HI6028 Taxation Theory, Practice & Law: Partnership & FBT Analysis

This assignment solution addresses two key taxation issues. The first question involves calculating the net earnings of a partnership (Brekkie and Lunch and OZ Bottle Shop) and determining the appropriate income distribution among partners, referencing Division 5 of the ITAA 1936 and relevant case law like FCT v Amalgamated Zinc Ltd. It identifies deductible expenses and capital outlays. The second question focuses on fringe benefit tax (FBT) consequences for an employer, specifically concerning expense payment fringe benefits and housing fringe benefits provided to an employee, citing sections of the FBTAA 1986. It calculates the FBT liability for the employer based on provided information and relevant tax rates. The document concludes by determining the total tax amount payable by the employer, providing a comprehensive analysis of the taxation implications in both scenarios.

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

1TAXATION LAW
Answer to question 1:
The fundamental problem to this instance is linked to estimate the net sum of earnings
that is grossed by the partners all over the year of assessment and to conclude the dispersal of
incomes amongst the partners.
Rule:
“Division 5 of the ITAA 1936” commence with the “section 90”, that explains
partnership is not the separate legal company within the purview of genera law and do not
pay taxes. It must be noted that the imposition of levy is only made when the earnings are
allocation amongst the partners. A noteworthy description has been made in the standing of s-
91, where there is a mandatory lodgement of tax to correctly reflect the allocation of incomes
between the partners (Polsky 2015).
Furthermore, “section 995-1, ITAA 1997” states that the partners perform the
business activities with the ultimate objective of earning profit. The partners generally
perform the business activities for earning the ordinary or statutory income.
It is worth mentioning that gains that originates from performing the business
activities are regarded as the ordinary income under “section 6-5, ITAA 1997”. The
characterisation of receipts is normally reliant on determining whether the taxpayer is
performing the business and whether the considerations received amounts to normal proceeds
of the business activity (Dodge 2014).
The legislative position of s8-1 says that there is the positive limbs which provides the
permission to the persons for being entitled to the deduction in taxation originating from the
taxation income given the outlays has been occurred for earning the taxable earnings. In the
event of “FCT v Amalgamated Zinc Ltd (1935)” there is an imperative elucidation of the

2TAXATION LAW
proceeds which embraces that the outlays should be happened by taxpayers while grossing
revenues (Hirschfeld 2016).
The legislative position of (s-8-1(2)) evidently provides an elucidations that the
criteria for being entitled to income tax is not met if the outlays amounts to private spending.
The principal reason is that these outlays barely embraces any relationship with revenue
proceeds.
The legislative position that has been made in “(s25-10, ITA Act 1997)” is that
eligibility for income tax deduction associated to maintenances is made when the assets is
engaged for originating chargeable incomes (Lincoln and Andrew 2017). Maintenance work
such as painting of business premises for rectifying further deterioration is termed as repairs.
There is also the elucidation that has been made that when the effort carried out on the asset
is only amounting to mere replacement of the longstanding component that only reinstating
the usefulness of the denigrating asset then it is characterised as the repairs.
The taxation body of ATO clarifies the position of claiming instantly the write-off
worth of asset procured for a lesser amount of $AUD 20,000.
Application:
The taxpayer here Daniel and Olivia are partners within the meaning of “section 90,
ITAA 1936”. By adhering with the statutory standing of s-91 there should be filing of tax
return as the means of demonstrating the apportionment of earnings concerning the partners
in the current case study (Henry, Plesko and Utke 2018). The partners here are perform the
business activities with the ultimate objective of earning profit. The cash receipts from the
sales proceeds and debtors payment represents gains that has originated from performing the
business activities jointly by Daniel and Olivia and which is regarded as the ordinary income
under “section 6-5, ITAA 1997”.

3TAXATION LAW
The partnership reported expenses such as union fees, electricity bill, mobile bill,
insurance etc. Most notably the outlays cited here is meeting the nexus with the legislative
standing of s8-1 so it is permitted for entitlement of tax deduction (Strobel 2018). The
standing of Daniel and Olivia here makes it eminent that the jurisdictional verdict of “FCT v
Amalgamated Zinc Ltd” is ideal as the outlays were the part of making chargeable proceeds.
The partnership also reported drawings made by Daniel and Olivia such as cash
withdrawn and drawing of goods from bottle shop. As per the explanations that has been
manifestly mentioned above in the rule, the partnership drawings is failing to satisfy the
nexus under the legislative position of s8-1(2) as they do not hold any link with the income
producing act.
The legislative standing of s25-10 can be referred here to say that the painting is
amounting to permissible repairs. There should also be noted that the outlays that is reported
in the current case by the partners on the installing air-condition is failing to fall within the
deductibility rule of s25-10 because they are capital outlays (Borden and Lee 2018). But the
replacement effort that has been made for the motor of refrigerator is the effort that is carried
out on the asset is only amounting to mere replacement of the longstanding component that
only reinstating the usefulness of the denigrating asset and hence it is characterised as the
repairs.

