Sample Taxation law Assignment

Taxation law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Calculations of the fringe benefit tax..........................................................................................1
QUESTION 2...................................................................................................................................3
A) Calculating the net capital gain or loss of Daniel Ray's for the year ended 30 June 2019...3
B) Daniel's treatment to the net capital gain..............................................................................5
C) Daniel's treatment to the net capital loss...............................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Taxation is a source of revenue to the government of a nation. The tax is levied on the
incomes and sales revenue and other business transaction and is collected form the tax payer.
This is imposed by the taxation authority compulsory and is collected form the assesses. In the
present reports calculations related with Australian Taxation law are presented. This includes
imposition of fringe benefit tax and capital gain tax on the tax payer which are individuals as
well as companies of Australian nationality. Along with this the extractions of the capital gain
and fringe benefits tax with their interpretation is presented.
QUESTION 1
Calculations of the fringe benefit tax
The fringe benefit tax is that tax which is payable by employees for benefit paid to an
employee. this also includes the tax to be paid by the employer for the befits given to the family
member of the employee (Root, 2018). The fringe benefits are given to the workers under
employment of a specific employer in the lied of his/her salary or wages. This tax is separate
from the income tax is calculated on the taxable value of the fringe benefits provided. This can
be calculated through either statutory formula methods and operating cost methods.
Give
Participial Percentage Amt. Days
GST included
Cost of car 18000
Insurance 2200
Fuel 990
Repairs 3300
Total distance travelled 20000
Business use 70.00% 14000 255.5
Personal use 30.00% 6000 109.5
Operating method;
Under the operating methods of calculating fringe benefit taxes based on the costs of
operating the car any other benefit provided by the employer. The taxable value of the car fringe
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benefits tax is calculated as the percentage of the total cost of the operating the car and during
fringe benefit tax. The percentage of usage varied with the actual use for personal purpose. The
lowers the incident of the private use the lower is the taxable value of the fringe benefit
(MacDonald, and Eyre, 2018). Under The operating cost method for calculating the FBT on the
car a log book where the records of travel kept which indicate the use of car for the business
and for personal purpose.
Operating method
Depreciation (on or after 10 May 2006) 25.00%
Cost of car 18000
Depreciation 25% 4500
Contributed 1000
Employee contribution Repairs + Insurance + Fuel + Extra cost
3300 + 2200 + 990 + 1000
Employee contribution 7490
Imputed interest depreciation amount * 5.20%
4500 * 5.20%
234
Private use percentage 30.00%
Taxable value
(Total operating cost * private use percentage)
– Employee contributions
Total operating cost 4734
Gross taxable value -6069.8
Taxable value 0
Fringe benefit tax NIL
(Section 23 B):
The above calculation present determination of the FBT through operational cost method
depreciation is calculated as 4500 and the employee contribution totalled to 7490. The imputed
interested is calculated veer the amount of depreciation by 5.2% which have given an amount of
234. the taxable value of the fringe benefits have been calculated as 5743. The taxable values is
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determined by multiplying the percentage of private use of the car by employee to the total
operating cost of car and then deducting the employee contribution from it. The resultant is the
gross taxable value. The total operating the cost is calculated as 4734 and the gross taxable value
has come as 6069.8 which is more than the total cost. So here amount of the FB is nil and there is
no value of FBT under the operting cost method of FBT.
Statutory method:
Car fringe benefit tax commonly arise when an employee holds the car provided by the
employer for personal use. As per the section 23 (A) the fringe benefit tax is calculated with
statutory method. For this calculation certain informations is required which is related with the
use of care and contribution made by the employees. The employee contribution includes the
amount that is paid by the employee directly for the use of car and any operational expenses that
paid by the employee such as fuel, repair and others and which are not reimbursed by employer
to employee. Along with this statutory percentage of the use of the car must be determined to
calculate the FBT (Esplugues Mota, 2018) . Under the statutory method the calculation of the
fringe benefit tac is more easy and less complicated as compared to the operational method of
calculating the FBT. Under this method the statutory percentage is required to be determined
which can reduce the base value of the car. This includes the provision as the reduction in the
FBT by one third of for the year ended 31 march 2019 the car is owned or leased from 31 st
march 2014. The reduction is applicable only once fro a particular car and then reduced base
value is used in the subsequent years.
Statutory method
Taxable value
((Base value * statutory percentage * no. of
days for private use) / no. of days) -Employee
contribution
base value 18000
Private use 109.5
Employee contribution 7490
Gross taxable value 1080
Taxable value -6410
Taxable value 0
Fringe benefit tax NIL
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For the above calculation to can be stated that the private of the car for 109.5 days the
employee contribution is 7490 and gross taxable value comes out to be 1080. The taxable value
is 6410 as negative value (MacTaggart, 2018) . The value has come out to be negative so there
is not application of the capital gain taxation over this value. The value of the FBT is also nil in
the case of statutory method FBT.
