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T O P I C 2

Assessable income P R E PA R E D B Y W E S O B S T A N D R A M I H A N E G B I F O R T H E U N I T T E A M

Contents

Introduction 1

Learning resources 1 Textbooks 1

Policy and design issues 1

Ordinary income 3 Income from property 5 Income from personal exertion 6 Income from business 8 Compensation for lost income or the loss of capital 10

Statutory income 12 Some items of assessable income 13

Exempt income 13

Deak in Univers i ty

P r inc ip les o f Income Tax Law

Introduction In Topic 1 we saw that assessable income is one of the major components used to determine taxable income and therefore the determination of assessable income is central to the income tax system. Assessable income is not specifically defined in ITAA 97 but s 6-1 gives a diagrammatic representation of the components that go to make up assessable income.

The diagram in s 6-1 shows that assessable income is made up of ordinary income, statutory income, exempt income and amounts that are neither assessable nor exempt. Division 6 then proceeds to define each of these components of assessable income. Section 6-5 defines ordinary income, s6-10 defines statutory income, s. 6-15 defines what is not assessable income and s 6-20 defines exempt income.

To understand the meaning of assessable income it is therefore necessary to understand the meaning of:

ordinary income;

statutory income;

exempt income; and

non-assessable non-exempt income.

Figure 2 .1

Learning resources

Textbooks Coleman et al. Principles of taxation law 2014, Thomson Reuters, Pyrmont NSW.

Deutsch, RL, Fundamental tax legislation 2014, Thomson Reuters, Pyrmont, NSW,

Policy and design issues Designers of the current income tax system have nominated income as the most appropriate measure of a taxpayers ability to pay tax, and therefore the definition of what is income is crucial to the determination of tax payable. Before looking at the legal interpretation of the meaning of income as applied to income tax, consider

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whether it is reasonable to expect that income can be defined to a degree that makes the taxation system reasonably certain.

Before you proceed, make a brief note about your understanding of the meaning of income from the following perspectives:

Economic Accounting Property owner Business Householder Member of a religious order that vows to give up all earthly possessions Member of a primitive South American tribe.

For each of the different perspectives of income suggested above there will be a different valuation, but the effectiveness and efficiency of the taxation system will be greatly influenced by how precisely, or otherwise, income can be determined.

If there is doubt in the taxation system about the meaning of income then there will be confusion about the taxpayers liabilities, and there will be increased levels of disputation which will add to the social and economic cost of collecting tax.

Q U E S TI O N 2 .1 Bearing in mind the concept of ability to pay and equity between taxpayers, which of the following items would you see as income and therefore subject to tax (please disregard any current knowledge of taxation law):

(a) employers payment of an employees childs private school education expenses

(b) finding $10 000 buried under a railway bridge

(c) being paid for giving up your right to practice your profession

(d) goodwill on the sale of your business

(e) gain realised on the sale of property purchased with the intention to sell it at a profit

(f) gain realised on the sale of your private home

(g) gain realised on the sale of property acquired as a long-term rental investment

(h) increase in the value of property not yet sold

(i) gambling winnings

(j) prizes won from a competition involving skill (eg. musical competition)

(k) gifts from a family member

(l) gifts from a business associate

(m) sale of shares in a public company.

Because there are many views as to the meaning of income it follows that this uncertainty causes considerable difficulty with the implementation of the Australian Income Tax Assessment Act. Take for example gifts or gambling winnings, if we view income as the accumulation of resources that enable us to acquire assets or

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consume goods and services then these receipts are clearly income. There is no doubt that someone who wins a major lottery will be wealthier following the win. Conversely, if we view income as the product of work, business or investment then lottery winnings would not be seen as income even though they have increased the persons wealth. To understand the meaning of income used by the Australian courts it is important to appreciate the various contenders in the quest to define income.

Ordinary income Our introduction explained that assessable income is made up of ordinary income, and statutory income. Our discussion of these elements starts with ordinary income.

Section 6-5(1) defines ordinary income as income according to ordinary concepts, but despite the importance of this concept there are no further definitions in either the ITAA 97 or ITAA 36 to throw additional light on the meaning of this phrase. Therefore, to understand the meaning of ordinary income it is necessary to consider in detail the indicia (indicators) of ordinary income that have been established by the courts. Prior to the enactment of ITAA 97 the equivalent of s 6-5(1) was in s 25(1) ITAA 36.

