Question

Donna is 18 years old and full time accounting student.She is saving for an overseas holiday and work part time at a major department store.Two months before her planned trip she finds she still need $5000. Her father employs her for four weeks as an office assistant in his busy accounting practice.He pays her $5000 for this work.The other office assistant receives $500 per week. Discuss the tax implication for both Donna and her father as to the amounts received and amounts paid.Your answer must be supported by reference to legislation case law and tax rulings if any....note subject advance taxation law(Australian taxation)

Answer 1

Reference to the legislation case laws:

• S 70 - 20, non-arm’s length transactions
• S 8 -1 (1) (b) – Carrying on a business; salary & wages, nexus to business income;
• S 26 - 35 (4) – Not include in assessable income NANE
• S 26 - 35 (1) – reduce deduction paid to related entities – relative
• Div 26 deny deduction

The other office assistant receives $500 per week.

Donna's father employs her for four weeks as an office assistant in his busy accounting practice.

Hence, market value of the compensation on arm's length basis = $ 500 per week x 4 weeks = 500 x 4 = $ 2,000 (Reference to S 70 - 20, non-arm’s length transactions)

Tax implication for both Donna and her father as to the amounts received and amounts paid:

• Hence, Dona's assessable income = $ 2,000
• Dona's father's deduction = $ 2,000