Taxation Theory, Practice & Law

Explore the concepts of taxation theory, practice, and law in this comprehensive study material. Learn about different types of taxes, their implications, and the legal framework surrounding taxation. Get insights into fringe benefits tax and capital gains tax calculations. Perfect for students studying taxation or professionals in the field.

Taxation Theory,
Practice & Law

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Question 1...............................................................................................................................3
Question 2...................................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Taxation is a system which is prevalent all around the globe through which the
government of a nation puts certain taxing liabilities upon the people residing in the country. It is
the most fruitful way of income for the government of any country. There are various types of
taxes imposed upon its people in different countries such as Income Tax, Sales Tax,
Entertainment Tax etc. Majority of the countries are divided among different states for
administrative purposes and in each of the country some of the taxes are collected by the central
legislature whereas others are collected by the states. It is a basic rule of Interpretation of
Statutes that every taxing statute must be interpreted in a Strict Manner. It has seen that the
central government has introduced various laws and policies since last few years in order to
make the taxing system more efficient and people more accountable so that they can understand
their responsibility of paying tax to the government and does not indulge in any illegal activities
for tax avoidance. The one such new law which has been introduced by the government is Goods
and Services Tax through which the taxing system in the country has become more smooth. In
this report, the taxing liability of Fringe Benefits and Capital Gain tax consequences will be
calculated.
MAIN BODY
Question 1
Fringe Benefit is that type of tax which should be imposed by the contractor in
accordance with the extra compensation which an employer should offer to its employees. This
tax is regarded as a fee which would be imposed upon the business organization in lieu of the
wages offered to its workers. This tax was imposed for the purpose so that to levy the tax on
some assets in full through which the tax could be evaded. There are various advantages of this
tax such as facilities which is given to former employees either intentionally or unintentionally,
payments of mobile phone of workers and payment of pension(Arnold Ault and Cooper, 2019).
There are various aspects and situations which are explicitly mentioned on which this
Fringe Benefits Tax can be imposed. There are various situations which are exempted from this
tax. For instance, any expense which would be paid by the firm in meeting the government duty
to workers.
Calculation of base value of car:
Particulars Amount

Purchase price $44,000
Deliver charges $2,000
Base value of
car $46,000
Amount of days on which the company provides compensation from 1May 2019 to 31March
2020= 304 days
Fringe profits are valued at 30% @
Measurement of the maximum payable for the fringe benefits:
Taxable amount: 20% * Base value of car * Number of days of benefit / 365 days – Expenses
incurred
= 20% * $ 46000 * 304 / 365 -$ 770
= $ 6, 892.46
As per the Section 55 of the Australian Constitution, it has been mentioned that the
Union government shall ensure that the rules related to the tax must always through a single
issue only. That is why there are various taxing statutes implemented in Australia at various
regional level which are liable to control a single type of tax issue such as income tax or excise
duty or entertainment tax or vehicle tax etc (Xynas, 2019). In each form of the tax there would be
purpose of enacting such taxing statute, who all are liable to be taxed under the said statute and
what will be the rate of tax on which the tax would be imposed. The high renaissance actions are
concerned with as following:
Collection of Income Tax for Persons as well as Corporations: The major governing
law regarding taxing purpose in Australia are Income Tax Act 1936 and The Assessment Act
1997. Also the other important law for this purpose is Fringe Benefits yearly tax. The act of
1997 was implemented for the purpose so that it can resolve the loopholes of the earlier act of
1936 but as of now both the acts are enforceable and governing their relevant provisions. The act
of 1997 is majorly a taxing statute which governs regulations on the capital gains. While
interpreting the taxing statute it must be taken into consideration that various rules of the
interpretation of statutes must be applied and the strict interpretation of the taxing statute must be
made(Barkoczy, 2017). The constitutional definition of the taxing rules is based upon various
statutes and various doctrines. With the help of various trust law theories, it has resulted in the

limited view of the burden of income tax. It has also lead in a major differentiation between the
capital and sales which is very less inclined towards the standard income tax concepts. The
foundation of the Goods and Services Tac has been limited by considering the Goods and
Services Tax as company tax instead of a sales tax. Due to this reason this purposeful method has
been extended in order to understand various agreements and by restricting the misuse of various
measures(Kercher, 2020). Treaties are examined in a very narrow manner as majority of these
laws overlaps the provisions of the treaties. In these types of judgements, the judiciary was
favoring the investors which lead to legislative initiative to modify the definitions given by the
judiciary according to the treaties to firms interposed between various shareholders and investors
and law dealing in tax avoidance. It is a settled principle that the right of an individual for the
collection of the pension from a programme shall be considered as expired on a certain time.
Whereas by transferring the sum to any other account where the individual acquires or state
benefits of the individual obtain as per the situation will be considered as more secured in
earning the scheme of pension(Guo and Ching, 2020).
Question 2
The Capital Gains taxes can be defined as the taxes which could be imposed mostly on
realizing of benefit by the union government after selling the certain types of assets.
Traditionally a capital gain can be understood as the difference between the purchase and
disposing costs payable by any person or an organization. It is a fact that Capital Gain Tax is the
component of the income tax distinguished from Income Tax Assessment Tax 1997 such as
Goods and Services Tax. It must be noted that when there will be a capital liability in that
situation where certain assets are disposed off, the taxpayer is not liable to pay the Capital Gains
tax on such transactions. The situation becomes complex in nature at that time when there would
be sustained capital gains or losses in both short term as well as long term(PATIL, 2017). It is of
utmost importance that all the connected benefits and losses must be linked altogether. It should
also be noted that it is necessary to equate the short term losses in order to achieve a cumulative
return in the medium term. Various owners of the organizations have certain methods in order to
reduce or minimize the net capital gains for a particular financial year. One of the easy way to do
this is to keep the investments for a more period until they get sold. It is a very efficient method
as long term capital gains rate users would pay the smaller gains as compared to short term gains.

