HI6028 Taxation Theory - Practice and Law For Statutory Interest

Answers  

1. This particular question is regarding computation of net capital loss or net capital gain of Eric for a particular year. Section 108-20 of the ITAA 1997 describes the capital gain or loss determination from obtained from selling of assets. Laws that deal with determination of net loss and gains involve Section 108-10 of ITAA 1997 and Section 108-20 of the ITAA 1997 (Brigham et al., 2015).

Selling of sound system has incurred a loss of $ 1000 that cannot be regarded for setting of under section 108-20 of the ITAA 1997. Loss incurred from selling of shares has resulted in collectible losses that should not be set off against gains attributable from shares under the same section. The disposal of ordinary shares in current year has resulted in current profit with no applicable deductions (Mumford, 2017). Therefore, the calculated capital gain of Eric is $ 15000. Therefore, loss attributable from collectibles cannot be offset by Eric as profit has been gained from ordinary assets disposal.

2. Present scenario deals with the computation of fringe benefit tax that is determined according to taxation rulings of TR 93/6. The plan of offsetting loan account is often made by financial organizations according to taxation rulings of TR 93/6 (Howieson et al., 2014). Such offset is regarded as interest offset agreement. Some interests are incurred by clients for which structuring of products are required. Profits attributable from such accounts and in regard to this, clients does not have liability for income tax payment. Brian would not be liable for income tax payment as per Taxation Rulings of TR 93/6, if refunding interests on loan is discharged by bank. Therefore, if bank releases Brain from making any interest payment, then he will not be entitled to make income tax payment.

3. Discussion of generated loss or divisionary net income arising from rental property from co owner asset property is provided in taxation rulings of TR 93/32. Co owners’ taxable position is evaluated as per the ruling of taxation. This particular situation deals with rental property taxable position of Jack and Jill. 90% of property is entitled to Jill and rest is entitled to Jack.

For the purpose of income tax, the rental property co ownership is regarded as one partnership. However, in the given case, the ownership account for business purpose carrying value is considered as one partnership and on other hand, for the purpose of satisfying the income tax computation, such co ownership is regarded as partnership. The distribution of partnership loss and gains and rental property ownership helps in managing the income loss gained from rental property. Income tax purpose forms the basis of co ownership of rental property between Jack and Jill and therefore as per universal law, such co ownership cannot be considered as partnership.

Under the general law, rental property co ownership is not regarded as partnership according taxation rulings of TR 92/32. The shared value of loss and income arising from considered property is not affected by agreement of partnership. Property between Jack and Jills is hold as joint renters’ rental property co ownership. Therefore, joint equality and ownership loss should be distributed between Jack and Jill as it is not accountable as partnership business.

4. The occurrence of tax avoidance is quoted as IRC v Duke of Westminster [1936] AC. One principle has been established in the given case the affairs are allowed to order by each individual for taxation allowance. Assigning of taxation is lower than this and for seeking tax avoidance, ruling is not regarded attractive as the structure of law is complex and the subsequent cases are weakened by this. The WT Ramsay v. IRC principle adopted the citation of court as an example. Transaction in this case is not for commercial purpose as they have been arranged artificially. Imposition of tax was the perfect value that is extended for transactions. If the results are scored for making the success is depicted by principle within Australia. In such situation, increased amount of tax is not liable to be paid by them and initiative might be Inland Revenue.

5. This particular situation deals with contemporary scenario where a large piece of land is owned by Bill that has several trees of pine. Land was primarily used by bill for the purpose for grazing sheep’s. A logging company was discovered by Bill that for every 100 meters of timber would pay $ 1000. The consequences of income tax arising from forestry activities are provided and discussed under taxation ruling related to 95/6. Sale of timber provides with receipt that that is limited by rulings. Since the tax payer is indulged in forestry activities, assessing income is involved in this part. The tax payer is involved in carrying out operations related to forestry according to subsection 6 (1) of the Income Tax Assessment Act 1936.

The definition of primary production as per the subsection 6 (1), the Income Tax Assessment Act 1936 is provided as the planting of trees in forest. Therefore according to subsection 6 (1) of the Income Tax Assessment Act 1936 and evident from case study Bill has been engaged into primary production of forest and he is regarded as basic producer. Tax payers are not concerned about payment of taxes as premium forest operations is tress plantation. The sales that are made involve partial or complete assets of business.

In order to eradicate unnecessary amount of timber by surrendering the right to logging by making tax payer a lump sum amount of $ 500000. Then the amount that is received will be regarded as royalties. The right is granted to tax payer on amount of fell timber on land in conformity with the section 26 (f) receipts of “royalties”. Trade of forest operations will not be carried out by Bill under this situation. Plantation of trees by tax payers has not been for the purpose of gaining profits. Under section 26 (f), such amounts are received by Bill and they combine the assessable income and royalties. Therefore, it can be concluded under sub section 6 (1) of the ITAA 1997, income generated from cutting of timber will be regarded as taxable income. 

Reference List:

Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.

Howieson, B., Hancock, P., Segal, N., Kavanagh, M., Tempone, I., & Kent, J. (2014). Who should teach what? Australian perceptions of the roles of universities and practice in the education of professional accountants. Journal of Accounting Education, 32(3), 259-275.

Mumford, A. (2017). Taxing culture: towards a theory of tax collection law. Routledge.