4TAXATION LAW
Working Paper:

5TAXATION LAW
Conclusion:
The analysis that has been presented evidently defines that the partnership has made
the total amount of earnings of $44,199 and they should file the tax return of the partnership
based on the provision of S-91, ITAA 1936.

6TAXATION LAW
Answer to question 2:
Issues:
The issues in this case is centrally focussed on understanding the fringe benefit tax
consequences for the employer relating to the expense payment fringe benefit and housing
fringe benefit provided to employee during the year FBT year.
Rule:
It is important to note that the expense payment fringe benefit under “section 20,
FBTAA 1986” arises when the employer reimburses the employee for any kind of
expenditure they occur. Alternatively, the expenses payment fringe benefit arises when the
employer pays the third party in order to satisfy the expense that is occurred by the employee.
One is required to denote that the circumstances for imposing tax happens within the position
of S-23 when the provider of such benefit returns or wages the amount (McCurry and
Solomon 2018).
As it has been elaborated in the S-25, that the fringe benefit for a house happens for
the presently employed employee that is working in the company only when the organization
or the employer is giving the benefit for the living. There is also the noteworthy standing of
the provision of S-25 that the levy for the benefit relating to housing is only applied when the
house has the market value and the member of staff is contributing any sum of formal rent for
the house (Kleinbard 2018).
Application:
There is an evident scenario that the current circumstances of John represents that he
is getting the imbursement by the employer that amounts to a sum of $15,000. This current

7TAXATION LAW
standing imbursement is for shouldering the schooling expenses for John. The imbursement
amounts to benefit within the statutory standing of S-20, FBT Act 1986 as the expense
payment benefit.
The payment made by the employer is in satisfaction of the third party obligation
occurred by John. There will be the application of the taxation for the employer within the
statutory position of S-23 of the fringe benefit act of 1986 (Lang et al. 2018).
On the other hand, evidences obtained from the case study also contributes that the
John was given an apartment in Sydney for accommodation purpose. The legislative standing
of S-25, there is a fringe benefit for John because he is paying the AUD $100 so that he can
live in the house but the weekly accommodation costs stands $800. The below listed table
provides that the yearly fringe benefit tax stands here AUD $51400. A tax rate of 47 per cent
has been implemented for paying the tax while the sum of $45,851 has to be shouldered by
John. The employer will paying the tax on the market value of accommodation by referring to
the legislative position of S-27.
Conclusion:
The calculations provides that the total amount of tax that should be paid here for the
employer is amounting to $51,400.

8TAXATION LAW

9TAXATION LAW
References:
Borden, B.T. and Lee, S., 2018. Quantitative Prediction Model of Tax Law's Substantial
Authority.
Dodge, J.M., 2014. theories of tax Justice: ruminations on the benefit, Partnership, and
Ability-to-Pay Principles. Tax L. Rev., 58, p.399.
Henry, E., Plesko, G.A. and Utke, S., 2018. Tax Policy and Organizational Form: Assessing
the Effects of the Tax Cuts and Jobs Act.
Hirschfeld, M., 2016. Enhanced Partnership Tax Audit Rules: New Challenges That Require
Consideration. Prob. & Prop., 30, p.8.
Kleinbard, E.D., 2018. Perversion of the Tax Policymaking Process.
Lang, M., Rust, A., Owens, J., Pistone, P., Schuch, J., Staringer, C., Storck, A., ESSERS, P.,
Smit, D. and Kemmeren, E. eds., 2018. Tax Treaty Case Law around the Globe 2017:
Schriftenreihe IStR Band 108 (Vol. 108). Linde Verlag GmbH.
Lincoln, I.V. and Andrew, C.E., 2017. What are the Implications for Partnerships and
Partnership Taxation Under the Republican Proposals for Tax Reform. Int'l Fin. Law Prof
Blog (Tuesday.
McCurry, P.J. and Solomon, T.A., 2018. Tax and Benefits Considerations for Service
Providers for Family Offices. Tax Executive, 70, p.82.
Polsky, G.D., 2015. Deterring Tax-Driven Partnership Allocations. Tax Law., 64, p.97.
Strobel, C.D., 2018. New Tax Law Takes Effect in 2018. Journal of Corporate Accounting &
Finance, 29(2), pp.166-168.

10TAXATION LAW