Taxation Law and Policy Analysis

This assignment delves into the complexities of Australian taxation law and policy. Students are tasked with analyzing various aspects, including income tax, corporate tax, and the role of the Australian Taxation Office (ATO). Key concepts such as tax fairness, efficiency, and avoidance are examined. The assignment also considers the impact of international tax treaties and the evolving landscape of global taxation.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction:...............................................................................................................................2
Determination of Car FBT.........................................................................................................2
Employment duties of an Itinerant Nature:................................................................................4
Car parking fringe benefit:.........................................................................................................5
FBT on accommodation:............................................................................................................5
Fringe Benefit Tax consequences of Charlie Homes.................................................................6
Conclusion:................................................................................................................................7
Reference List:...........................................................................................................................8

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Introduction:
The following study is concerned with the determination of the fringe benefit
consequences of Shine Homes and Charlie. As evident from the following scenario Charlie is
an employee of Shiney Homes Pty Ltd working as the real estate agent. Homes on the other
hand performs a business of landscaping and provided Charlie with the 4 wheel drive sedan.
As stated under Section 6 of the Miscellaneous Taxation Rulings and Fringe Benefit Tax
Assessment Act 1986 it lays down the circumstances under which the fringe benefit tax will
be tax will be levied on car (Miller & Oats 2016).
Determination of Car FBT
As defined under the taxation rulings of MT 2027 personal use under sub-section
136 (1) any kind of use made by an employee or associates which is not completely used in
the phase of generating taxable income of the employee will be considered as personal use
(Pope et al., 2016). However, under sub-section 136 (1) a definition on the operating cost
valuation method for commercial journey has been stated in effect of any kind of use of car
other than the personal use made by an employee (Christie, 2015). As defined under
paragraph 3 of the Miscellaneous Taxation Ruling 2027 details concerning the business
journey is required to be recorded in the logbook or identical kind of document if the business
kilometres travelled by the car are used in the determination of the personal use part of a car
for the purpose of applying the operating cost method. Hence, it is found from the case study
that Charlie travelled a total of 50,000 km relating to work. In determining the fringe benefit
of the car used by Charlie operational cost valuation method will be used in compliance with
sub-section 136 (1) of the Miscellaneous Taxation Rulings of 2027 (Fleurbaey&Maniquet,
2015).
A critical question arises in determination of the personal and commercial use.
Therefore, whether the car used by the member of staff or the employee was wholly in the
phase of the generating taxable earnings of the employee (Kabinga, 2015). This comprise of
all the use that is completely made by the employee in the phase of acquiring or generating
the taxable proceeds or performing the business activities for the purpose of generating the
taxable proceeds in agreement with the sub section 136 (1). If further follows the use made in
the phase of employment by the member of staff with the employer who presented the car for
business carried on by the member of staff or an additional employment action of the
employee might make up for business use of the car for Fringe Benefit Tax (Lang, 2014).

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Furthermore, use of car made by the employment during the phase of business that is carried
on by the member of staff might similarly be considered as the business use for this purpose.
From the given scenario of Charlie and Homes, it can be said that Charlie made the
use of the car during the course of his employment with Charlie who provided him with the
car to carry on the activities of the business. The use of car by Charlie constitutes business
use of car in producing the assessable income of the employee and hence attracts Fringe
Benefit Tax.
The test involved in determining the business use and private use for FBT purpose is
identical that has been defined under the income tax law in ascertaining whether the
expenditure acquired in using the car are considered deductions under section 51 of the
Income Tax Assessment Act 1997. There are evidences from the case study that expenditure
incurred by Charlie on car is for the employment use that can be completely considered for
deductions for income tax purpose (Barkoczy, 2016). In ascertaining the differences between
the personal and business use FBT can be used by raising the question whether Charlie had
occurred expenditure on the use of the car and the expenses in the present case of Charlie
would be considered as the allowable deduction for income tax.
Operating Cost Method
In the Books of Charlie
For the year ended 2016/17
Particulars Amount ($)
Petrol and oil per month 6000
Repairs and Maintenance per month 10500
Registration per annum 240
Insurance per annum 960
Car parking fee 2400
20100
Gross Taxable Value (a) 6030
Employee Contribution (b) 0
Taxable Value of the benefits 6030
In consistent with the present case study of Charlie and Homes, the guidelines from
the Miscellaneous Taxation Rulings of 2027 established principles relating to Income tax
(Snape& De Souza, 2016). As evident, Charlie correspondingly in compliance with the
requirement of Sub-division F of Division 3 of the income tax assessment act in ascertaining
the expenses of car occurs the ruling and Homes are deductible for the purpose of income tax
(Braithwaite, 2017).

