The primary taxes which are levied under the Australian laws are the income taxes which includes the capital gains tax, withholding taxes, and taxes for the services and goods. The central tax legislation governing the taxation of trade activities are the Income Assessment Act of 1936 and the Income Assessment Act of 1997 as amended. For the tax purposes, individuals resident in Australia if they are domiciled in Australia, has spent more than half of the year in the country unless the commissioner of tax is satisfied that the individual is domiciled outside the country.
In the present case, John is a self-employed architect who bought the house because it had a room which could be modified for use in architecture business. However, the room made up only 15% of the whole house. In essence, although John is entitled to pay taxes for his income, he is eligible to deductions of the expenditures incurred in the production of income. The expenses that are deducted from his income must be wholly and exclusively incurred in the production of income.
The question of what is wholly and exclusive has been considered in several cases. In the case of Prince V Mapps, the court stated that the phrase entirely and exclusively means that the expenditure is only for the particular business. The court went on to state that if the expenditure was partly for business and partly for private or domestic purposes, then it will not meet the …
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