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Taxation Law for Revenue Collection Body

Question:

Discuss about the Taxation Law.

Answer:

Introduction:

The Australian Taxation Office (ATO) is a statutory agency and the main revenue collection body in the government of Australia. The ATO has the obligation of managing the superannuation legislation and Australian taxation system[1]. The ATO has the responsibility of collecting tax, services or good and other related taxes from the taxpayer. The ATO has the obligation of managing the register of the Government and delivering loans for education program[2].

No, the ATO does not make laws. It has the responsibility of providing practical knowledge to taxpayers once the superannuation measures are established. Additionally, the ATO may also give advice the taxpayers depending on the issue they face with regard to tax payment or any new policy that is developed as per the legislation in Australia[3].

The doctrine of “separation of powers” in Australia separates the organizations of government into three different branches: the legislative, executive and judiciary[4]. The legislative makes laws the executive “implements the laws” and the judiciary interprets the laws. In this case, study, the legislation that is related to the given case study that is Income Tax Act, 1997 and the Social Security Act 1991 is established by the legislature. The Australian Taxation Officer executed the laws by stating that self-education expenses are not deductible by the recipient of a youth allowance. However, the Judiciary overturned the decision of the Full Federal Court because expenses that were incurred by the respondent were not private in nature.

The significance of the High Court decision in terms of tax law as it is applied within Australia was changed considerably as the Court declared that “youth allowance” tax is computable under the Income Tax, 1997. Additionally, the High Court also concluded that “self-education expenses” were deductible and that the expenses were not private in nature as part of “section 8 – 1 (2) (b) of the Income Tax Act”[5].           

Issue:

Based on the facts, the issue that arises here are the following:

  • Whether youth allowance is computable as part of the income under the 1997 Act?
  • Whether the education expenses of the respondent were acquired “in gaining or producing” her assessable income?
  • Whether the expenses were personal in nature?

Relevant Rules:

            To be entitled for and to carry on receiving Youth Allowance under the Social Security Act, 1991, the taxpayer should have been enrolled as part of an educational organization. The issue was whether the taxpayer as a receiver of the “Youth Allowance” was entitled to deduct self expenses as part of the “section 8 – 1 (1) (a) of the Income Tax Act, 1997[6].”

Application:

The High Court rejected the plea of the Commission and held that the taxpayer was permitted to a subtraction under “section 8 – 1 of the Income Tax Act, 1997” for the expenses acquired in obtaining income from receiving “Youth Allowance.” The Federal Court had earlier  rejected the appeal of the Commissioner that “self education expenses” acquired by the tax payer in obtaining “Youth Allowance” were allowed deductions.

Conclusion:

The High Court held the following:

  • “Youth Allowance” was measureable as part of the Income Tax Act, 1997.
  • Taxpayer’s self-education expenses incurred in gaining measureable income were deductible
  • and the expenses so incurred were however, disallowed of being private but the Court held that it is not private in nature as there was lack of sufficient bases for a conclusion that the expenses were confidential in nature as part of section 8 of the Income Tax Act, 1997[7]. 

References:

Barkoczy, Stephen. "Core tax legislation and study guide." OUP Catalogue(2016).

Dahl, Gordon B., and Lance Lochner. "The impact of family income on child achievement: Evidence from the earned income tax credit." The American Economic Review 102.5 (2012): 1927-1956.

Gale, William G., and Andrew A. Samwick. "Effects of income tax changes on economic growth." Available at SSRN 2494468 (2014).

Krishnan, Gopal V., et al. "A PUBLICATION OF THE TAX SECTION OF THE AMERICAN ACCOUNTING ASSOCIATION." (2013).

Mertens, Karel, and Morten O. Ravn. "The dynamic effects of personal and corporate income tax changes in the United States." The American Economic Review 103.4 (2013): 1212-1247.

Saez, Emmanuel, Joel Slemrod, and Seth H. Giertz. "The elasticity of taxable income with respect to marginal tax rates: A critical review." Journal of economic literature 50.1 (2012): 3-50.

 

[1] Saez, Emmanuel, Joel Slemrod, and Seth H. Giertz. "The elasticity of taxable income with respect to marginal tax rates: A critical review." Journal of economic literature 50.1 (2012): 3-50.

[2] Krishnan, Gopal V., et al. "A PUBLICATION OF THE TAX SECTION OF THE AMERICAN ACCOUNTING ASSOCIATION." (2013).

[3] Gale, William G., and Andrew A. Samwick. "Effects of income tax changes on economic growth." Available at SSRN 2494468 (2014).

[4] Barkoczy, Stephen. "Core tax legislation and study guide." OUP Catalogue(2016).

 

[5] Dahl, Gordon B., and Lance Lochner. "The impact of family income on child achievement: Evidence from the earned income tax credit." The American Economic Review 102.5 (2012): 1927-1956.

 

[6] Saez, Emmanuel, Joel Slemrod, and Seth H. Giertz. "The elasticity of taxable income with respect to marginal tax rates: A critical review." Journal of economic literature 50.1 (2012): 3-50.

[7] Mertens, Karel, and Morten O. Ravn. "The dynamic effects of personal and corporate income tax changes in the United States." The American Economic Review 103.4 (2013): 1212-1247.


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