1

A.
Answers:
Issue 1:
Are Mustapha and Salam conducting a business?
Rule:
In this case, S 995- 1(1) (b) of ITAA 1997 can be used. 1 This section describes business as
any profession, trade, employment, vocation or calling but does not include occupation as an
employee. Case Ferguson V FCT can be taken into consideration which gives an insight on
which activities can be considered a business.2 The factors which includes a definition of
business:
i. A reason for benefit making
ii. Repetition and consistency
iii. Commercial Approach
iv. System and association utilized
v. Methods normal for the line of business
Application:
In this case, section 995 -1(1) definition of business is satisfied. The case presented supports
that Mustapha and Salam are considering carrying on a business apart from their
employment. The facts presented suggests that they have the intention to sell olives, goats,
and wool. Ferguson v FCT can be applied here as it satisfies that fact that Mustapha and
Salam are conducting a business. Likewise, the fact presented as their intention to sell olives
commercially concludes that the activities undertaken are more than a recreational activity. In
addition to this, breeding and selling goats and wool discusses about the systematic and
organised approach of which further proves that they are conducting a business as it gives an
insight on how much time is invested to execute a plan.
Similarly, Thomas v FCT case can be taken into consideration where high court held that
there was a business of essential creation and the tree planting was a lot more prominent than
what might be required for local reason and the movement was viewed as something beyond
a recreational action or interest.3 The introduced choice can be applied in Mustafa and Salam
case as they have chosen to plant 50 olives trees and breed goats and sell wool which infers
that they have commercial purpose behind it.
Conclusion: Hence, all elements introduced to do a business in Ferguson v FCT and Thomas
v FCT are fulfilled in Mustapha and Salam's case. We can infer that Mustapha and Salam are
leading a business.
B.

1
Income Tax Assessment Act 1997 (Cth) s 995-1 (1) (b).
2
Ferguson v FCT (1979) 9 ATR 873.
3
Thomas v FCT (1972) 3 ATR 165.
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Issue 1
Can Mustapha claim foreign travel expenses, relocation expenses, and work travel expenses
under deduction from his assessable income?
Rule
In this case, section 8-1 (1) of ITAA 1997 can be applied to assess whether to deduction is
possible or not.4 Likewise, judicial test or the negative limbs of section 8-1 used by the court
also helps in assessing whether the deduction is possible or not. Moreover, Case of Fullerton
v FCT can also be discussed to justify the case.5
Application:
Section 8 (1) of ITAA states that a tax payer can deduct can deduct any losses or outgoings
from their assessable income to the degree that it is incurred while gaining or producing
assessable income or incurred while carrying on business for the purpose of gaining or
producing assessable income.
Mustapha’s employment required him to travel him to different location such as Dubai,
Singapore, and Bahrain as a part of his employment. Case of FCT v Ballesty can be discussed
as it shows how an employee is required to work in different places, rather their choice about
where to live.6 So, this situation put Mustapha to claim foreign travel expenses such as
airfares, and hotel bills as those are the expenses incurred in gaining or producing assessable
income. Likewise, Mustapha relocated to rural Sydney for business purpose which was
private or domestic in nature.
Private costs can be alluded as those costs which are incurred to put the taxpayer in a position
to gain or produce assessable income. So, in this case, the positive limb of section 8-1 such
as costs or expenses occurred while gaining or producing income or expenses incurred while
carrying on business for the purpose of gaining or producing income cannot be satisfied as it
has put Mustapha only in a position to gain or produce any assessable income rather than any
actual expenses incurred. So, under Section 8 – 1(2) (b) any costs identified as private nature
will not be deductible.7 Similarly, Fullerton v FCT case can also be used where court
decided that any expenses incurred by a taxpayer in moving their home ought to be non-
deductible
Lastly, Mustapha travel expenses incurred to travel from his home to work is not deductible
as those expenses are incurred while putting the tax payer in a position to gain or produce
assessable income, rather than in the production of assessable income and does not satisfy
any of the positive limbs and are prevented to be deducted under negative limbs as well as it
is private or domestic in nature.

Conclusion:

4
Income Tax Assessment Act 1997 (Cth) s 8-1 (1).
5
Fullerton v FCT (1991) 22 ATR 757.
6
FCT v Ballesty (1977) 7 ATR 411
7
Income Tax Assessment Act 1997 (Cth) s 8-1 (2) (b).
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Thus, Mustapha can only claim foreign travel expenses under s 8-1. However, the
Mustapha’s case cannot satisfy the positive limbs of section 8-1 to claim any deduction under
relocation expenses and travel to work from home expense. In contrary, it satisfied the
negative limbs of 8-1 being private or domestic in nature so Mustapha cannot claim any
relation expenses deduction from his assessable income under section 8-1 (2) (b).