QUESTION 2
A) Calculating the net capital gain or loss of Daniel Ray's for the year ended 30 June 2019
Capital gain or loss: Capital gain tax is a levy assessed on the positive differentiate
between the price and sales which asset the original purchase price. It is also considered the long
term profit gain the sales of assets held over the year. It has increased the rate 15% to 20 %
which depending on the price of taxes (Cooper, 2018) . On the other hand, it is considered as a
short term capital tax that applied to assets held for less than year. It can be minimized through
deducting the loss of capitals and occurs when the taxes assets to sold for less than the original
price or cost. The capital gain or loss arises when there is a sale of capital assets. This includes
land, houses, building and property, securities, shares and bonds, painting, things of artistic
values , yacht and other property with good valuation.
Particulars Amount
Artistic piece purchased 15000
sold 125000
Capital gain income on 31st 110000
Particulars Amount
Purchased yacht 110000
sold 60000
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Capital gain 50000
Particulars Amount
Value of the shares purchased 75000
Values of the share sold 80000
Capital gain on the sale of shares 5000
Loan money taken 70000
Payment of stamp duty 250
Paying the fess of brokerage 750
Capita loss on the sale of shares -66000
Particulars Amount
Particular Year
Capital gain on artistic piece 110000
Capital loss on shares 66000
Capital loss on yacht 50000
Net capital loss from previous financial year
2017 – 2018 10000
Capital loss as on 30 June 2019 -16000
Interpretation:
The above calculation presents the determination of the capital gain or loss on the
property of the sale of the capital assets by Daniel. For the art theistic piece of the sale the
capital gain is determined as 110000. The capital loss of on the sale of the yacht is 50000. For
the sales of the shares there is a capital loss to Daniel of 66000. With adding all capital gain and
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losses the overall capital for the current year is 6000 and by adding the capital loss of previous
the total total capital loss to be carried forwarded in next year is 16000.
B) Daniel's treatment to the net capital gain
The capital loss occur when there is a loss or gain is on the sale of any of the capital
property held by a tax payer, the treatment of gain and loss on the sale of capital asset is
different (Butler and Calcott, 2018). The gain is not realise until a capital asset is sold. The
capita gain can be short term or long terms and it depends on the time of holding of the asset by
the tax payer. The capital gains have link to the security which is sold at the higher prices than
the prices at which it was accumulated. The capita gain arises when a capital assets is sold at a
price more than the the prices at its was first bought or purchased. For the asset which are
purchased before 20th September, 1985 are applicable for the indexation method where the
purchase prices is indexed to reach the indexed method of acquiring the capital asset.
Daniel is required to identity the exemptions and deductions from the capital gains and
form his income as well. The roll-overs are allowed fro different gains which comprise transfer
of asset the death of the outcome of a court divorce decree and when the organisation acquire
exchange for shares in acquisition of company.
C) Daniel's treatment to the net capital loss
The capital losses arises when a capita asset is sale at a prices lower then its acquired
cost. The particulars are realised that assets is sold at lower value. This is a result of selling of a
long term or short term investment which is less than its price of acquisition (Grigsby, 2018) .
The main point to be considered in calculation is that the capital losses are not weighed and
applied as simple operating losses. As capital loss can also be long term or short term where a
forum is required to filled in to determine the term status of the loss. The capital losses have
advantage to Daniel as they can be carried forward to next year and will be adjusted to he capital
gain if any of the forth coming year. The adjustment of the capital losses reduces the capital gain
tax liability of a tax payer for a particular and its subsequent year by reducing the value of
capital gain (Briegel, 2019). Denial can undertake the treatment of capital loss as:
 The short term losses had counterbalances the expensive gains for short term perspective
as net short term capital gain or loss. If there is absence of gains, then net would be
equalised to total loss.
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 Apart from this, long term losses are directly applied to gains for long term perspective as
it outcomes at the end and
CONCLUSION
From the above report it can be concluded that the the fringe benefit taxes are the one
which have been required to be paid by the employer for the benefits allowed to the employee.
The FBT is paid by the employer on the items of fringe benefit for the extent of use for personal
purpose. The calculation of the FBT can be calculated through statutory and operating cost
method. For the given question tax the calculation have been done through both methods and
both have given a resolute as nil value for the fringe benefit tax over the use of car for the
personal use by Spiceco Pty Ltd. Moreover for the question 2 the calculations have been
presented to determine the capital gain taxes over the sales of different capital assets by Daniel.
For the transaction of sales of house there in no capital gain or loss as there is no sale of the
capital property. For all other transaction their have been either capital loss or gain and all the
calculation is have been presented in the report.
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