HI6028 Taxation Theory Practice and Law

According to “section 102-20 of the ITAA 1997” the taxpayer because of the CGT event makes the capital loss or the gains. According to “section 104-10 (1) of the ITAA 1997”the A1 CGT event occurs at the time of the removal of asset. The “Sara Lee Household v FC of T (2000)” court held that when a taxpayer arrives an agreement that period becomes suitable for the CGT event.  CGT appears as a combined income tax regime for the taxpayer. It is not a detached tax (Dixon and Nassios, 2016).

As per “section 102-5, ITAA 1997” it is justified by the taxpayer that net capital gains that is earned at the income year. The taxpayer contrary to the capital gains confines the capital loss. The capital losses are not measured as the deductible amount while the net capital losses are to be passed onward. The assets that are received on or after 20th September 1985 are assumed as the capital gains. According to “Section 104-20(1)” it is stated that the C1 in the CGT event occurs at the time when the CGT asset is lost or damaged (O'faircheallaigh, 2017).

Sale of vacant block of land:

An empty land is acquired by an individual either for the personal use or for investment purpose, which is generally accepted as the capital asset. But at the time of selling the land it is exposed to capital gains tax. In the present case, the taxpayer provides information that for selling the empty land a bond is invented. The land was originally acquired for an amount of $100,000 and happened $20,000 in the direction of local council, land and water tax at the time of ownership (Richardson, et al 2015).

As per the Australian Taxation Office the tax payer who has regarded the empty land as the capital asset which is exposed to capital gains tax like many other assets. The taxpayer is required to preserve the accounts of the time and cost of gaining the land by the Australian taxation office. This comprises the council interest and the rates on loan. In this current circumstance the taxpayer incurred expenditures on local council, land and water tax throughout the period of ownership. In this scenario the taxpayer is not permitted to claim reduction for income tax since no revenue is the produced by the land. Relatively the taxpayer can enhance the expenditures of local council and sewerage and water charges in the property cost as this will assist in the calculation of the net sum of capital gains at the time of selling the land (Findlay and Garnaut, 2017).

Antique Bed:

According to “section 108-10(2) of the ITAA 1997”. “Section 108-10(1), ITAA 1997”the meaning of collectibles assists the taxpayer in confining the capital losses. Under “section 108-10(2), ITAA 1997” collectables are raising to artwork, an antique, jewellery, a medallion or a coin. Collectables are denoted as intermittent portfolio, book, manuscript, a postage stamp or the initial day cover that is largely reserved for the taxpayer for private use and pleasure. There are some special regulations that is practical in case of the collectables (Lal, et al 2017).

Under the initial component, capital losses and capital gains must be overlooked when the collectable of the cost base is lower than $500. The taxpayer provided the information about the antique bed that was pilfered from the taxpayers’. Hence, the insurance company provided the information that the antique bed was not the stated item in her policy of insurance. Thus, the insurance compensated the taxpayer below household contents policy was furnished with the payment of amounting $11,000 (Deutsch, 2018).

As per “section 104-20(1), ITAA 1997” the C1 of the CGT occurs during the span when the asset which was possessed by the taxpayer is misplaced or destroyed. The span of CGT event like when the reimbursement is acknowledged for the loss or demolition is important in defining capital gains or loss. The antique bed was not the stated item in the insurance policy of the taxpayer and the receiving of compensation arose to C1 in the CGT event as because the asset was misplaced for the taxpayer (Mossialos, et al 2016).

Painting:

In the “section 108-20(2), ITAA 1997” the meaning of personal use asset is defined. “Section 108-20(1)”clarifies that any capital loss should be disregarded by the taxpayer which is earned thru from the personal use asset. In accordance with the “section 108-20(2), ITAA 1997” the personal use assets other than the collectable is mostly reserved for the private use of the taxpayer or satisfaction but does not comprise of the land or building. The “section 118-10(3), ITAA 1997” declares that any capital gains which is achieved from the personal use asset is to be disregarded in the situation where the assets’ cost base is lesser than $10,000. The information provided by client propose that the painting was shopped for an amount of $2000 on 2^nd May 1985 which is to be characterised as the pre-CGT asset as it was bought before 20^th September 1985. Here the taxpayer to contempt the obtained capital gains derived from the painting sales because the asset appears as pre-CGT (Chardon, et al 2016) requires it.

Shares:

In accordance with the ATO the organisation shares alike other assets are measured for the tenacity of the capital gains tax. During the CGT event the CGT event as applied by the investors to harvest capital gains after shares, mostly during the sale. The profit that is received by the taxpayer from the shares selling are regarded as the ordinary income. Consequently, to this matter of the taxpayer, the approval of Build Ltd, PHB Ltd as well as the Common Ltd shares the capital gains were detached. From the elimination of the shares of the Young Kids Learning Ltd the losses were completed. In such scenarios the claim of the capital loss balance by the taxpayer in incongruity of the capital gains obtaining from the vending of the shares (Mahar, et al 2016).