Issue 2
Are Mustapha and Salam eligible to claim any deduction incurred to start their business to
sell olives and goat breeding?
Rule:
In this case, first it we need assess if any deductions are covered under section 8-1 of ITAA
1997. Moreover, section 8 -1(2) can be discussed as it describes about any non-deductibles
even though they satisfy the positive limbs of section 8-1.8 Similarly, Dixon J test used in
Sun Newspaper Ltd and Associated Newspaper Ltd V FCT can also be applied to outweigh
any loss or outgoing from their personal income.9

Application
Section 8-1 states that a taxpayer can deduct any loss or outgoing from his assessable income
if it is incurred in gaining or producing assessable income or necessarily incurred in carrying
on a business for the purpose of gaining or producing assessable income. So, in Mustapha
and Salam case they decided to move to rural Sydney and start a business of olives and goat
breeding. Any expenses incurred while planting olive trees or purchasing angora goats can be
deducted as it satisfies the nexus test of positive limbs of any outgoing incurred in carrying
on business to gain or produce assessable income. However, there exists an exception to
positive limbs of section 8-1 such as any outgoings capital or capital in nature. Section 8 -1
(2) (a) states that any loss or outgoing that is capital or capital in nature are non-deductible. 10
Moreover, applying Dixon’s J test such as:
 Character of the favourable position looked for
 Way the advantage is to be utilized, depended upon, or delighted in
 Means embraced to acquire the advantage
It infers that Mustapha and Salam investing in planting olives and purchase of goats will
bring them a lasting benefit and proves to be capital expense. Similarly, the olive trees and
goats will provide them with a benefit that they can rely on once and the lump sum payment
of $2000 for olive trees and goat indicates that expense is more likely to be capital. The facts
satisfy all the conditions of judicial test under Dixon’s J and negative limbs of section 8-1.
Conclusion

8
Income Tax Assessment Act 1997 (Cth) s 8-1 (2).
9
Sun Newspaper Ltd and Associated Newspaper Ltd v FCT (1938) 61 CLR 337
10
Income Tax Assessment Act 1997 (Cth) s 8-1 (2) (a).
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Therefore, Mustapha and Salam cannot claim for deduction from their assessable income as
their investments is capital in nature.

Issue 3
Can Salam claim deductions for her travel expenses under S-8-1, S 25-100, and division 28
of ITAA 1997?

Rule
In this case, section 8(1) of ITAA 1997 can be applied to assess whether to deduction is
possible or not. Similarly, case of FCT v Weiner can be discussed if Salam is able to claim
any travel expenses or not.11

Application
Section 8 (1) infers that any expenses incurred while gaining or producing assessable income
or necessarily incurred in carrying on a business for the purpose of gaining or producing
assessable income can deducted from an assessable income. Similarly , in Salam case she is
an itinerant worker and travelling to different location is a requirement of her employment
and any expenses incurred while travelling can be deductible under section 25-100(2) and s
8-1 of ITAA 1997 as the expenses are incurred in the course of gaining on producing
assessable income.12 Moreover, she can claim her expenses under division 28 of ITAA 1997
which sets out the rule for calculating the amount of deductions for car expenses where a tax
payer owns or leases a car during the year and the car is used by the taxpayer in the
production of his/her assessable income. 13 Salam can claim deduction under s 28-25 (1)under
two methods cents per kilometre or logbook method. 14 As Salma travelled an average of 200
kms for 38 weeks per year she can claim deductions under cent per kilometre method of
$3400 under s 28- 25 (1). 15
Calculations:
Cent per kilometre method
=Number of business kilometres the car travelled X Number of Cents per kilometre
in the income year
=200x38kms

11
FCT v Weiner (1978) 8 ATR 335.
12
Income Tax Assessment Act 1997 (Cth) s 25-100 (2).
13
Income Tax Assessment Act 1997 (Cth) s 28.
14
Income Tax Assessment Act 1997 (Cth) s 28-25 (1).
15
Income Tax Assessment Act 1997 (Cth) s 28-12 (1).

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=7600kms per year .

But she can only claim 5000 kms of travel
So,
5000x0.68
=$3400
Similarly, case of FCT v Weiner is related to Salam’s case as in this case the court decided to
allow deductions for any expenses incurred while travelling from home to work as travelling
was an essential part of the plaintiff employment. Likewise, Salam travelled to different
location in the process of gaining or producing assessable income rather than the travel was
just to put her in a position to gain or produce income. Salam’s case satisfies the positive
limbs conditions of S-8-1 and her expenses do not fall in the category of any negative limbs.

Conclusion
Thus, Salam claim deductions for her travel expenses under S-8-1 and division 28 of ITAA
1997 as all expenses incurred while travelling satisfies the condition of positive limbs set
under section 8-1.

Pallavi Rijal
19922010