However, the courts also have not offered an explicit definition, but rather identified prerequisites and characteristics which they say are attributable to receipts that are income in nature. The failure to provide a concrete definition stems from the belief that the notion of income is not a technical term and hence should simply be accorded its ordinary meaning (Scott v. C of T (NSW) (1935) SR (NSW) 215 at 219, 3 ATD 142 at 144).

If the term income is therefore to be given its ordinary meaning then it may be helpful to consider the dictionary meaning of the word.

Q U E S TI O N 2 .2 Research several dictionary definitions of income and summarise the common characteristics expressed in those definitions. How do these definitions compare to those that you proposed earlier in this topic?

You should find some general agreement as to the characteristics of income included in the dictionary definitions. There is no absolute list of the characteristics of income but you should have observed some or all of the following characteristics:

money

regular

received as a reward for services

received from the use of property

a return on investments

a gain.

Q U E S TI O N 2 .3 Make a list of receipts, both personal and business, that you think meet the definition of income. Also make a note of whether you believe (without any

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knowledge of the tax law) these receipts should be included in the calculation of assessable income. Keep this list for later reference when we consider the meaning of income used for taxation purposes.

This chapter will discuss some general concepts of ordinary income. The discussion will then turn to looking at three categories of receipts, and which of those receipts constitute ordinary income. These three categories, which have generally been used by courts to categorise income, are as follows:

Income from property

Income from personal exertion

Income from business.

It is important to appreciate that case law has distinguished between items that are ordinary income and those that are capital. The two categories are mutually exclusive. However, though uncommon, it is possible for something to not be ordinary income or capital.

In general, case law has indicated that ordinary income has certain prerequisites and characteristics. The prerequisites are necessary but not sufficient conditions for an item to constitute ordinary income. Specifically, the prerequisites are:

That the gain must either be cash or cash convertible: Federal Coke Co. Pty Ltd v. FCT (1977) 7 ATR 515

That there must be a real gain: Hochstrasser v. Mayes [1960] AC 376. This prerequisite is mostly applied to employment situations.

Ordinary income also has certain characteristics. These are traits that make an item more likely to be ordinary income.

A gain that is regular/periodic is more likely to be ordinary income than a lump sum.

If something flows it is more likely to be ordinary income. Courts have used analogies with fruits and trees to illustrate this concept: Eisner v. Macomber (1920) 252 US 189. For instance, the sale of a business is the sale of the tree, so the gain is likely to be capital and not ordinary income. In contrast, everyday profits from the business are the fruits that flow from the business tree and so are likely to constitute ordinary income.

T EX TB O O K Please read Coleman et al. 2014, 5.00 5.170.

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Q U E S TI O N 2 .4 Consider the following situations and discuss whether any part of the receipt/s is capital in nature.

(a) An author sells the rights (copyright) to the publication of his book for a fixed lump sum.

(b) A property developer operates his business by purchasing land that can be subdivided into housing lots. In some cases he simply sells the vacant blocks of land after subdivision, but in other cases he contracts the construction of a home and sells the property with the completed house. In the current year he sold:

subdivided lots for $400 000

completed home and land packages for $800 000

for $150 000 land on which his business office was located as the office was now too small

$300 000 worth of farm land which he inherited from his parents and has been leased to a farmer for the past 10 years. This land was not suitable for subdivision so he sold it to the farmer who had been leasing it.

Income from property The passive ownership of property can give rise to the earning of income under ordinary concepts in a number of ways, namely dividends, interest, rent, royalties and annuities. Although a number of specific sections of the ITAAs deal with the assessability of these receipts (see later in this topic) it is still important to understand their place as income in ordinary concepts.

Interest Interest is described in Riches v. Westminster Bank Ltd [1947] AC 390 as a payment which becomes due because the creditor has not had his money at the due date. This definition expresses the idea of interest being compensation for the loss of use of money.

There is no question that interest is income in ordinary concepts: Lomax v. Peter Dixon & Son Ltd [1943] 1 KB 671.

Dividends Dividends are regarded as ordinary income as they have the prerequisites and characteristics of ordinary income.

Rental and lease payments Rent is clearly income in ordinary concepts because it flows from the employment of the capital, and is normally described as payments made by a tenant to a landlord but can also include the lease or rental of goods and equipment.

