Taxation Law Report: Case Studies on Australian Taxation Law

This report delves into the intricacies of Australian taxation law, examining several case studies to illustrate key concepts and regulations. The report begins with an introduction to the Australian taxation system and its governing bodies, followed by an analysis of five distinct case scenarios. The first case explores capital gains and losses from the sale of various assets, referencing relevant sections of the Income Tax Assessment Act 1997 (ITAA 97) and taxation rulings. The second case examines fringe benefits tax, specifically focusing on an employee's loan and the calculation of taxable fringe benefits. The third case involves a joint tenancy rental property and the allocation of profits and losses. The fourth case discusses tax avoidance principles, referencing the IRC v Duke of Westminster case. The final case considers the tax implications of land sales and logging activities. The report concludes with a summary of the key findings and references relevant legislation, rulings, and academic sources.

Taxation Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
QUESTION 2...................................................................................................................................2
QUESTION 3...................................................................................................................................3
QUESTION 4...................................................................................................................................4
QUESTION 5...................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Federal commission and Australian taxation office has formed various acts and their
supportive regulations that have impact over fair taxation in country. The present report is based
on various case situations which will describe several laws, rulings and sections that have been
awarded by federal legislation related to taxation methods in Australia.
QUESTION 1
Issue:
 Eric has purchased various assets and sold them.
 Capital gains or loss can be acquired by him on the sales.
Rules:
 Section 6 (5 & 10), (6-20)
 Section 8(1-10)
 CGT u/s 104.5-110
 TR 92/3
 Arthur Murray (NSW) Pty. Ltd. V. Federal commission of taxation.
Application:
Particulars Purchase price Selling price Gain / loss
Antique vase 2000 3000 1000
Antique chair 3000 1000 (2000)
Painting 9000 1000 (8000)
Home sound system 12000 11000 (1000)
Shares of a listed
company
5000 20000 15000
Net capital gain 5000
As per section 6(5& 10) Eric can be liable for the assessable income he gain on the sales
of various assets. These assets can be ordinarily or statutory as per ITAA 97. there can be
exemptions allowed to him on the basis of section 6-20 and deduction under section (8-1) over

some assets (Income Tax Assessment Act 1997, 2017). The capital gain taxation can be calculated
under section 104.5-110 where the various conditions and limits over the exemption of sale of
assets. There will be use of taxation ruling of TR 92/3. This case is same as the case of Arthur
Murray pty ltd v FCT.
Conclusion:
As per the above case it can be said that Eric has made sales of various goods and had
capital gains or losses over them. He made the gain for $5000 as the net capital gains (104.5-110
of ITAA 97). He will be liable to make payments over the income he gain through selling of
such assets (s6 5& 10 of ITAA 97).
QUESTION 2
Issue:
 Brain a bank executive, his employer awarded him 3 year loan of $1m a part of his
remuneration.
 Interest over the loan is 1% pa as monthly installments.
 He has used 40% of such fund. Calculation can be made over the fringe benefits.
Rules:
 Fringe benefits assessment act, 1986 (5A& 5B)
 Employee's fringe benefits (5E)
 DIVISION 6 (ITAA 97)
Application:
On the basis of cited case situation, Brian who is bank executive provided with loan of $1
million at a special rate 1% p.a. by his employer. From assessment, it has found that average of
benchmark interest rate in Australia accounts for 4.68% respectively. By taking into account
such aspect it can be said that fringe interest rate benefits attained by Brian implies for 3.68%.
Further, given case situation presents that Brian has used 40% of the borrowed funds such as

$400000 and met all the obligations pertaining to interest. In this regard, taxable value of fringe
benefits is enumerated below:
Particulars Figures
Fringe interest rate 5.65% - 1% = 4.65%
Fringe benefit (in $) 400000 * 4.65% = 18600
FBT tax rates 49%
Taxable amount of fringe benefit 18600 / (1- 49%) = 36470.59
Amount of tax payable (Fringe benefits
taxable amount * rate of tax)
36470.59 * 49% = 17870.59
In both the cases, whether interest rate payable monthly or at the end of loan there would
be no difference in the taxable amount of fringe benefits (Buchanan and Consett, 2016.).
However, if bank releases Brian from the obligation in relation to making payment of interest on
loan then amount of taxable fringe benefit will differ significantly.
Conclusion:
As per the above case Brain can be benefited with the fringe benefits under section (5E of
FBA, 1986). He will be liable to make payments of the taxes over the 50% consumption such
loan. There can be monthly payment of the Fringe benefits which will be in section 5e of FBA.
QUESTION 3
Issue:
 Jack and Jill as joint tenant has acquired rental property.
 Profit over the property can be gained by Jack as 10% and Jill as 90%
 Loss is being 100% bear by Jack.
 Loss occurred for $10000 in last year
Rules:
 Capital gain tax sec.(104(5) & (110))
 Exemptions under section (8-1)
 taxation rulings IT 2167
Application:

Jack and his wife Jill have acquired a rental property. As per the agreement, they have
signed as joint tenants to that property. Profit can be gain by both the person on the basis of 10%
to Jack and 90% to Jill, but if there is loss 100% is to be bear by Jack. They have capital loss last
year for $10000 and the loss can be allocated in section (104 (5& 110) of ITAA 97). There will
be deduction under section (8-1) of ITAA 97, here he can claim the exemption over the capital
losses he had. The case follows the taxation ruling IT 21067 (Capital gains tax, 2017).
Conclusion:
As per the above case Jack and Jill were become the join tenant and has made their profit
ratio as 10% of Jack and 90% of Jill but losses are fully paid by Jack (Xynas and et.al., 2014).
There was loss of $10000 this would be deductible over rental properties as per some conditions
mentioned as in section 8(1) of ITAA 97.
QUESTION 4
Issue:
 Principle of IRC v Duke of Westminster [1936] AC 1
 Current principles in Australia
Rules:
 section 6(5-110) of ITAA 1997
Application:
Case of IRC V Duke of Westminster is highly related to the aspects of tax avoidance. In
such case Duke of Westminster paid wages to his gardener from the post-tax income (6(5-110)).
As per specific deed of covalent, Duke promised to their servants in against to the services
delivered by them. Hence, with the motive to reduce the tax liability Duke stopped paying
gardener wage. In accordance with tax laws of time, Duke can claim for the reduction and
thereby would become able to reduce tax liability (Russell, 2016). Thus, in such case, it has been
identified that payment to the gardener and servants is tax deductible only when it is paid on
annual basis. On the basis of such aspect, Duke will be eligible only when he pays to the servant
on annual basis (Buchanan and Consett, 2016). Current principles are stated that there will be

payments to the employees on the basis of work done by them and the hours of time they have
spend.
Conclusion:
It can be concluded that as per current principle followed by the country the payments
can be made to their employees on hourly basis and work performed by them.
QUESTION 5
Issue:
 Bill acquired a land full of pine trees for grazing sheep.
 Logging company has offered him $1000 for each 100 meter to clean the land
 If Lump-sum of 50000 being paid to logging company for cleaning land.
Rules:
 CGT u/s 104 (5- 110)
 exemptions u/s 8-1
 section 6(5-10)
Application:
Bill has made investment in purchasing land which is non-deductible expense under
section 8-1 of ITAA 97 (Sembrano and et.al., 2017). As per contract, logging company will pay
$1000 for each 100 meters. On which CGT will be charged (104. 5-110). If he pay $50,000 on
cleaning land these will be deductible expense under section 6(5-10).
Conclusion:
As per above case bill will make payments of gains he acquired from logging company as
per section 104.5-110 of ITAA 97 make deductible payment u/s 6(5-110) in some condition as
the land is going to be used for commercial purpose.

CONCLUSION
From the above report it has been concluded that taxes are levied over capital gains and
losses of various ordinary and statutory assets. Legislation and deductions were awarded by
federal commission and ATO in Australia for fair taxation. As per the case of Eric the sales of
assets has made capital gain for $5000, as in the case of Brain the fringe benefits was awarded to
him by his employer was measured at rate of 49% has end result of 1787.59. Besides this, it can
be inferred that various cases, individuals were informed and suggested for make claim to have
deductions on several transactions.

REFERENCES
Books and Journals
Buchanan, R. and Consett, E., 2016. Section 974-80 ITAA97: The current state of play. Tax
Specialist. 19(5). p.217.
Russell, T., 2016. Trust beneficiaries and exemptions from CGT: Reflections on the Oswal
litigation. Taxation in Australia. 51(6). p.296.
Sembrano, J. N., and et.al., 2017. Skeletal Anomalies Associated with Esophageal Atresia. In
Esophageal and Gastric Disorders in Infancy and Childhood (pp. 135-153). Springer
Berlin Heidelberg.
Xynas, L., and et.al., 2014. Allowable deductions, cost base of CGT assets and the GAAR: a
minefiled for taxpayers and their advisers. Australian Tax Law Bulletin. 1(5). pp.94-98.
Online
Capital gains tax. 2017. [Online]. [Available through] :<https://www.ato.gov.au/General/Capital-
gains-tax/>. [Accessed on 19th September. 2017].
Income Tax Assessment Act 1997. 2017. [Online]. [Available through]
:<https://www.legislation.gov.au/Details/C2017C00282>.[Accessed on 19th September.
2017].