Violin:

As per “Subdivision 108-C” the assets for personal use are concerned. The asset that is non-collectable which is also known as the personal use asset. This is used by the taxpayer primarily for gratification purpose which includes of boats, furniture, household items as well as the electrical goods. According to “Section 108-20(2), ITAA 1997”, the subdivision is contained of selections or right for obtaining the asset that is for fun as well as for the personal utilisation of the taxpayer. In accordance with “Section 118-10(3)”, there is no involvement of the capital gains into the taxable income at the place where an asset is obtained for an amount of $10,000 or of a condensed amount (Deutsch, 2014).

The proposals that is provided is recommending that a violin is bought for an amount of $5,500 and sold for an amount of $12,000 via the taxpayer. The violin is bought by him for personal utilisation. Because the asset cost base appears lesser than $10,000, hence, the capital gains persist omitted below “section 118-10 (3), ITAA 1997”. The net amount of the capital gains is charted:

Issues:

The consequences of the fringe benefit tax of the taxpayer is determined in this present study under “FBTAA 1986”. As per the “section 7, FBTAA 1986” the personal use of car is negotiated in this study for determining that whether it is considered as fringe benefit or not. The car parking expenditures is assumed liable for the taxpayer according to “section 39 A, FBTAA 1986”. The significances of the loan fringe benefit are also measured for the taxpayer according to “subdivision A of FBTAA, 1986”.

Rule: 

An employee is paid with a benefit apart from the salary or wages is measured as the fringe benefit. In accordance, to the legislations of the fringe benefit tax is the benefit that the employee is provided which is stranded on the employment is the fringe benefit (Robson, 2014).

A car fringe benefit as explained in “section 7, FBTAA 1986”is obtained at any time to an employee who receives a car from the hire. The car fringe benefit for the employee is utilised either for personal or an employee subsidiary. Whenever a car is provided to an employer or by an associate then it is termed as the car fringe benefit. Therefore, because of the application and the availability of the car it is regarded as the car fringe benefit which is given to the employee for the employment purpose by the employer (Mays, et al 2016).

According to “sub-section 136 (1), FBTAA 1986”a car is held in respect by the employee as facility or the associate of the employee in obtainability connection of the car practice is specified as fringe benefit tax. As per “Federal Commissioner of Taxation v Lunney (1958), the taxation commissioner held that the travel of the taxpayer from the residence to employment area is regarded as private travel (McGee, et al 2016).

As per “Subdivision B 22A of the FBTAA 1986” explains considering, the expense payment fringe benefits which origination happens when an employee is compensated by an employer along with incurred expenses. Generally, the expenses are observed which reasons for the employer due to an employee as well as depend on a consequential expense compensation to employee. The invention of the expense payment fringe benefit occurs (Mohan, 2018).

According to “Division 4 of the FBTAA 1986”, the sourcing of loan fringe benefit occurs when the application of loan for the employee through the employer is done. This is the benefit that the recipient is provided. According to “subsection 136 (1), FBTAA 1986” an individualist accountable for compensating to another person. A loan fringe benefit arises, when a loan is given to an employer with the interest summation of the FBT year. A subordinate interest rate exemplifies the digit which appears lesser compared to interest statutory rate (Lanis, et al 2017).

 In this case it is viewed that Jasmine parked a car at the commercial airport which was not in use for ten days till that time (Lehmann, et al 2014). Therefore, fringe benefit pledges for no car parking because, neither parking of the car was Rapid Heat premises, nor the parking appeared within the area calculated which one-kilometre of commercial parking is. So, not be considered as fringe benefit tax (Beshears, et al 2015).

A loan was given to Jasmine by the Rapid Heat Pty Ltd of summing $500,000 at the constitutional interest rate of $4.25%. The total of $500,000 is regarded for Jasmine as benefit that is provided by the organisation. Rapid Heat charged Jasmine an interest rate that is lesser than the statutory interest rate. According to “Division 4 of the FBTAA 1986”the loan fringe benefit charge establishes the change between the gathered interest in the fringe benefit year as per the statutory interest rate application (Bateman, 2015).

As concluded, the benefits that is given to Jasmine generates benefit below “section 7 of the FBTAA 1986”. The car usage underneath “sub-section 136 (1), FBTAA 1986”is visible as fringe benefit tax. Laterally, benefits like expenses reimbursement for repair linked with loan that happened to Jasmine identify benefit beneath the “FBTAA 1986”.

According to “section 8-1 of the ITAA 1997”, a taxpayer is permitted for the allowable deductions entitlement for the involvement to the experienced expenses to produce the computable income. A taxpayer is only permitted for the right of the incurred expenses deductions to yield the computable revenue.

Later, if the remaining loan summation of $50,000 which Jasmine used for share buying by her as an alternative of same quantity loaning to her spouse, so, Jasmine is allowed for deductions that seems appropriate below “section 8-1, ITAA 1997”. Hence, the loan residual was lent to her spouse for share buying therefore, an acceptable deduction is not enabled to loan interest relation under the general distribution of “section 8-1, ITAA 1997” is permitted for deductions.

References:

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Deutsch, R.L., 2014. Australian Tax Handbook 2006.

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