Taxation, Theory, Practice and Law: Analysis of Australian Taxation

This report provides a comprehensive overview of taxation, focusing on Australian tax law, fringe benefits tax (FBT), and capital gains tax (CGT). It begins with an introduction to taxation and its importance, followed by an in-depth analysis of FBT, including calculations and relevant regulations. The report then examines capital gains tax, explaining its application to various asset sales and providing detailed calculations for different scenarios. It also explores the legal framework and the impact of tax laws on individuals and businesses. The report concludes by summarizing the key findings and highlighting the importance of understanding taxation for effective financial planning.

Taxation, Theory,
Practice and Law

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

INTRODUCTION
Taxation is termed as law where government gets the right to decide about the tax that
needs to be paid by any of the individuals. It is one of the mandatory laws that is to be followed
by each of the citizen or non-citizen of any of the specific nation. Tax is always collected in the
form of direct tax and indirect tax depending upon the situation and the services provided to the
customers. Here, role of central government and state government plays the significant role in
deciding that what types of polices regarding tax should be formed. In recent time period one of
the major improvements that has been brought within tax law is about Goods and Services Tax
where government is highly benefitted. In consideration to this, some of the case scenario has
been given in aspects of different parties and by considering this Fringe Benefits Tax Liability
and Capital Gain Tax Consequences will be explained. Even for better understanding some of
the calculations will be explained on the basis of given questions.
MAIN BODY
Question 1
In present scenario tax has been one of the most important criteria that needs to be met out
in the similar manner, it is said that Fringe benefit tax is the type of that is always imposed by
looking at the circumstances of additional compensation which is always offered by an employer
to their staff. Here, duty is always of the company which they must be able to fulfil (Tang, 2016).
It is that the FBT was an effort which was shown upon number of assets which is fully taxable. It
means that any of the authority or management will not be able to find out the way to not pay the
accurate amount of tax. FBT has number of pros that includes huge spectrum, services,
convenience which is always provided by the company to their employees by knowingly or
unknowingly. In addition, there are some of the rules that has been mentioned under FBT that
helps to understand about the concept in detail. Such as: ABC Ltd, had a incurred a expenses of
$4000 for lunch of employees and many more are there.
Calculation of base value of car:
Particulars Amount
Purchase price $44,000
Deliver charges $2,000

Base value of car $46,000
The total number of days which are given by the company for the purpose of providing
the compensation is between 1May 2019 to 31March 2020 equal to 304 days.
All of the Fringe benefits 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 mentioned information in Australian Legal System of article 55, it is mandatory
for the Union government that they will always work according to that taxation rules and policy
for purpose of dealing with any of the particular issue in one specified manner. For the purpose
of considering this respective aspect there are number of laws and regulations that currently
exists such as IT, ED, Import taxes and many more (Evans, Minas and Lim, 2015). Also, each of
tax issue is being solved with its specified obligations where certain liability for the tax is also
mentioned. In addition, there will be rate law where rates for certain type of tax will be explained
on the other side there will be evaluation law which will point out about the estimate amount of
tax that needs to be paid by any of person or entity. Whereas higher renaissance actions will
relate to the specific concern which is mentioned below:
Collection of income tax for persons and corporations: The concept of Income tax is
quite wider as there are number of laws and policies which are included in it. As per Australian
Constitution, the first Income tax act was introduced in the year 1936 which is crucial for
collecting the income tax. As well as there is an Assessment Act 1997 including Fringe Benefits
yearly Tax Act, 1986. All of this laws and regulations are the main principal for collecting the
income tax. The tax law which was formed in the year 1997 was has a main intention to bring
changes to the act which was commenced in the year 1936 where some of the main information
related to capital gain were missing (Boadway and Tremblay, 2016). But, both of them are

performing equally well at the moment which is quite effective in nature at the moment. There
are different types of law definition that has been derived by the government whether it is of
state level or central level and all of them have been very effective. The Australian government
has introduced the taxation because it has been one of the laws that has a route to improve the
economic condition of the nation. The concept is quite wider for individual as well as for
organization as well and for the better understanding number of sub laws has been introduced by
state level government as well. But, in some of the sector there is wider scope in tax so, there
was an introduction of GST which carries limited scope and quite effective in obtaining the
result. In addition, there is different treaties that has been viewed in detail so that it can be
identified that whether domestic legislation overrule those treaties or not (Jones, 2016). If any of
those situations arises, then jurisdiction ruling will be viewed for the purpose of deciding that
how nation and investors can be favoured so that nobody will have to suffer and even chances of
tax avoidance will also not occur. The pension scheme will be quite effective for any of the
individual where it is said that it will expire after certain time period but sometimes it will be
based on the contract formed.
QUESTION 2
Capital Gain Tax is the important tax under income tax where most of the taxes are based
on the assets that in an individual or an organisation have. This takes place will selling specified
types of assets in which CGT is imposed upon the variance amount. The concept of CGT was
introduced for the first in the year 1997 where ITAA act was introduced. In any of the CGT
concept, it is said that capital cost is always erased from capital gain for the purpose of
determining the total income in each year. On the other side, it is said that the concept gets more
complex whenever person or organisation is able to generate CGT for short term and long term
both. It is the concept that explains that net return is always decreased on the amount of
investment made by the person (Kraal and Kasipillai, 2016). As per this concept, it is always said
that investment should be made for longer term as compared to short term which is one of the
smart tactics under CGT.
As per the given scenario, Taryn has offers a list where different types of made has been made
which is mentioned below:

