HI6028—Taxation Theory, Practice and Law

Answer 1

In the given case john is the furniture shop owner who sells furniture both in cash and credit. Some of the customers of john went bank due to unprecedented market situation and are unable to pay him back. As the result john written off the bad debt and requested business deduction.

As per the section 25.35 of income tax assessment tax 1997 the assesse can deduct the debt or part of debt which they write off as bad debt in the income year if such debt was included in the assessable income for the current income year or earlier income year and debt is in respect of money which they lent in the ordinary course of business and not unusual course of business. However as per the subdivision 20-A if the assesse receive a sum of amount as the recoupment of bad debt which is deducted under the mentioned section then such amount will be included in the assessable income of assesse(ATO, 2019).

Hence if some part of the debt is paid back by any client of john in the subsequent income year then such amount would be included in the assessable income of such year of john.

Answer 2

In the given case Gary, a lessor owns a commercial building and leased it to john for conducting a bakery business. As per the contract john would repair any damaged or modified part of the building after the end of lease term. However, at the end of lease term john fails to repair the building and agreed to pay $3100 to Gary for covering the repair expenses.

As per the law in a lease agreement the landlord has the responsibility of ensuring that the rented property is in a habitable condition. The rented property should be free from repairs. However, landlord is not responsible to make any repairs of the damage done by the tenant. Such repairs are at the responsibility of tenant cost. Further the repairs and damages should be done as per the lease agreement.

In the given case john is responsible for repairing the damaged or modified part of building after the lease term end. He is responsible for making any repairs that has been done on his part. However, john can pay the agreeable amount to the lessor for covering the repair expenses if the lessor agreed to it(ATO, 2019).

Answer 3

In the given case William, a property investor engaged David, a property advisor as his agent. David has the responsibility of negotiating with the potential property sellers in the market. As compensation David would receive $200000 for three years as the fixed commission.

As per the law the agency relationship can be established either by expressed or implied agreement. The principal is liable for the actions of agent in the agency relationship. Agent has the responsibility of acting only within the scope of his authority. Further the principal is also liable to pay for the remuneration to agent for the performance of his duties. The conditions and manner of commission payment to the agent should be predetermined and mentioned in the agency agreement. The principal has the obligation of making the payment of commission, rewards and remuneration to the agent as per the agency agreement(Jolly, 2019).

Thus, in the given case William is liable to pay the fixed commission to David. Both the agent and the principal have the legal obligation of complying with the terms of agency agreement.


ATO, 2019. Deductions you can claim. [Online]
Available at: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/

ATO, 2019. Rental expenses you can claim now. [Online]
Available at: https://www.ato.gov.au/general/property/residential-rental-properties/rental-expenses-you-can-claim-now/
[Accessed April 2020].

Jolly, W., 2019. How is rental income taxed?. [Online]
Available at: https://www.savings.com.au/home-loans/investing/rental-income-tax
[Accessed April 2020].


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