HI6028 Taxation Theory, Practice and Law| Holmes Institute



In the current case, John got the license of working a betting club in Melbourne Australia which named 'The casino club East. The working period of this license continues for one decade sanctioned by the Victorian government. The betting club's structure's approval is for quite a while for this casino. The organization agreed to give a license to John on the desired consideration. The government exhorted john to pay $180 million for the grant of the club. Close by the grant of the gambling club, they moreover instructed to give $80 million for the prepaid rent of the club premises. This 80 million is for the rental of the club working for a total of 10 years. Somehow, John made sense of how to pay $400,000 consistently for quite a while of the lease of the structure. By and by the case is to inspect the possibility of the club's prepaid rent as revenue or capital expenses. The critical laws and the cases are considered in choosing the possibility of this expense.


As showed by the ITAA demonstration 1997, the deductibility of the capital expense is given under segment 40. This obligation is directing the assessability of the business-related capital utilizations. As indicated by the tax ruling 10, expenses should be capital in nature and not of revenue (O’Connell, 2017). The capital consumption should be related to the business completing by an individual.

Each cost made sure about under this head if that occurs after first July 2005 and for the current business of an individual. The deductibility of the expenses gets impacted if it doesn't meet the conditions of the obligation managing.

According to the Income-tax act 1997,8A-1 portrays the general deductibility of the costs distinguished in the business (Burton, 2018). The cost is related to the business is made sure about under this head to attract the deductibility.

Both the capital and the salary cost must meet the necessities viz conditions of the obligation choices. The ITAA showing applies to choose the deductibility of these expenses. Failure to meet any of the conditions doesn't attract the deductibility of the expenses.


The above evaluation of choices and costs rules are diverged from the offered case, to summarize. Before settling the present case, it is essential to know the motivation behind the complexities between capital or revenue utilizations. These differentiations help in recognizing the possibility of prepaid rent as revenue or capital utilization.

The primary reason for the examination of the revenue, and expense achieved concerning the fixed amount of assets go under the capital nature, and assets acquired are not fixed then it is another one. Likewise, the permeability of the utilization describes the possibility of capital or revenue (Shaw, 2019). Capital cost is for more than one year or various years anyway revenue use is for the transient explanation. Making a solitary sum portion falls under capital utilization and paying something in partitions is pay use.

Considering this three-motivation behind differentiation between the capital or salary costs, the current case gets an extra piece of elbowroom of choosing the possibility of the prepaid rent. For this circumstance, John obtained this use for the betting club filling in as a significant part of their business that arranges the possibility of the advantage. This shows this expense brought by john is for a fixed cost (Silver, McGregor-Lowndes and Tarr, 2016). The lease of the structure is for quite a while that again organizes the need of capital utilizations. At last, the lumpsum portion payable by the owner for the remainder of the extensive stretches of the lease of the structure exhibits that the prepaid rent is capital in nature.

In the wake of exhibiting the above use as capital, the accompanying thing that comes is to show the deductibility of the comparable. The evaluation choices of ITAA 1997 will comes in the end-all strategy in dismembering the deductibility of the current capital expense from the income tax liability imposed in the hands of John.

To consider the prepaid rent paid by john for the rental of the club developing necessities to pass a couple of sections of 40-880 and charge regulating 10 (Jones, 2019). The utilization should be related to the business , the business is required to be active and It denies all the revenue utilization.

Prepaid rent arranges all of these guidelines for this portion and the obligation choices. Thusly, it can say that prepaid rent paid by john is altogether deductible from its cost for the assessment year.

As opposed to the current assessment, the case-law of capital utilization is used to legitimize the decision of this case. The evaluation law of  GP International pipecoaters pty Ltd v Federal commisioner of taxation is about the conspicuous verification of the deductibility or capital nature of remuneration (GP International pipecoaters pty Ltd v Federal commisioner of taxation, 2019). The case exhibits that the wages payable to Steele from the nominee boss are pondering as the deductible or falls under capital nature.

Australian duty assortment official chooses this case by searching for the help of ITAA 1997 and its noteworthy regions to give the last choice. The general deductibility of the expense is poor somewhere around considering territory 8-1 of the yearly cost evaluation act 1997.

Draft of tax ruling by managing the commission contradicts the capital points of interest for clarifying the vulnerability of the irritated party and the defendants to the case. Capital assets are the advantages that are indisputable and non-generous. Assets are a bit of the advantage of the business or a substance. It consolidates structures, licenses, secured development, promote data, and trademarks. All of these points of interest is the structure of some segment of the capital assets.

The confusion among the pay and capital uses clarifies with the draft of the commission as opposed to this case (Campbell, 2019). The choice says that the possibility of the client chooses if to deduct into the capital or pay the nature of the expenses.

As indicated by the above notification two case laws, a license purchased by john for working a betting club is moreover considered as the capital assets nearby the prepaid rent. The license is a capital asset as it is a central essential of starting this business. $180 million paid by john for buying the grant is moreover deductible under the cost of the law.


It is summarized from this study that prepaid rent paid by john for the rental of betting club building is of capital nature and not salary costs. The capital expense of $400,000 consistently for quite a while is deductible under head 40-880 as they are related to the business. The case laws portray the capital assets in giving the last choice in the official court. John furthermore ensured the entirety paid for the grant of the betting club creating that is $180million (Paull, 2016). The individual evaluation commitment of john gets diminishes as he gets a case for two of its capital assets. These are prepaid rent and the license of the gambling club business.



