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Answer:
Answer 1

The Income Tax Assessment Act of 1997 (ITAA 1997) does not provide any definition of income based on the ordinary concept. As a result, applying court-developed criteria to the circumstances of the case is required for assessing whether an amount is an income under ordinary concepts. There are several judicial opinions on whether or not a sum is considered income and how and when it is earned (1).

According to the common-law perspective, any receipt derived directly or indirectly from the taxpayer’s profession or job, profit-making operation, company, or investment will be considered ordinary income. For example, if a $100 yearly payment was sent to each of the employees year after year, it would be considered a normal payment. As a result, it is chargeable in the recipient’s hands.

Only actual receipts or receipts that generate current profit or gains during the year are included in income. Ordinary income does not include unrealized gains or savings. for example, FCT v Cooke and Sherden 80 ATC 4140. The Full Federal Court held in this case study that if a receipt is used to save a taxpayer’s spending, the receipt is not considered income since income refers to what comes in, not what is kept from going out (1).

Answer 2

Exclusive dealing means imposing some restrictions by the manufacturer on others’ freedom to sell products of a particular brand. Only when exclusive trading significantly reduces competition is it illegal.

Exclusive purchase agreements state that the dealer must sell just one manufacturer’s product. If exclusive purchase agreements restrict outsiders or newcomers from competing for sales, they may be in violation of antitrust rules.

In this instance, Manly Ltd entered into exclusive arrangements with many merchants to carry only Manley’s items, which is prohibited because it prevents outsiders or newcomers from competing for sales.

If the court takes action in this matter, then the higher of the following penalties apply to exclusive dealing:

$10 million
If a court can find this then three times the amount of the contravening parties’ reasonably traceable gain, or
10% of each offender’s annual revenue for the previous 12 months if the Court is unable to ascertain the advantage gained by the contravening parties (3)

According to Section 8-1 of the income tax assessment Act 1997, only the legal expenses of $240000 incurred by the Manley are deductible expenses.

Answer 3

As per sections 6-5 of the Income Tax Assessment Act 1997, a revenue account is one that records all of a company’s revenue received and expenditures. If the receipt is included in the taxpayer’s gross income for the year, it is considered a revenue account. These receipts and expenditures are sometimes used to update and Maintain Tangible Assets such as property and buildings, then it is treated as capital in nature for another taxpayer (2).

For example

The sale of land as trading stock by Mr. A to Mr. B. Therefore, it is treated as a revenue account in the hand of Mr. A. Mr. B purchased the land as a fixed asset that can be used for a long period of time. Therefore, the expenditure incurred by Mr. B is treated as capital in nature. 

References
McNeill I. Tax Basics – Program 13: Business Income [Internet]. https://www.tved.net.au/. 2022 [cited 23 April 2022]. Available from: https://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfm&PaperDisplay=https://www.tved.net.au/PublicPapers/February_2007,_Tax_Basics,_Tax_Basics___Program_13___Business_Income.html
ato.gov.au. Legal database [Internet]. https://www.ato.gov.au/. 2022 [cited 23 April 2022]. Available from: https://www.ato.gov.au/law/view/view.htm?docid=EV/1051409556122&PiT=99991231235958
com.au. Hicksons Lawyers – The dangers of exclusive dealing [Internet]. Hicksons.com.au. 2022 [cited 23 April 2022]. Available from: https://www.hicksons.com.au/insight-news/september-2018/the-dangers-of-exclusive-dealing#:~:text=Individuals%20who%20are%20knowingly%20concerned,be%20fined%20up%20to%20%24500%2C000.

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