Tax Avoidance and Corporate Structures

TAXATION LAWS AND PRINCIPLES
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Table of contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
Task 2...............................................................................................................................................4
Task 3...............................................................................................................................................5
Task 4...............................................................................................................................................7
Task 5...............................................................................................................................................8
Conclusion.......................................................................................................................................9
Reference list.................................................................................................................................10
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Introduction
In the study, it has been decided to show the taxation system of Australia, taking the help of the
five different case studies. With this given case reference, it is said to obtain complete sense of
implication of taxation as well as it has been decided that the principles of governing body and
certain legislation to be reviewed for the purpose of reconciling the rules and laws with that of
the case studies. In addition, principles laid in the Income Tax Assessment Act 1997 of Australia
will also be considered for the fine judgment of the case references.
Task 1
Over the last 12 months Eric has purchased certain assets and shares which he sold them along
with shares last week same year. If the assets are held for more than one year it is called long-
term assets. On the other hand, if the assets are held for less than one year it is to be said as short-
term assets (Piketty and Zucman, 2014). In this case Eric had held the assets and shares for less
than one year and sold them in the same year. So the assets which was held by Eric is short term
assets.
Computation for short- term capital gain or loss for the year ended.
Total assets purchased
An antique vase $ 2,000
An antique chair $ 3,000
A painting $ 9,000
A home sound system $ 12,000
A share of listed company $ 5,000
Assets purchased in total = $ 31,000
Total assets sold.
An antique vase $ 3,000
An antique chair $ 1,000
A painting $ 1,000
A home sound system $ 11,000
A share of listed company $ 20,000
Assets sold in total = $ 36,000
Table 1: Computation of short-term gain or loss
(Source: Created by author)
Short term capital gain for the year ended = Assets sold in total - Assets purchased in total.
= $ 36,000 - $ 31,000
= $ 5,000
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So, it can be seen that the assets which were held by Eric was short term assets because the year
in which he purchased the assets, he sold the assets in the same year.
Task 2
In the study, it is said that Brian is a bank executive and he will be provided by three-year loan of
$1m as a part of his remuneration provided, and the interest rate will be 1% pa (payable in
monthly installments). In addition is also said that the loan has been provided on 1 April 2016
(Williams, 2016).
Brian will use 40% of his loan for income producing purpose and for meeting all his obligation
to interest payment. It is also said that the fringe benefit in the loan for the year 2016-2017 was
received by Brian. The computation of the taxable income of Brian for the year 30 June 2017 is
done below:
Amount of loan = $ 1m
Actual rate of interest on loan in Australia is 15%
Date on which loan was provided = 1April 2016
Rate of interest = 1%
Mode of payment = monthly installments.
Loan amount = 40% of $ 1 million = $ 4, 00,000.
Calculation of installments for 15 months = ($ 1, 00,000*1% / 12 months)* 15 months.
= ($ 10,000 / 12 months) * 15 months
= $ 12,500.
Calculating taxable income for the year ended 2016-17
Revenue
LESS:
Expenditures = $ 0.4 million
Interest on installments = $ 0.01 million
Actual installments = $ 0.25 million
Total = $ 0.34 million
In this study, it has been found that the amount of tax that Brian has to pay upon his taxable
income is $0.34 million and the monthly installment (interest + principle) on the loan is $ 0.26
million. It can be seen that Brian has to pay for installment and because of this his taxable
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