Regulations of Income Tax Assessment Act

Question: Discuss about the Regulations of Income Tax Assessment Act. Answer: Introduction: As per the regulations of Australian Taxation Office, assessable income includes ordinary income, income from profession or business, income from other sources as well as income from personal services. According to the regulations of Income Tax Assessment Act 1997, income from personal service is referred to as income from personal exertion, which is earned by the individuals out of personal skills and efforts. Further, in case the income received from business or profession incorporates income received more than 50% out of expertise then such income is referred as income from personal exertion. In the present case, Hilary is a famous mountain climber who wrote her life story without any assistance and received $10,000 as copyright. It has been mentioned that Hilary never wrote a story before therefore assigned all the rights and interest in the copyright for story writing. Further, Hilary received income amounted to $5,000 from the sale of manuscript and amount $2000 from the sale of various pictures that she clicked while mountain climbing. Considering the explanations provided under Australian Taxation Law on ordinary income as well as income from personal exertion, it could be noted that the profession of Hilary has been a mountaineer but the income received was from her personal skills. Hilary wrote the story for the first time and received payment after it was published, hence income earned from story writing is considered to be income from personal exertion. In addition, income from sale of manuscripts and sale of mountain climbing pictures will be considered as income from personal exertion since Hilary has received the income out of her expertise. Further, it can be said that any receipt of income cannot be considered as an ordinary income under the regulations of Australian Taxation Office since; ordinary income constitutes income from business and profession. If any income received for individuals skills and expertise then such income is assessed as income from personal services as per the rules of Australian Taxation System. In addition, ordinary income should include the pre- requisite of providing real gain to the assessee while income from personal exertion may not incorporate the requisite of real gain to the individual. Accordingly, in the present situation, Hilary received income from writing a book based on the mountain climbing that assigns all her rights and interest as the book has been written personally. In addition, income received for sale of manuscripts and pictures also considered as personal instead of income from profession because sale of manuscripts or pictures was not a regular activity. Therefore, all the three incomes received by Hilary are income from personal exertion and not as an ordinary income. Reference List Ato.gov.au (2017) Home Page https://www.ato.gov.au Austlii.edu.au (2017) Australasian Legal Information Institute (Austlii) https://www.austlii.edu.au Benczr, P., Ktay, G., Kiss, . and Rcz, O.M. Income taxation, transfers and labour supply at the extensive margin (2014). Bird, R.M. and Zolt, E.M. Redistribution via taxation: the limited role of the personal income tax in developing countries.Annals of Economics and Finance,(2014) 15(2), pp.625-683. Chirelstein, M. and Zelenak, L.Federal Income Taxation, 13th (Concepts and Insights Series) (2015). West Academic. Dafermos, Y. and Papatheodorou, C. Linking functional with personal income distribution: a stock-flow consistent approach.International Review of Applied Economics,(2015) 29(6), pp.787-815.