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As stated in the taxation rulings of IT 112 the conclusion held in the case of Lunney
and Hayley v FCT (1958) confirmed the circumstances that travelling between residence and
an individual’s usual place of employment or trade is considered as the ordinary private travel
(Cao et al., 2015). Travelling to place of employment is regarded as the essential pre-requisite
in generating the earnings and it is not regarded in the phase of earning that income.
Therefore, the kilometres travelled by Charlie to his work will be considered as private and
the fact that Charlie used the car during the course of his employment would not change the
results. It is understood that the place of work or employment is significantly itinerant in
nature (Saad, 2014). Citing the reference of Newsom v Robertson (1952) 2 All ER 728;
(1952), the cost that is occurred by the barrister in travelling between his home to the place of
his business would be considered as expenses. The court acknowledge that traveling the
expenditure occured in travelling from home to chambers or to various courts in the course of
day does not amounted to expenses.
Log Book Method Computation
In the books of Homes
For the year ended 2016/17
Particulars Amount ($)
Total Kilometres Travelled 80000
Distance travelled for Business use 50000
Distance travelled for Private use 30000
Percentage of Business Use 62.5
Expenses:
Petrol and oil per month 6000
Repairs and Maintenance per month 10500
Registration per annum 240
Insurance per annum 960
Car parking fee 2400
Total Expenses 20100
Taxable value of the FBT 12562.5
Employment duties of an Itinerant Nature:
From a long time, it has been recognized that travel by an member of staff from his
home might comprise business travel on the circumstances that the nature of the office or
unemployment is inherently itinerant (Woellner et al., 2016). Citing the reference of Simon
in Taylor v Provan (1975) AC 194travel of Charlie will be regarded as employment travel
since travel formed the fundamental part of his work (Robin, 2017). Furthermore, the terms

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of employment for Charlie required him to discharge his employment responsibilities at
additional place of employment.
According the FBT Act 1986, Charlie was using the car of his employer partly for
work purpose and partly for private purpose (Blakelock& King, 2017). Charlie incurred cost
on petrol, repairs and maintenance, insurance and registration. Therefore, Charlie for the
purpose of FBT deductions can claim the work related portion of petrol and repairs since it
was used in gaining or producing the assessable income.
Car parking fringe benefit:
A car parking fringe benefit may originate if the employer present the car parking to the
member of staff and all the subsequent state of affairs are met;
a. The car is parked at the premise which is owned or leased under the direction of the
contributor
b. The car is parked for more than four hours
c. The car is leased or owned or under the control of the employee
d. The car is presented in relation of the employee’s employment
e. The car is used by the employee to travel between the place of residence and work or
work and home for a minimum of once in day
f. There is a business-related parking place that imposes charge on a fee for all day
parking within the radius of one kilometre of the premises
As evident from the above stated conditions, Charlie has parked his car at a secure
parking for which the employer Shine Homes paid $200 each week. It is found that the car
was parked in Charlie’s garage and was under the control of the provider. The car was
provided to Charlie in respect of his employment. Furthermore, Charlie used the car to travel
from home to work and work to home each day (Fry, 2017). Therefore, a fringe will arise in
context of the Charlie and Homes can claim deductions for the parking fees paid on behalf of
his employee.
FBT on accommodation:
According to the Fringe Benefit Tax Act 1986, provision of entertain represents
entertainment in the form of drink or recreation, accommodation or travel in connection with
the entertainment (Williamson et al., 2017). As evident from the case study that Charlie has
incurred a minor accident and was unable to use the vehicle for a period of 2 weeks. This

