Taxation Law Assignment: Examination of Tax Principles and Cases

This taxation law assignment provides a comprehensive analysis of various tax-related issues under Australian law. It addresses topics such as net capital loss and its implications, the application of Fringe Benefit Tax (FBT), the division of income and losses in rental property scenarios, the principles of tax avoidance, and the tax treatment of proceeds from the sale of timber. The assignment explores relevant legislation, including the ITAA 1997 and FBTAA 1987, and examines key cases like McDonald v FC of T (1987) and IRC v Duke of Westminster (1936). The solutions offer detailed explanations and conclusions for each question, providing a clear understanding of the tax principles involved. The assignment covers scenarios involving both individual and business contexts, including primary producers and royalty income, offering a broad overview of Australian taxation law.

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

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Answer to question 1:
Issue:
The depicted issue is interrelated to net capital loss for the income year derived from
the personal use of asset is disregarded.
Laws:
i. “Section 108-20 of the ITAA 1997”
ii. “Section 108-10 of the ITAA 1997”
Applications
At the time of working out the net capital loss for the income year capital loss made
from the personal use of the asset is not regarded. In the current situation there is only a
capital loss that is been made by Eric from the home sound system that is disallowed from

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being considered for offset against the capital gains of sale of shares. In accordance with
“section 108-10” loss of collectables are disregarded and not setoff are permitted (Kiprotich
2016). So Eric has only derived income from ordinary assets with no current year capital or
deductions will applied on Eric. During the current year the capital gains for Eric accounted
$15,000.
Conclusion:
The assessment defined that Eric will not be able to offset any loss of collectables
because has generated gains that were in the nature of ordinary assets.
Answer to question 2:
Issue:
The question is dealing with the issue of FBT that is defined under the Fringe Benefit
Act 1999.
Rule:
i. “Fringe Benefit Tax Assessment Act 1986”
Applications:
It is found from the study that Brian is released from the Bank from the payment of
interest on monthly instalment basis and he is only required to pay interest at the end of the
loan period. As defined under the “Taxation Ruling of 93/6 that banks sometimes provide
their customers with the facility of setting off interest that is incurred by the customers on the
amount of loan (Chan 2013). Taking in the account Taxation ruling of 93/6, Brian on making
the payment of loan interest at the end of the loan term rather than on instalment would not be

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required to pay income tax in respect of the benefit arising from the loan account under
section 16 of the FBTAA 1987.
Conclusion:
The assessment can be concluded by stating the payment of interest on loan at the end
of the loan period will reduce the burden of tax liability for Brian.
Statement representing Fringe Benefit Taxation Calcuations
Answer to question 3:
Issue:
i. “McDonald v FC of T (1987)”
ii. “Taxation ruling of 93/32”

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iii. “Section 51 of the ITAA 1997”
Applications:
Taking note of the “Taxation Ruling of TR 93/32” it provides the explanation on the
basis of which the commissioner of taxation contemplates the dissection of the net income or
loss among the co-owners of the rental property. The case study provides that Jack and Jill
rental property agreement contained a share of 10% and 90% respectively. With losses are to
be completely carried by Jack. Joint owns of the rental property under taxation ruling of TR
93/32 would not be observed as partners in terms of common law, but will be accounted as
partners under income tax law (Miller and Oats 2016). Jack and Jill co-owners is treated as
partnership with respect to income tax and not under general law.
As denoted in “FC of T v McDonald (1987)” where the taxpayer principally wanted
to increase the income of his spouse by indemnifying his wife against any kind of loss. Jack
and Jill will be treated as partners only for income tax and not in respect of general law. The
losses from the rental property between Jack and Jill must be shared equally.
If Jack and Jill decides to sell property then the cost base and the reduced cost be
should be accounted with gains or losses must be considered in respect of the ownership
interest of the property.
Conclusion:
The debate conducted above concerning the situation of Jack and Jill, they would be
required to share loss equally among them.

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Answer to question 4:
The case of “IRC v Duke of Westminster (1936)” is stated when there is a tax
avoidance. According to this it has been stated that each individual taxpayer has the authority
of making order for their tax affairs. It states that the allocation of tax should be made under a
method that no taxpayers are required to pay any amount that is lower than it would have
originally been (Preez 2016). The ruling is regarded as an element of appeal for the taxpayers
that looks for avoiding tax by setting up a a lawfully complex structure. As a result of this the
court has considered the example of “WT Ramsay v IRC” in order to take more restrictive
approach. It must be noted that transaction have predetermined counterfeiting stage that fails
to serve any purpose associated to business rather than tax avoidance. The correct approach is
to apply tax up to the effect of the business completely.
On applying the principles of modern day of Australia if the taxpayer is successful on
ordering correct tax assignment then the taxpayers are will not be forced to pay higher tax
(Atkinson and Stiglitz 2016). This principle offers taxpayers to structure their financial report
in a manner that reduction of tax liability should be within the lawful framework.
Answer to question 5:
Issue:
Will the taxpayer would be liable to tax for proceeds from the sale of timber engaged
in the forestry industry constitute assessable income.
Laws:
a. “Section 6 (1) of the ITAA 1936”
b. “Taxation Rulings of TR 95/6”

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c. “McCauley v FC of T (1944)”
Applications:
The contemporary issue states that Bill having a large land of pine trees initially
intended to perform the business of sheep grazing. Consequently an offer from logging
company of $1000 for 100 of timber made Bill accept the offer. Evidently, selling of timber
is taxable component under taxation ruling of 95/6.
In respect of the present situation of Bill under “subsection 6 (1) of the ITAA 1936”
he will be assessed as primary producer for his actions of indulging in tending of trees. Bill in
spite of the owner of the land did not planted the trees for tending it however the sale of such
timber would be considered as assessable income and would be included in his tax return.
The principles of “subsection 36 (1)” evidently puts forward that selling of timber is observed
to be an income that attracts liability to tax since such trees constituted the part of business
assets (Shome 2015).
Under the circumstance of section 26 (f) of the ITAA 1997” if Bill is provided
$50,000 as lump sum for giving the right of taking the as much as the amount of timber from
his land than the receipt of such amount should be viewed as royalties. With reference to the
decision in “McCauley v FC of T (1944)” payment for cutting down the trees would
represent royalties and would regarded for assessment under “section 26 (f) of the ITAA
1997” (Kaldor 2014).
Conclusion:
The discussion can be concluded by defining that Bill will be treated as the primary
producer and the royalties is taxable under the section 26 (f) of the ITAA 1997.

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Reference List:
Kiprotich, B.A., 2016. Principles of Taxation. governance.
Chan, L.K., 2013. AAT.: Principles of Taxation. Paper 5. Pearson Education Asia Limited.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Du Preez, H., 2016. A construction of the fundamental principles of taxation (Doctoral
dissertation, University of Pretoria).
Atkinson, A.B. and Stiglitz, J.E., 2016. The design of tax structure: direct versus indirect
taxation. Journal of public Economics, 6(1-2), pp.55-75.
Shome, P. ed., 2015. Tax policy handbook. International Monetary Fund.
Kaldor, N., 2014. Expenditure tax. Routledge.