Little dispute arises as to the assessability of rental and lease payments except for the issue of whether premiums paid to enter a lease agreement are income or assessable under specific provisions of the ITAAs. A premium is paid for the grant or assignment of a lease and is generally considered to be capital unless it is a substitution for rent, or the receipt of premiums is part of the lessors business: Dickenson v. FCT (1958) 90 CLR 460, 7 AITR 257, 5 ATD 264; Kosciousko

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Thredbo Pty Ltd v. FCT (1984) 17 ATR 105, 84 ATC 4043. The statutory treatment of lease premiums is covered in Topic 4.

Royalties Royalties are payments based on usage of intellectual property or resources. In general, some royalties are ordinary income whereas others are capital.

Annuities Under case law the full annuity receipt is regarded as ordinary income: Egerton-Warburton v. FCT (1934) 51 CLR 568, 3 ATD 40. This is an unfair outcome as part of an annuity payment is in reality a return of capital. Consequently legislation deems part of the annuity receipt as being non-assessable.

T EX TB O O K Please read Coleman et al. 2014, 9.00 9.20, 9.80 9.210.

Note: At this stage we are only considering what is income in ordinary concepts, however, many of the transactions discussed are also subject to specific legislation, particularly capital gains tax.

Q U E S TI O N 2 .5 Is the repayment of an increased capital sum to the creditor (whether interest is paid on the debt or not) a payment of interest or capital?

Q U E S TI O N 2 .6 Is the sale of the right to receive interest, income or capital?

Income from personal exertion Cases such as Scott v FCT (1966) 117 CLR 514 and Hayes v FCT (1966) 117 CLR 514 establish the principle that a receipt that is a product of employment or a reward for services will constitute ordinary income. This is the case even if the money or property was given voluntarily.

As long of the remuneration shows a nexus to the labour of the taxpayer, it does not matter whether the remuneration is for past, present or future services: Hochstrasser v. Mayes [1960] AC 376. Nor does it matter that it is paid by a third party, rather than the recipient of the services: Kelly v. FCT (1985) 16 ATR 478, 85 ATC 4283; Reuter v. FCT (1993) 27 ATR 256, 93 ATC 5030.

Where there is no nexus between the receipt and the services provided, the receipt will generally not be ordinary income.

It is therefore clear that wages, bonuses and commissions constitute ordinary income, it is not even necessary that any service be rendered but only that such service may be required. For example, a solicitor who receives a retainer may perform no direct service during the period for which the retainer is paid, but will nevertheless be assessed on the amount received. However, it is less clear whether gifts, prizes and other unexpected receipts are income.

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Tips From the above introduction it will be apparent that tips will generally constitute income because the receipt is from recognition of the services provided. This is the case even though the payment may be unexpected and is made by a person other than the employer.

Gifts In contrast to earned income, receipts received as a personal gift are not earned and are therefore not income in ordinary concepts but are a windfall gain (not earned): Scott v. FCT (1966) 117 CLR 514, 10 ATR 367, 14 ATD 286; FCT v. Harris (1980) 10 ATR 869, 80 ATC 4238. For example, payments made by parents to their children (provided they are not for work performed) are gifts and therefore not assessable as ordinary income. In contrast, a Christmas bonus paid to employees is income in ordinary concepts (Laider v. Perry (1965) 2 All ER 121), as are payments received that are regarded by the taxpayer as income: FCT v. Dixon (1952) 5 AITR 443; 10 ATD 82.

Prizes and chance winnings Prizes will not constitute ordinary income unless they are either a product of a taxpayers income-producing activities or they are proceeds of a business (see later on this topic for discussion of what constitutes a business). As a result, winnings that are purely a result of luck will not be ordinary income. In contrast, prizes that are received by professional sports men and women which have been held to be income: Kelly v FCT (1985) 85 ATC 4283. Given that many receipts of prizes involve some degree of both of skill and luck, it is often difficult to decide at what point a prize resulting from the skill of the taxpayer becomes income. Unfortunately, there are no specific judicial decisions to assist with this distinction so it is necessary to rely on the general principle that unearned receipts are not income, but prizes resulting from the taxpayers income-producing activities are income.


Q U E S TI O N 2 .7 If the taxation system is based on an ability to pay, why are gifts and other windfall gains excluded?

Q U E S TI O N 2 .8 There is little indication that even the largest gambling winnings of a punter will be held to be ordinary income. Do you think that the total revenue collections would increase or decrease if gambling winnings and losses were taken into account for tax purposes?

Capital receipts or personal exertion Although rewards for personal exertion are generally regarded as ordinary income, payments given in exchange for giving up capital right will be regarded as capital. This is based on the compensation principle discussed later on in this chapter that compensation for loss of ordinary income is ordinary income, and

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compensation for loss of capital is capital. For instance, payment for an employee giving up paid for giving up capital under their employment contract will be capital: Bennett v FCT (1947) 75 CLR 480.