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took place a week prior to the Charlie wedding and Shine Homes undertook the decision of
hiring the car for that period in order to allow Charlie to go his honeymoon. Furthermore,
Shine Homes paid Charlie’s honeymoon accommodation. The current circumstances is in
accordance with the fringe benefit tax provision and attracts tax liability for entertaining
employees and non-employees for a weekend tour at the tourist place or offering them with
the a holiday. From the given scenario it is found that Shine Homes paid the accommodations
trip for Charlie and the same cannot be claimed as deductions for Charlie however, Shine
Homes on the other hand can claim for deductions. Charlie is however required to declare
such allowance in his tax return as income.
Fringe Benefit Tax consequences of Charlie Homes
The taxation rulings of TR 94/25are applicable to the employers and are held liable
for tax that is imposed under the section 5 of the Fringe Benefit Tax Act 1986. The rulings
provide that subsection 51 (1) of the Income Tax Assessment Act 1936 is applicable to claim
for fringe benefits tax and taxpayers that are employers (Ismer&Jescheck, 2017).
Specifically, the rulings is concerned with the timing of the fringe benefit and fringe benefit
tax instalments that are incurred for the purpose of subsection 51 (1). According to the
taxation rulings of TR 94/25 or fringe benefit tax instalments are generally occured in
producing or generating taxable earnings that is unavoidably occured performing the business
with the amount of those tax are deductible under the subsection 51 (1) of the ITAA(Gordon
&Keuschnigg, 2017).
The liability for Fringe Benefit Tax for Shine Homes originates under the
commonwealth legislation. As defined under section 5 of the Fringe Benefit Tax Act 1986,
tax is generally imposed in accordance with the fringe benefits taxable sum of an employer
during a year of tax (Fleurbaey&Maniquet, 2017). Citing the reference of Tubemakers of
Australia Ltd v. FC of T 93 Fringe Benefit Taxable sum comprises of amount incurred in
ordinary case represents the sum of all the values which is allocated to the numerous Fringe
Benefit provided by Shine Homes to his employee Charlie (McDaniel, 2017).
From the given scenario, it is evident that Shine Homes incurred several expenses
such as honeymoon accommodation, car hire cost, parking fees and these expenses are
incurred in gaining or producing assessable income (Bankman et al., 2017). In compliance
with subsection 51 (1) of the ITAA 1997 the expenses incurred by Shine Homes was

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incurred in generating the taxable earnings that is inevitably occured in carrying on of a
business and shall be considered as a deductible expenses.
Conclusion:
To conclude with it is found from the case study that fringe benefit expenses events
are taxable under the FBT Act 1986. The study takes into the considerations the relevant
sections and case laws in arriving at the decision related to car fringe benefit. The use of car
by Charlie constitutes business use of car in producing the assessable income of the employee
and hence attracts Fringe Benefit Tax.

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Reference List:
Bankman, J., Shaviro, D. N., Stark, K. J., &Kleinbard, E. D. (2017). Federal Income
Taxation. Wolters Kluwer Law & Business.
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Blakelock, S., & King, P. (2017). Taxation law: The advance of ATO data matching. Proctor,
The, 37(6), 18.
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Routledge.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ...&Wende, S.
(2015). Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP, 1.
Christie, M. (2015). Principles of Taxation Law 2015.
Fleurbaey, M., &Maniquet, F. (2015). Optimal taxation theory and principles of fairness (No.
2015005). Universitécatholique de Louvain, Center for Operations Research and
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fairness (No. UCL-UniversitéCatholique de Louvain).
Fry, M. (2017). Australian taxation of offshore hubs: an examination of the law on the ability
of Australia to tax economic activity in offshore hubs and the position of the
Australian Taxation Office. The APPEA Journal, 57(1), 49-63.
Gordon, R., &Keuschnigg, C. (2017). Introduction on Trans-Atlantic Public Economics
Seminar: Personal Income Taxation and Household Behavior.
Ismer, R., &Jescheck, C. (2017). The Substantive Scope of Tax Treaties in a Post-BEPS
World: Article 2 OECD MC (Taxes Covered) and the Rise of New
Taxes. Intertax, 45(5), 382-390.
Kabinga, M. (2015). Established principles of taxation. Tax justice & poverty.
Lang, M. (2014). Introduction to the law of double taxation conventions. LindeVerlag
GmbH.

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McDaniel, P. R. (2017). FEDERAL INCOME TAXATION. Foundation Press.
Miller, A., & Oats, L. (2016). Principles of international taxation. Bloomsbury Publishing.
Pope, T. R., Rupert, T. J., & Anderson, K. E. (2016). Pearson's Federal Taxation 2017
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