Taxation Law Case Study Analysis

This taxation law assignment presents a series of case studies exploring various tax concepts. Students analyze scenarios involving fringe benefits tax (FBT), the barter system, and primary production activities under Australian taxation law. The assignment requires applying relevant legal provisions and case precedents to determine the tax implications of these situations. It includes detailed solutions for each case study.

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

1TAXATION LAW
Table of Contents
Answer Part A............................................................................................................................2
Answer Part B:...........................................................................................................................4
Answer A:..................................................................................................................................4
Answer to B:..............................................................................................................................5
Answer C:...................................................................................................................................5
Answer D:..................................................................................................................................6
Reference List:...........................................................................................................................7

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Answer Part A
Fringe benefit tax are regarded as the important term of business that are useful in
payable by the employers relating to the benefit paid to the employee apart from salary and
wages. Charlie is a real estate agent and Shiny homes has provided Charlie with a sedan. The
car ran a total of 80,000 kilometres with 30,000 for business purpose. According to the “sub-
section 136 (1)” use of car by employee that is not related to the employment or business
constitutes personal use (Somers and Eynaud 2015). Charlie has occurred cost that is in
running the car and these cost is required to be separately incorporated in log book for
keeping track of the business kilometres travelled.
The operating cost method is determined under “section 10A and Section 10B of
FBTAA 1986”. A statutory rate of 20% is applied in determining the fringe benefit tax under
statutory method (Shaw 2017). Similarly, the operating cost process separates the
administrative cost in determining the fringe benefit tax. For Charlie both the method of
statutory rate and operating costing method is applied in determining the fringe benefit cost.
These are as follows;

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A computation relating to the deemed interest and deemed depreciation for has been
depicted in compliance with “section 11 (2)” of the act.

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As evident from the above stated computation the fringe benefit tax under the
statutory method is lower than the fringe benefit derived in the operating cost method.
Shiny homes have shouldered an expense of his employee Charlie honeymoon cost, cost
of accommodation and cost relating to the car hire charges for the wedding of his employee
(Fisher 2015). In compliance with the taxable value of the car fringe benefit that is computed
above the cost incurred by Shiny for Charlie’s wedding and accommodation will be included
in his overall tax liability. The case study of Charlie evidently provides that he has incurred
expenses for car parking. Section 39A of the ITAA 1986 requires some criteria to be fulfilled
before claiming car parking fringe benefit tax;
a. The car should be owned by the employer
b. The car must be parked in the employers premises
c. Car is used for employment purpose
From the above listed criteria car was parked in separate premises by Charlie therefore it
would not be considered assessable in respect of section 39A.

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Answer Part B:
Answer A:
Alan is a practicing locum doctor and he receives from his clients cakes and scones as
the mark of appreciation for treating his clients. Alan also charges fees from his clients. One
day one of his client gifted Alan with a wine bottle that had the market value of $360 because
he cured his client dog from a snake bite. Section 6-5 of the ITAA argues that any form of
income that is related to the employment will be considered for assessment (Accounting,
2017). The cakes and scone received by Alan was not regarded assessable since it lacked
commercial market value. Similarly, the receipt of fees and wine bottle would form the part
of Alan assessable income because they held market value and commercially related to his
employment income under “section 6-5 of the ITAA 1997”.
Answer to B:
The taxation ruling of TR 97/11 takes account of business of primary production
under ITAA 1997. The ruling provides the guiding framework that are relevant in
understanding whether the person is carrying on a business or hobby (Jones 2017). The
difference between hobby and business are as follows;
a. A business has the significant commercial character while a hobby has no commercial
purpose.
b. A taxpayer under business has more than just the intention of engaging in business
while a hobby has no business intentions it is generally for recreational purpose.
c. In business taxpayer has the purpose of profit making while hobby lacks the profit
making purpose.

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An explanatory example of “Thomas v FC of T – 72 ATC 4094” considers that the
business activities generally carries the intention of commercial purpose and are carried in the
manner of ordinary trade.
Answer C:
The “taxation ruling of TR 97/11” applies on the taxpayer that executes the primary
production activities under 1997 of the act (Tang and Wan 2015). Situations provides that
Betty has been creating marmalade and was very famous among her neighbourhood. A
decision was made by her to sell the marmalade in the market and a stall was set up on every
Sunday for selling them to the customers. The extra amount of marmalade was sold by her
husband Alan to the supplier and had the intention of making profit. According to the
example of “FC of T v Evans (1989)” both Alan and Betty were indulged in repetitive
business activities and the amount derived is taxable component (Jones 2017).
Answer D:
Any form of transaction taking place from the barter system would be considered
taxable under “subsection 25 (1) of the ITAA 1997” (Dunne et al. 2015). The transactions of
barter system are similar to cash and credit having GST consequences. The commencement
of barter system by Alan and Betty and income generated from such transaction would
require tax payment under “subsection 25 (1)” with GST as well. Considering the example of
“FC of T v Cooke and Sherden 80” the barter transaction of Alan and Betty would require
tax and GST to be paid.

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Reference List:
ACCOUNTING, M., 2017. TAXMATTERS. Small.
Dunne, J., Aldred, J., Gorton, T. and Taylor, H., 2015. 2014 cases show a continuing trend of
high ATO success rate. Taxation in Australia, 50(1), p.20.
Fisher, D., 2015. Mid market focus: No joy regarding FBT on travel expenses for FIFO
arrangements. Taxation in Australia, 49(7), p.377.
Jones, D., 2017. Mid market focus: Income or capital?: Taxpayer draws a blank. Taxation in
Australia, 51(7), p.357.
Jones, D., 2017. Tax and accounting income-Worlds apart?. Taxation in Australia, 52(1),
p.14.
Shaw, A., 2017. Tax files: Why small really is better: Accessing the lower corporate tax rate
for small business entities. Bulletin (Law Society of South Australia), 39(10), p.39.
Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO's proposed treatment of
unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.
Tang, R. and Wan, J., 2015. Fringe benefits tax and fly-in fly-out arrangements: John Holland
Group Pty Ltd v Commissioner of Taxation. Australian Resources and Energy Law
Journal, 34(1), p.17.