Income from business Earnings from business activities are generally income in ordinary concepts. This is in contrast to non-business activities such as a hobby or pleasure activity, and transactions of the business that are not business related, e.g. selling the assets of the business. The main issues relevant to business activities and the definition of income in ordinary concepts are:

identifying when a business is being carried on;

identifying business income; and

extraordinary and isolated transactions.

Identifying when a business is being carried on The definition of business contained in s 995-1 provides that the term includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee. As the definition is inclusive, it provides little assistance in identifying a business. However, case law has identified a number of indicia of business, but it is extremely important to realise that these indicia are not exhaustive and that no one alone is a decisive indicator of a business. To identify a business the courts have taken an accumulative approach weighing each of the factors against others that are present and taking note of those that are absent. Also, different rules may be applied where the activity is a traditional leisure or pastime activity. For example, the courts tend to look for a higher degree of certainty that a business exists for such activities as gambling: Babka v FCT (1989) 20 ATR 1251.

The indicia considered are:

profit-making intent;

scale of activities;

system and organisation;

methods characteristic of the particular line of business;

Repetition;

type of taxpayer; and

special rules for traditional pastimes.

For example, the High Court held that a full-time policewoman who competed in the sport of javelin-throwing at the Olympic level was running a business: Stone v FCT [2005] ATC 4234. The court was influenced by the fact that she had entered into various sponsorship agreements.

Even where there is a business for tax purposes, there are some instances where losses from that business cannot be used to offset other assessable income (such as salary income). The legislation concerning this is in Division 35 of ITAA 97.

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Identifying business income If there is a business present, then normal proceeds of that business will be ordinary income. Proceeds that are not its normal proceeds might be ordinary income in some circumstances see the later discussion in this chapter on extraordinary transactions.

To ascertain whether a receipt constitutes normal proceeds of a business requires a two-step process. Firstly the nature of the business should be investigated. Secondly, it needs to be ascertained whether the receipt in question has a nexus with the business activity.


Extraordinary and isolated transactions As mentioned, normal proceeds of a business will constitute ordinary income. Receipts of a business that are not its normal proceeds are termed extraordinary transactions. These will sometimes be ordinary income.

A related concept is an isolated transaction. An isolated transaction is once-off transaction not undertaken by a continuing business operation. An example of this is an ex-farmer who develops and sells his or her farming land.

Extraordinary and isolated transactions will generate ordinary income if they fall into at least one of the following three situations:

The transaction has sufficient indicia of a business and so forms a business in itself: FCT v Whitfords Beach Pty Ltd (1982) 12 ATR 692.

The transaction fulfils the requirements of the first strand of FCT v Myer Emporium Ltd (1987) 163 CLR 199.

The transaction fulfils the requirements of the second strand of FCT v Myer Emporium Ltd (1987) 163 CLR 199. This will not often be the case.


Q U E S TI O N 2 .9 Section 6-5 makes ordinary income assessable. Is ordinary income a gross or net concept? How does the meaning of ordinary income match with what the court found to be assessable in Whitfords Beach?

Q U E S TI O N 2 .1 0 When applying the First Strand of Myers, does a profit-making intention have to be the sole or dominant purpose?

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Q U E S TI O N 2 .11 When applying the First Strand of Myers, must the profit-making intention exist at the time of acquisition for s 6-5 to apply?

Q U E S TI O N 2 .1 2 It may be argued that every taxpayer who purchases property has the intention to sell it in future and would as a matter of course hope to realise a profit. Is this sufficient to bring the subsequent sale of the property into the meaning of income in ordinary concepts?

Q U E S TI O N 2 .1 3 Consider the following situations and discuss whether they are income in ordinary concepts or not. Note: Where no dates are given, the previous tax year is to be assumed.

(a) Mrs Sly purchased land ($50 000) on 1 February 1983 with the intention of building a shopping complex on it. However, no plans were ever prepared and in May 1987, a developer offered her $150 000 for the land but Mrs Sly believed that she could do better by developing the land herself. Acting on the advice of her accountant, Mrs Sly proceeded to subdivide the land and sell it in small lots.

(b) P Shrood invested $4000 (3 May 1985) in a gold ingot as a hedge against inflation and as a provision for his retirement. Will he be taxed on any profit received when sold?

