Taxation Report: Capital Gains Tax and Fringe Benefit Tax Analysis

This report provides a detailed analysis of Australian taxation laws and practices, focusing on capital gains tax (CGT) and fringe benefit tax (FBT). It examines CGT implications on the sale and purchase of various assets, including vacant land, an antique bed, a painting, shares, and a violin, with detailed calculations to determine net capital gains or losses. The report also addresses fringe benefit tax (FBT) for the Rapid Heat company, specifically concerning car benefits, loan benefits, and heater benefits provided to an employee. It includes calculations to determine the taxable amount based on the Fringe Benefits Tax Assessment Act 1986, offering insights into the application of statutory formula and operating cost methods. The report further explains the determination of taxable value on car benefit, and loan benefit as per FBT assessment act. The report is a comprehensive guide to understanding the complexities of Australian taxation.

Taxation Theory,
Practice & Law

INTRODUCTION
Taxation law and practices in Australia is imposed by legislative authority, to bring fair
tax operations in country. There are various taxes, norms and regulation which are imposed on
different level of different activities. The present study will discussed about different laws
imposed in Australia. Report include a detailed description on capital gains tax on different gains
or losses occurred to the client on selling and purchasing of different assets. On the basis of the
capital gain or losses incurred by the client, different calculation has been made to evaluate the
total amount of gain or loss on which client has to pay capital gain tax of current year. Further,
there well be a discussion included in the file on deter,mining the Fringe benefit tax to Rapid
Heat company on providing car benefit, loan benefit and heater benefit to one of its employee.
Different calculation to evaluate the taxable amount as per Fringe-benefits tax Assessment Act
1986 is included in the file.
1. Determination of client's net capital gain or net capital loss for the current tax year.
Capital gain tax under Australian taxation system, is a tax which is applied on the sale of
assets. CGT (capital gain tax) is a part of income tax of a person which he earned by selling or
purchasing of an assets. In Australia, CGT is applicable on all the property of person in country
or anywhere in the world.. CGT will be applicable on the basis of a period in which an asset is
being used before being disposed out.
If a person is using an asset for less than a year, than he/she is applicable to pay full CGT,
but disposal of assets after using it for more than a year could give a person a 50% discount on
capital gain (Burns, 2018). This are some provisions of discount on capital gain tax in Australia.
If a person has made a capital gain on disposal or selling of an asset after holding it for more than
a year, then person can apply for 50% discount on capital gain.
In case of selling of shares, capital gain or losses will be determined which will come
under the income tax return in Australia. With the influence of the provision from 20th
September, 1985 which states that there will be no capital gain or loss (CGT)on the disposal of
assets. Under Australian tax provisions, CGT applies to capital gain or losses of shares in the
same way as any other assets. That means a person has to pay tax on any capital gain arises by
selling of the shares( as per provisions of 20th September, 1985).
a). Block of Vacant Land:

Interpretation:
From the above calculation of selling of a vacant land for capital gain, it can be
illuminated that client who purchased the land in January 2001 is contracting to sell a block of
that property. She has purchased the land for $ 100000 and paid local sewerage land tax of $
20000. it accumulated the total cost base of $ 120000 as per January 1, 2001. On 3rd June she had
signed a contract of selling her asset for $320000. however, in accordance with the provision of
the contractual right of real estate properties, the time when a person is entered in or create any
contract she will fall under the CGT event for next year(Grant, Westerholm and Wu, 2018). At
the time of disposal of assets, the CGT will applied at time of entering in the contract, not when
the contract is settled. There is a provision of CGT under section 140-20 it stated that CGT will
be applicable on the lost or destruction of that asset.

So, in the above scenario, the CGT tac will levied on the client for the next year as she is
signing a contract on 3rd June, but the contract will be settled on 3rd January of the next year.
Therefore, CGT event will happen on 3/06. The land is sold at cost of $ 320000 and the cost base
UN-indexed will be reduced which was of $ 120000. It can be interpreted from the above
calculation, that the cost base will be deducted from the selling cost, which will give the gain of
$ 200000. As per the discounting model of 21st September 1999, 50% discount will be applicable
as assets is being purchased after 1999. Hence, the capital gain tax levied on the client for the
next year on her capital gain of this year which is $100000.
b). Antique Bed:

Interpretation:
In relation with the present scenario, it can be assessed that the client has an antique bed
which was purchased for $ 3,500 on 21 July 1986, the alteration charges paid was $ 1,500 which
was paid by her after purchasing bed. The bed was stolen on 12 November of current tax year .
Market value of the bed as per 31 Oct of same year was $ 25,000. As per the calculation above,
the purchasing price of bed with the influence of rate 2.9 is determines as $ 10157.22 as on July
1986 (Jacob, 2018). In addition to this, the charge on alteration of bed with the influence rate of
2.67 is $ 4011.88. With this impact the cost base un-index of the bed is $ 14169.09.
as per the provision under Section 140(20) of loss and destruction of CGT assets, the
market value of bed will not be determined in calculation. In addition to this, the insurance claim
on for $ 11000 on basis of which the capital loss has evaluated which is - $3169.09.
c). Painting:

Interpretation:
As per outline of the table, client has purchased a painting on 2 may 1985 at a cost of $
2,000. Influence rate of the painting is 2.97 which makes the amount of painting $ 5941.95.
client has sold the painting in April of current tax year at cost of $ 125000. Hence, as per the
assessment above, an asset has been purchased before sept,1999 hence provision of indexation
model will be applied. Thus, the capital gain on painting will be $ 119058.05.
d)Shares:

Interpretation:
On the basis of the present scenario, it can be interpreted that the client has
purchased 4 kinds of shares in different respective years. In three cases calculated above,
the shares were purchased after September 1999, so the provision of discounting method
will be applied in above three cases (McCormack, 2017). With the varying in duration of
obtaining shares different CGT will be levied on the client. In (i) client has earned capital
gain of $30700 on selling of shares. In case (ii) the client has earned total gain of $ 30000
on sale of 2500 shares. Where in case (iii) client had a loss of -$6900. in last case (iv)
client has purchased 10000 shares at $1 per share on 5 July of current tax year with stamp
duty of $1100 . She has sold all 10000 shares at $2.50 per share with a brokerage fees of $
900. the total capital gain earned is $ 23000. However, in this case the shares purchased
and sales has been done in less than a year, other method will be applied to ascertained
the capital gain.
Moreover, current year gain is 23000, summing up all the gains and losses, net
capital gain of period is determined as $39900.

e). Violin:
Interpretation:
As per the above case, the client had purchased at $ 5500 on 1 June 1999. she sold
the asset on 1 May of current year at $12000. As per provision, asset has been purchased
before sept 1999 the index model of discounting method will be applied. As interpreted
above, the cost of purchase on current year with influence rate is $9093.98 . Moreover, as
per June 1999 sales cost is $ 12000. the total gain to client were determined as $2906.02 .

Interpretation:
As per the scenario given, the total capital loss of current year is determined as $
158694.98. Additionally, capital gain from all collectables are 118794.98 has been
obtained. Moreover, the capital losses from past year is $7000 and collectables loss are
determined as $ 1500.
As per the section 102, losses of collectables have to be settled by collectables
capital gain earned. So, the total capital gain after setting off all the collectables will have
amounted to be $157194.98. After deducting the previous year’s losses of $ 700, the net
capital gain for year ended 30th June is amounted $150194.98.

2. Advising the client(Jasmine) on analysing FBT of various assets.
FBT is Fringe benefits tax levied on the employers on certain non-cash benefits
which they provided to their employees. These benefits are separated from income tax.
The company or employers can provide different fringe benefits like car facilities, car
parking, low interest loans etc. In Australia, all employers who provided fringe-benefits to
their employees have to lodge FBT returns to disclose value of benefits during the year
1st April 2016 to 31st march 2017.
CAR: Rapid-Heat Pty Ltd is provided car benefit to one of its employee Jasmine for
travelling purpose. It will come under Fringe Benefits Tax Assessment Act 1986. As per
section 7 of the Fringe Benefit Tax Assessment, if an employee is using car for his/her
private use, it will come under Car fridge benefit tax (Car fringe benefits, 2018).
According to the section 7(3) if car is not parked in business premises or near the
company or parked at employee's home, it will be treated as personal use of employee. As
per FBTA act, a car is any of the following:
 Station wagon, vans or any utilities.
 Any good carrying vehicle like panel van.
 Any other passenger-carrying vehicle.
Under the provision of Fringe Benefit Tax section 7, there are two methods to calculating
taxable value on car benefit, statutory formula method and operating cost method.
Section9 of FBT states that an amount if paid by employee for fuel, repair at the vacant
period has to be bared by the company. The maintenance and repair of car will not be
covered under personal use.
Calculation of taxable amount of car benefit:
As per the section 9 of FBTA act, a statutory percentage will be provided on the
taxable amount of car benefit , if car fringe provided to employees is after 1st April 2014.
after that period fix rate of 20% is mentioned in the act .
So as per the given scenario, the car fridge taxable amount to be paid by Rapid-
Heat Pty Ltd. Is calculated as under:
The base value of car with GST is $ 33000.