Alex Kingsford is an employee of ABC structuring as a specialized mechanical draftsman in Melbourne and runs a little extension sustenance of food business from its home. He takes off from its workplace to pass on the sustenance isolates the school container by his vehicle or uber. In recording its appearance for assessment year July 2019 he requested of for the induction of the traveling costs. This case is to choose the deductibility of the journeying expenses of Alex from its office to its privately arranged business.


Section of 25, states the deductibility of the transport costs is given in the wake of meeting a bit of the condition. An individual can get the finding of the expenses brought about by the going between its workplace and home (White and Townsend,  2018).

The development between the workplace is also organized into different orders, for instance, before the first and second spots. An individual trip between the workplace and regardless is busy with increasing an assessable compensation or appreciate the activities of the business. By then, taking everything into account, the development costs are deductible (Barkoczy and Wilkinson, 2019).  A person at the next in line also participates in picking up and appreciate the business practices then they can get the deduction for the expenses of journeying. It is unequivocally referenced in the showing, there is no determination available for all the capital uses brought about by an individual.


The conditions of the above section 25 of the act 1997 are differentiated and the events of this case. Alex procured traveling costs for going from ABC building workshop to its privately arranged business. As indicated by the above notification rule, an individual can get the deduction for going between the two destinations. Additionally, Alex went from its office to the resulting spot. The essential spot is where he filled in as a mechanical designer and the following one is of a privately settled business.

Alex earned an assessable compensation from both these spots one out of them is also business development. The second spot of traveling is the matter of the owner which he runs from its home. Another spot makes assessable compensation to the owner and this activity is one of a bit of the business. The owner fulfills both the conditions of the above territory. Organizing of the standards of this case shows that Alex is able to get the finish of development costs from its workplace to its business place.

According to the case-law of  Masters v Fc of T is about the deductibility of the development costs. The high court handles this case hearing in recognizing the deductibility of the journeying costs under ITAA 1936 ( Masters v Fc of T, 2019). The official court studies this case under region 51 subsections 1 of the exhibit. Payne is a full-time pilot who goes from its work's place to its business of deer on his estate. The court denied considering the thinking journeying costs caused in wandering out from work to its property. Along these lines, he cases to the high court committee to get value from the force. Master’s traveling costs as thinking from its total individual cost commitment wich the expense assortment official denied.

As indicated by fragment 51-1 of ITAA 1936, setbacks and the spendings are caused in as a real end. By virtue of masters, the traveling cost between the work and the farmhouse of deer matches with the above guideline yet the business is arranged on the private property of the owner (White and Townsend, 2018). As a result of this condition, the deductibility of the expenses got excused and the individual appraisal commitment doesn't get reduces.


It is explained from the above case that as per section 25 of ITAA 1997, Alex can get the determination of its utilization. Alex meets the models for going between workplaces. The workplaces are first and second places that incorporate the period of assessable compensation and working together errands. The case intends to discuss the deductibility of the expenses for the passing by Alex. The deductibility was unpredictable as Alex went from its workplace to its business. In any case, the territory allows the expenses of passing by pondering the two places between the work. The current example of Alex matches the two spots traveling the rule of this fragment. The essential spot is crafted by Alex and another is the supplying food parcels business. The yearly obligation hazard achieved for the assessment year gets diminishes with the number of development costs. In any case, according to the above notification case law, the deductibility of the journeying costs ensured by Alex is invalid and void. As per region 51-1, the spending on transport isn't made sure about as a real expense. This region excuses this expense to offer to loosen up to an individual.

You may also like similar pages such as Taxation LawAdvanced Taxation Law


Books and Journals

Barkoczy, S. and Wilkinson, T., 2019. Australia’s Early Stage Investor Program. In Incentivising Angels (pp. 41-79). Springer, Singapore.

Burton, M., 2018. Interpreting the Australian Income Tax Definition of Ordinary Income: Ritual Incantation Or Analysis, When Examined through the Lens of Early Twentieth Century Linguistic Philosophy. eJTR16, p.2.

Campbell, S., 2019. TD 2019/D6 and TD 2019/D7:(Further) unintended consequences?. Taxation in Australia54(6), p.323.

Jones, D., 2019. Wasting assets: Revenue or capital expenditure?. Taxation in Australia53(11), p.593.

O’Connell, A., 2017. Australia. In Capital Gains Taxation. Edward Elgar Publishing.

Shaw, A., 2019. Tax files: Deduction?: What a capital idea!. Bulletin (Law Society of South Australia)41(11), p.36.

Silver, N., McGregor-Lowndes, M. and Tarr, J.A., 2016. Delineating the fiscal borders of Australia's non-profit tax concessions. eJTR14, p.741.

White, J. and Townsend, A., 2018. Deductibility of employee travel expenses: The ATO's guidance. Taxation in Australia52(11), p.608.


GP International pipecoaters pty Ltd v Federal commisioner of taxation, 2019. Available through: < http://www5.austlii.edu.au/au/journals/FedJSchol/2014/24.html > [Accessed on 5th may 2020].

Masters v Fc of T, 2019. Available through: < https://iknow.cch.com.au/document/atagUio2862815sl850531913/masters-v-fc-of-t> [Accessed on 5th may 2020].

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