LEC6: INCOME FROM PROPERTY
Myer (1987): lump sum amount was OI as it replaces the periodic payment of interest
McCauley (1944): payment was for recover of timber from the land & the amount of
payment dependant on how much timber recovered from the land
=> Ordinary royalty as amount of payment varies by extent of right exercised
Is it ordinary income?
Is it capital gain under statutory income s102-5(1)?
Is there a CGT event?
Is there a CGT asset?
Is it pre-capital gain (acquired before 20/9/1985)?
Is it collectible or personal use asset? (check cost, gain/loss may be disregarded)
Does an exemption apply?
Is there a roll-over relief?
LEC 7,8: GENERAL DEDUCTIONS
Consider specific deduction first => general deduction (nexus w AI, business)
***Loss related to AI:
Charles Moore (1956): loss from robbery: 1. banking the day's income is part of taxpayer’s
daily business operations => loss arose in the course of earning AI
=> positive limbs of a s8-1 satisfied
2. it is loss outgoing (involuntary) => even not choose to incur expense
=> still claimable for deductions under s8-1
W Nevil (1937): compensation for fire director: overall approach => expense improve the
Business (better mgmt) & improve AI => positive limbs satisfied
***Misconduct related to AI
Herald & Weekly Times (1932): pay damages for libel claims => deductible as libel purpose
is of increase sales & so AI; libel is a common incident for newspaper business
Snowden & Wilson (1958): incur legal & ad expenses as investigations & complaints
=> deductible as purpose is defend company reputation
=> sufficiently connected to earning AI
La Rosa (2003): drug dealer, robbed income: illegality is irrelevant => $ stolen is deductible
=> s26-54: deny deduction for expense of illegal business (income assessable)
***Misconduct unrelated to AI
Magna Alloys (1980): legal expense for director criminal proceedings
=> director misconduct not company misconduct, but protect reputation &
interest of director also protect company’s => business purpose
=> positive limbs satisfied
Day (2008): officer charged for failure duties under Public Service Act (1922) & incur legal E
=> Legal E deductible as the charges brought under the Public Services Act
were only brought because of his job as an officer. (Occasion of E approach)
***Expense yr ≠ AI yr
Steele (1999): incur interest on loan to buy land to use for business in future but end up
can’t earn AI => deductible if can show E is to earn AI
Placer Pacific (1995): E for previous manufacture operations => deductible
***Capital E: Add to structure of business vs operational E
Sun Newspapers (1938): pay for rival to shut down rival for 3yrs => strengthen business
=> not deductible as enduring/lasting benefit => capital E
***Private/domestic:
Cooper: rugby player needs to eat more than usual for purpose of earn AI
=> positive limbs s8-1 not satisfied
=> not deductible as negative limbs as food is living E
***Quantum
Ronpibon Tin: continue domestic & stop oversea but both have expense (dual purpose E)
=> partial deductions for E incurred for domestic operations
***Self-education E
Hatchett (1971): self-education E need to result in your income from your job
=> Teacher deductible for high certificate in teaching not art degree
Studdert (1991): Flying lesson result in increase of income in current job => deductible
Finn (1961): travel in LSL to study architecture design
Has evidence that the trip increased his chance of promotion;
Maintain records of his study. => Deductible
Peter Lenten (2008): history teacher went on holiday with wife to a historical sight
=> Allow deduction for some of the expenses as he did get promotion
Carlos Sanchez (2008): travel agent went on holiday, claim that is sight research
=> Allow deduction for some of the expenses as he show sales increase
Anstis (2010): youth allowances: OI, Condition for receive allowance is to make satisfactory
progress in degree => self-education E is deductible as E is in earning AI,
not put her in position of earning AI
=> But not applied anymore because s26-19 (Rebatable deductions)
But if have other assessable income (scholarship, internship) with condition
of satisfactory progress => can claim under Anstis case
***Clothing expenses
Edwards (1994): assistance for wife of governor, require wearing high quality clothes &
change many outfits during the day => deductible for addition clothes E
Mansfield (1995): air stewardess => deductible for stockings, shoes, moisturizers, lipstick as
caused by work environment (dry air & cabin pressure)
=> non-deductible for cosmetics & hair dressing: not because work conditions
Morris (2002): sun & rain protection items are deductible as work outdoor
***Repairs:
Lindsay (1960): If what being replaced is capable of independent use => it a whole asset
=> not deductible as it is capital
***Bad debt
Point (1970): TP agreed to write-off BD in 1yr but actually write-off in later yr
=> no BD deductions as already agreed to write-off in previous yr so there’s no debt
***EI reduces amount of your losses while NANE not reduce amount of losses