Throughout the sense of the case situation in question, a person named Taryn offers a list
of payments identified as follows:
Events ($)
Sale of Antique Painting $25000
Sale of Car $12000
Sale of Harry Potter’s collection $1500
Sale of gold necklace $2000
Sale of sculpture $6,000
Sale of Antique Painting
In the context of antique painting, Father brought the same on 20th August 1984 at $
2500 which was provided to Taryn 5 year ago. At the time of sale the selling amount was
$25000, so the profit was
$25000- $2500 = $22500
Sale of Car
The car was bought by Taryn on 1st jan 2015 = $20000 and sold the same on 20th may
2020 at $12000, thus the profit will be
$ 20000- $ 12000 = $ 8000
Sale of Harry Potter’s collection
The purchase amount of Harry porter collection to Taryn on 10th Oct 2018 was $ 350 and
the selling price on 4th Jan 2020 was $ 1500, thus the remaining amount will be treated as profit
which is:
$1500- $ 350
= $ 1150
Sale of gold necklace
As gold prices are increasing day by day all over the world, thus selling of gold necklace
by Taryn also makes a decent profit to her. Such as the purchase price of necklace was $ 1200 on

8th Aug 2018 which she sold for $ 2000 on 20th Mar 2020 (Datt and Keating, 2018). The profit
amount will be
= $ 2000- $ 1200 = $ 800
Sale of sculpture
On 1st Jan 2020, Taryn traded a $6,000 sculpture, which she acquired on December 1994
Calculation of CBT
$ 22500 + $ 8000+ $1150 + $ 800 + $ 6000
= $ 38450 * 20.6/100
In the given facts the major question was that how Taryn must comply with all the
activities as per the Capital Gains Tax laws in order to adjust the capital gain tax and the
associated implications for their transfers as defined in the relevant law i.e. Capital Gain Tax Act
2019. The Capital gain was happened when the Taryn has sold the item on a higher price. It is a
general practice by Taryn that they will keep the asset for a long time period, generally for 2
years which will lead in long term profit. It is proven fact that under the long term capital assets,
the gain of indexing and the individual who drops underneath the 30 percent income range also
gets the bonus of charging the 20% lower tax rate(Hanlon, Verdi and Yost, 2018). It must be
noted that long term capital profits are also considered and measures in the similar manner as
short term capital profit. The only difference among both is that regarding the purchasing costs
and development costs which are offset by the weighed transaction costs and increased costs.
The scheme which is related to the capital benefit investment would be very helpful to an
individual in order to obtain tax deductions when owing a home. The Australian Government is
permitting the individuals to buy plots and houses through this fund. It is also the principle of
law that if the amount has been withdrawn for any other purpose, it must be used within the 3
years of the withdrawal. Failure of this will show impact upon the gross benefit figure which will
be paid according to the standard long term capital gain tax thresholds.
CONCLUSION
By the above report it can be concluded that taxing statutes are very much important in
every country because these are the laws which are the basis of the income of the government. In
the above report two facts were examined and it was seen how the Capital Gains Tax Act 2019

would be imposed upon the individuals and the business organizations. It was seen that capital
gains tax is majorly imposed upon the gains which are recorded.
REFERENCES
Books and Journals
Arnold, B.J., Ault, H.J. and Cooper, G. eds., 2019. Comparative income taxation: a structural
analysis. Kluwer Law International BV.
Barkoczy, S., 2017. Core tax legislation and study guide. OUP Catalogue.
Guo, S. and Ching, W.K., 2020. High-order Markov-switching portfolio selection with capital
gain tax. Expert Systems with Applications, p.113915.
Hanlon, M., Verdi, R. and Yost, B., 2018. Insider Tax Effects on Acquisition Structure and
Value.
Johnson, C.H., 2016. A Conceptual Framework for Capital Gain. Fla. Tax Rev., 20, p.664.
Kercher, B., 2020. An unruly child: a history of law in Australia. Routledge.
PATIL, N., 2017. Impact of tax on long term capital gains (LTCG) in indian stock
market. International Journal of Transformation in Accounting, Auditing & Taxation
[ISSN: 2581-7590 (online)], 1(1).
Xynas, L., 2019. Obesity and Taxation-Is Australia Ready?. Journal of law and medicine, 27(1),
pp.122-148.