Capital Gains and Fringe Benefit Tax: A Study on Tax Liabilities

This study defines the capital gains and fringe benefit tax liabilities. It includes transactions reported by taxpayers and discusses car fringe benefit, loan fringe benefit, and expense reimbursement fringe benefit.

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Taxation
Name of the Student:
Authors Note:

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Executive Summary:
The current summary is based on defining the capital gains on the consequences of the tax
liabilities as well as the fringe benefit tax. This study is comprised of the numerous
transactions, which the taxpayer reported. The first segment includes the queries about the
significances of the taxpayer to choose the income tax which is experienced during the
specific year. The next part holds the research of the significances of the fringe tax benefit
according to the fringe benefit tax act 1986. The discussion is comprised of the car fringe
benefit, loan fringe benefit and the fringe benefit of the expense reimbursement to value the
consequences of tax for the taxpayer.

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Table of Contents
Answer to question no. 1:...........................................................................................................3
Sale of vacant block of land:..................................................................................................3
Antique Bed:..........................................................................................................................4
Painting:.................................................................................................................................5
Answer to Question no. 2:..........................................................................................................7
Answer to A:..............................................................................................................................7
Issues:.....................................................................................................................................7
Rule:.......................................................................................................................................8
Conclusion:............................................................................................................................9
Answer to B:............................................................................................................................10
References................................................................................................................................11

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Answer to question no. 1:
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

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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

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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 2nd May 1985 which is to be characterised as the pre-CGT asset as it
was bought before 20th 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

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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:

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Particulars Amount Amount
Net Capital Gains on Sale of Vacant Land
Proceeds from sell of Vacant Block of Land $320,000.00
Cost base $100,000.00
Add: Ownership Expenses $20,000.00
Add: Deposit $20,000.00
Total Cost base $140,000.00
Gross Capital Gains $180,000.00
50% CGT Discount $90,000.00
Capital gains on sale of shares
Proceeds from Common Ltd Shares (1000@ $47 per
share) $47,000.00
Less: Cost Base (1000@15) $15,000.00
Less: Brokerage fees $550.00
Less: Stamp Duty $750.00
Gross Capital gains $30,700.00
50% CGT discount $15,350.00
Shares in PHB Iron Ore Ltd
Sales Proceeds $62,500.00
Less: Cost Base $30,000.00
Less: Brokerage Fees $1,000.00
Less: Stamp Duty $1,500.00
Gross Capital Gains $30,000.00
50% CGT Discount $15,000.00
Shares in Young Kids Learning Ltd
Sales Proceeds $600.00
Less: Cost base $6,000.00
Less: Brokerage Fees $100.00
Less: Stamp Duty $500.00
Loss on Sale of Shares -$6,000.00
Share Build Ltd
Sales Proceeds $25,000.00
Less: Cost Base $10,000.00
Less: Brokerage Fees $900.00
Stamp Duty $1,100.00
Gross Capital gains on Sale of Shares $13,000.00
Total Capital gains $127,350.00
Less: Capital Loss Carryforward $7,000.00
Total Net Capital Gains $120,350.00
Calculations of Capital Gains Tax

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Answer to Question no. 2:
Answer to A:
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),

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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

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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).
Conclusion:
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”.
Answer to B:
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.

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