(c) Ms Ng just received $200 000 from the estate of her deceased grandparents. Ms Ng decided to invest the money by purchasing a holiday park in a small coastal town in Queensland. The property was not well maintained so Ms Ng spent an additional $50 000 in bringing the park to a commercially viable business. Three years after buying the park Ms Ng realised that her property was worth $500 000 so she sold it and purchased another holiday park that was in a rundown condition with the intention developing and selling it as well.

(d) Shifty is a small time thief who has a regular job but on weekends he supplements this income through regular house break-ins and selling stolen goods at a series of selected hotels. During the last year he made about $10 000 from his illegal activities.

Compensation for lost income or the loss of capital Compensation takes on the same character as what it replaces. Therefore, compensation for loss of capital is capital, and compensation for loss of ordinary income is ordinary income.

In a business context, this means that compensation for loss of an ordinary trading contract will usually be ordinary income: Heavy Minerals Pty Ltd v. FCT (1966) 115 CLR 512. On the other hand, compensation for loss of a contract that goes t the structure of a business will often be capital: Californian Oil Products Ltd (in liq) v. FCT (1934) 52 CLR 28. Furthermore, compensation for the permanent loss of a capital asset will be capital: Glenboig Union Fireclay Co Ltd v. IRC (1922) 12 TC 427.

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Where compensation contains both capital and revenue elements, then the whole amount will be treated as capital unless these components may be separated: McLaurin v. FCT (1961) 104 CLR 381.

T EX TB O O K Please read Coleman et al. 2014, 10.10 10.110, 10.150 10.260.

Q U E S TI O N 2 .1 4 Ignoring statutory provisions, will the refund of a previously deducible expense be income in ordinary concepts?

Q U E S TI O N 2 .1 5 What are the key differences in Californian Oil and Allied Mills that influences the courts to find one receipt income and the other capital?


(a) An amount of $3000 received in a lump sum as compensation following the settlement of a Work Cover claim and representing compensation of $100 each week for a period of 30 weeks. An additional amount of $5000 was received for damage to the taxpayers right eye.

(b) Would a receipt, by a professional footballer, for agreeing not play for any other club than his own, be treated any differently for tax purposes to a payment for agreeing to only play for his own club?

(c) The taxpayer runs a business that relies on several agency agreements. Recently, one of these agreements was cancelled due to a breach of contract. As a result of the cancellation the taxpayer received $200 000 in unliquidated compensation for the loss of the three year agreement which represented about 10% of the taxpayers business. During negotiation for the compensation the taxpayer argued that her business would suffer a loss of goodwill due to an inability to supply goods under the existing agency agreement. After the compensation was paid the taxpayer entered a similar agency agreement and suffered little or no loss in business.

(d) Mr Tan accepted early retirement from his employment of 35 years and as part of the package he was paid $20 000 to enter an agreement not to disclose any of the employers secret processes and technology.

(e) Damages received by a Member of Parliament arising from a libel action against a newspaper.

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(a) On winning a major professional tennis tournament Mark received from the tournament organisers $100 000 cash and a gold trophy which cost $10 000 to make.

(b) In recent years, some people have entered into a barter system where they may exchange the use of something they own (e.g. lawn mower) for some other goods or services (e.g. fresh vegetables). Some of these systems have become quite sophisticated and now have a point system to compare different goods and services (e.g. the use of the lawn mower for 2 hours might be worth 10 points and a bunch of carrots may be 2 points).

Discuss whether the exchange of goods for domestic use is income in ordinary concepts under s 6-5. If the goods exchanged were used in a business, for example, one farmer agrees to help his neighbour with his harvest in return for the use of the neighbours bull to mate with his cows, would your answer be different?

(c) Your client owns a house in Warrnambool and intends to move permanently to Melbourne to work. However, she does not wish to sell her house in Warrnambool but intends to rent it for $350/week. At the same time she wishes to rent a place in Melbourne for about the same price.

If your client goes ahead with this arrangement, will she have income in ordinary concepts from the rent received on the Warrnambool house? Would it make any difference if she was not paid the rent on the Warrnambool house but the tenant agreed to pay your clients rent on the Melbourne house?

Statutory income The introduction to this topic outlined the components of assessable income, as described in Div. 6, to be ordinary income, statutory income and exempt income. Ordinary income is income according to ordinary concepts but statutory income is an amount that is specifically made assessable by the Act (s 6-10). Structuring assessable income into a general (ordinary income) and specific (statutory income) component raises the possibility that an amount may be assessable under more than one provision of the Act. In this event issues arise in relation to which provisions apply for the determination of the amount of assessable income and in some cases the amount of tax. Where an amount is assessable under more than one provision s 6-25(2) states that unless the Act states otherwise the statutory provision should be applied over the rules relating to ordinary income.

