accessed 24 May 2017].

Television Education Network. (2017). Television Education Network services the professional development needs of lawyers, accountants, business and finance executives.. [online] Available at: http://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfm&PaperDisplay=http://www.tved.net.au/PublicPapers/September_2008,_Tax_Basics,_Tax_Basics___Program_29___Taxation___CGT_Aspects_of_Real_Property_Development.html [Accessed 24 May 2017].

Mc dermott, B (2017). Cases and comments(As at 16 November 2011). [online] Available at: https://sydney.edu.au/law/slr/slr28_2/McDermott.pdf [Accessed 24 May 2017].

Khoo, E (2017). Revenue law journal(As at 16 November 2011). [online] Available at: http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1034&context=rlj [Accessed 24 May 2017].Eichholz, R.B., 1938. Should the federal income tax be simplified. Yale LJ, 48, p.120

Rosenberg, W.G., Walker, M.R. and Alpern, D.C., 2004. Financing IGCC: 3 Party Covenant. Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University.

Rogers Jr, F.W., 1967. The Case For Greater Uniformity of Federal And State Law With Respect To Individual Income Taxpayers. In Ann. Tax Conf. (Vol. 13, p. 71).

Klein, W.A., 1965. The Deductibility of Transportation Expenses of a Combination Business and Pleasure Trip--A Conceptual Analysis. Stan. L. Rev., 18, p.1099.

Walker, W., Rossi, T. and Islam, N., 1998. Method of successive averages versus Evans algorithm: Iterating a regional travel simulation model to the user equilibrium solution. Transportation Research Record: Journal of the Transportation Research Board, (1645), pp.32-40.

Epstein, L., Segal, J.A., Spaeth, H.J. and Walker, T.G., 2015. The Supreme Court compendium: Data, decisions, and developments. Cq Press.

Heckerling, P.E., 1966. The Federal Taxation of Legal Education: Past, Present, and Proposed. Ohio St. LJ, 27, p.117.

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