Car has been used from 1st may 2017 to 31st march 2018, and the 5 days of repair and
maintenance (as per act, has to be bared by company)
So the total days, car has been used is 335-5=330 days.
Employee's contribution will not be reduced as it is reimbursed by employer.
According to this, taxable value of FBT on car benefit is , (33000*20%)*335/365 = $
6058
Interpretation:
As per analysing the scenario, the FBAT tax on car benefit levied on the company
of giving car facilities. The cost of the car was $ 33000 on which statutory FBT rate will
be applied of 20%, as the car benefit provided to employee is before 1st April 2014. the
car was operated by employee from 1st May 2017 to 31st march 2018 in which 10 days car
was operated as employee was out of station and 5 days for repair and maintenance. The
total period car has been used is (335-5) 330 days. However, the Fringe Benefit Tax
payable is $6058.
LOAN:
As per section 16 of Fringe Benefit Tax Assessment Act 1986, loan benefit arises
where you provide a loan to an employee and charge a low rate of interest other than
statutory rates, presented during the FBT year (Loan fringe benefits, 2018)
). The amount of tax on loan benefit will be:
The interest that would have been if the statutory rates were applied to the
outstanding daily balance of loan.

Any interest that have been accrued. If it was used for the asset for which no income can
be generated so FBT will be Nil.
GST Act 1999 defines that input tax credit will be available for things that are
used for business . So here in the given question, Car that was purchased for employee
and the expenses made on that car is also for business purpose so, company can claim
Input credit in both cases.
Electric Heater:
Interpretation: As per the above table on which it can be said that costs of
purchasing an electric heater of $1300 with additional manufacturing cost of $700. Thus,
overall purchase costs of that heater were $2000 (Federal Register Legislation, 2018).
Thus, it has been sold for $2600 on which overall gain was of $600. The FBT had been
levied on asset on rate of $282.
2. Analysing the tax consequences of loan amount if used by jasmine in purchasing shares
As per the given scenario, a portion of loan which was provided to
Jasmine(employee) has been used by her husband on purchasing shares. Hence, it will
come under income bearing investment. The taxable amount of FBT on loan will be
4.25%-5.5% from 1st seot 2017 to 31st march 2018 will be= 50000*1.25%*212/365= 363.

Interpretation:
By considering above listed table, on which it has been analysed that the Fringe
Benefit Tax rate estimated as 5.5% which is more than the loan interest rate of 4.25%.
Therefore, it has been analysed from the above calculation that FBT of Jasmine,if she had
utilise all $50000 in purchasing shares for herself. Thus, Fringe Benefit Tax has been
analysed is $363.
CONCLUSION
By summing up the above report, it can be concluded that influences of taxation
law, regulations and practices help in analysing assessable income of an individual or an
organisation. The above study has analysed different capital gain tax levied on purchasing
and selling of different assets various assets such as violin, land, antique bed, painting and
shares. Calculation has done to determined the net capital gain or losses tax payable by
the client at the end of year. Further, Fringe Benefit Tax was analysed on the car benefit
provided by company to its employee. The report has concluded the FBT calculation of
tax amount payable on car, loan and heater benefit.

REFERENCES
Books and Journals
Burns, A., 2018. Options in succession planning for a family business. Taxation in
Australia. 52(10). p.543.
Grant, A. R., Westerholm, P. J. and Wu, W., 2018. Imputation Credits and Trading
Around Ex-Dividend Day: New Evidence in Australia.
Jacob, M., 2018. Tax regimes and capital gains realizations. European Accounting
Review. 27(1). pp.1-21.
McCormack, C., 2017. Our clinging to the fringe is stultifying development. News
Weekly. (3010). p.7.
Online
Car fringe benefits.2018. [Online] Available Through:
<https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/Types-of-fringe-benefits/
Car-fringe-benefits/>
Federal Register Legislation. 2018 [Online] Available
Through :<https://www.legislation.gov.au/Details/C2014C00048>
Loan fringe benefits, 2018 [Online] Available Through:
<https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/types-of-fringe-benefits/loan-
fringe-benefits/>