Therefore it is possible that the final section imposing assessability will be reached by first asking is it income in ordinary concepts, then whether it is assessable under a specific statutory provision, then whether that statutory provision applies over the ordinary income or not.

There are a large number of statutory income provisions and Div.10 provides an index these statutory income. However, the following items only of statutory income have been chosen for discussion in this unit because of their commercial and taxation significance. You will come across other provisions that give rise to

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statutory income throughout your reading of the Acts but the ones covered below are the most important for this unit.

Some items of assessable income

Royalties s 15-20 As stated earlier in this chapter, some royalties are ordinary income whereas others are capital. Royalties that are capital would be ordinary assessable under s 15-20.

Benefits arising from employment s 15-2 Some personal exertion receipts that are not ordinary income will be statutory income due to being assessable under s 15-2. S 15-2 has a wider net than ordinary income due to it having a more lenient nexus requirement, and due to it not requiring the receipt to be either cash or cash-convertible.

Dividends s 44 Section 44(1) specifically makes the dividends received by a resident shareholder assessable as statutory income.

The taxation of dividends and company distributions is covered in Topic 6.

T EX TB O O K Please read Coleman et al. 2014, 6.190 6.240, 9.150.

Q U E S TI O N 2 .1 8 Consider the following situations and discuss whether they are income in ordinary concepts or statutory income. Note: Where no dates are given, the previous tax year is to be assumed.

(a) A sales representative has received the following amounts:

Wages $45 000

Allowances for entertaining clients 8 000

Reimbursement of telephone expenses 800

(b) The following sums received by an employee who has retired from his employment:

pro-rata share of the companys Christmas bonus received two weeks after his resignation

a special bonus paid in recognition of a long and meritorious service received two weeks after resignation; this was accompanied by a note from management expressing their gratitude

Exempt income The final factor used to determine a taxpayers assessable income is whether any part of their ordinary or statutory income is specifically made exempt under the Acts.

Section 6-1(3) provides that the exempt income is not assessable income, and s 6-20(1) defines exempt income as an amount of ordinary income or statutory income made exempt by the Act.

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Part 2-15 of the ITAA 97 has provided a considerable improvement to the organisation and structuring of the exemption provisions, also Div. 11 provides a very useful index to the exemptions contained in both the ITAA 36 and the ITAA 97.

The principal exemption provisions contained in ITAA 97, Part 2-15 (commencing s. 50-1) deals with exempt entities, exempt amounts, pensions, exempt payment and payments that are not exempt.

You should scan through Div. 11 to gain an overview of the type of entities and income that are exempt from income tax. The obvious ones are there, such as hospitals, charities, educational institutions and religious institutions. However, look for whether receipts such as unemployment benefits and other social security are exempt.

Q U E S TI O N 2 .1 9 Consider the following situations and discuss whether they are income in ordinary concepts, statutory income or exempt income. Note: Where no dates are given, the previous tax year is to be assumed.

(a) A scholarship of $2000 received by a full-time student from an industrial company, conditional upon the recipient agreeing to be employed by the company for three years after the completion of his studies.

(b) If Deakin University incorporates a separate corporate body for the operation of income-producing activities, is this corporation exempt from income tax?

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Assessable incomeIntroductionLearning resourcesTextbooks

Policy and design issuesQuestion 2.1

Ordinary incomeQuestion 2.2Question 2.3TextbookQuestion 2.4Income from propertyInterestDividendsRental and lease paymentsRoyaltiesAnnuitiesTextbookQuestion 2.5Question 2.6

Income from personal exertionTipsGiftsPrizes and chance winningsTextbookQuestion 2.7Question 2.8

Capital receipts or personal exertionTextbook

Income from businessIdentifying when a business is being carried onTextbook

Identifying business incomeTextbook

Extraordinary and isolated transactionsTextbookQuestion 2.9Question 2.10Question 2.11Question 2.12Question 2.13

Compensation for lost income or the loss of capital

Assessable incomeQuestion 2.17Statutory incomeSome items of assessable incomeRoyalties s 15-20Benefits arising from employment s 15-2Dividends s 44TextbookQuestion 2.18

Exempt incomeQuestion 2.19

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2014mlc703ws1-t02