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
Discussing about the painting it was brought in the year 1984 on 20th August by Taryn
Father which was handed to him before 5 years. The painting was purchased at the price of
$2500 whereas it was sold at the price of $25000 which means that the total amount of profit in
the case was ($25000 - $2500=) $22500
Sale of Car
Taryn purchased a car on 1st January, 2015 at the price of $20000 whereas it was sold at
the price of $12000 on 20th May, 2020. In this transaction, the profit was of $8000.
Sale of Harry Potter’s collection
The price paid for collecting the Harry Porter volume was $350 which was purchased on
the date of 10th October, 2018 (Datt and Keating, 2018). On the other side it was found that
collection was sold at a mega price of $1500 which means the difference amount is equals to the
profit.
$1500- $ 350
= $ 1150

Sale of gold necklace
It has been seen that price of gold is always hiking due to which if any of the person sells
the gold then there is huge possibility that they can earn huge amount of profit. In the same
manner, Taryn has purchased the necklace at the price of $1200 whereas it was sold at the price
of $2000. It was purchased on 8th August, 2018 whereas it was sold on 20th March, 2020. The
amount of profit earned in this particular transactions is
= $ 2000- $ 1200 = $ 800
Sale of sculpture
On 1st Jan 2020, Taryn traded a $6,000 sculpture. This sculpture were purchased in the year 1994
in the month of December.
Calculation of CBT
$ 22500 + $ 8000+ $1150 + $ 800 + $ 6000
= $ 38450 * 20.6/100
= $ 7920.7
It is necessary to understand that how Taryn could have handled all of this activity in an
effective manner for obtaining the effective result. If Taryn decides to sell for such a lot further
than they paying for it, there is indeed a capital gain. Those who hold a commodity for longer
than two years until buying and selling; this gain is considered long-term gain and is charged in a
lower amount (Deb, 2018). With both the long-term savings, they can limit or negate the benefit
of investment income by using tax-favoured retirement accounts and combining capital profits
with capital losses. Collectible income including works of art and money are paid at a cost of
28%. This same cap is the share of profit for the sale of a registered small business product
which is not exempted by tax. Long-term capital gains are prosecuted with interest deduction at a
cost of 20.8 per cent. In essence, indexing is an asset values measure in accordance with the
inflation index. The above raises total costs and will accounted for a larger in chargeable
estimated tax obligations. Consequently, the indexing profit as well as the person that falls below
the earnings range of approximately% will also receive a benefit of a 20 % reduction under tax
of LTCG. Capital profit investment scheme allows an investor to gain tax benefits while owning

property. The Australian government just authorises the withdrawal of financing from such a
funds to buy residences and properties, but if withdrawn for any purpose, the investments should
always be used inside of 3 years of transactions (O’Connell, 2017). The vicious higher profit
margin would instead be required to pay through fixed tax rates for long-term capital gains.
CONCLUSION
It is concluded from the file that taxation is among the law which is necessary for any of
the nation economic. There are certain types of allowance that are being given to the individuals
when they purchase any of the assets. The concept of CG is crucial for any of the person or entity
where they should know that how they can use their strategies so that tax saving can be done.
The difference between LTCG and STCG should be known by all of the individuals for
determining that how taxation should be planned.

REFERENCES
Books and Journals
Tang, C., 2016. Australian GST update—2015. World Journal of VAT/GST Law. 5(1). pp.32-41.
Evans, C., Minas, J. and Lim, Y., 2015. Taxing personal capital gains in Australia: An alternative
way forward. Austl. Tax F.. 30. p.735.
Boadway, R. and Tremblay, J. F., 2016. Modernizing Business Taxation. CD Howe Institute
Commentary. 452.
Jones, D., 2016. Capital gains tax: The rise of market value?. Taxation in Australia. 51(2). p.67.
Kraal, D. and Kasipillai, J., 2016. Finally, a goods and services tax for Malaysia: A comparison
to Australia's GST experience. Austl. Tax F.. 31. p.257.
O’Connell, A., 2017. Australia. In Capital Gains Taxation. Edward Elgar Publishing.
Datt, K. H. and Keating, M., 2018, April. The Commissioner’s obligation to make compensating
adjustments for income tax and GST in Australia and New Zealand. In Australian Tax
Forum (Vol. 33, No. 3).
Deb, R., 2018. Tax Reforms and GST: A Systematic Literature Review. Journal of Commerce
and Accounting Research. 7(1). p.40.