T2 2017 HI6028 Taxation Theory, Practice & Law Individual Assignment

This document presents a comprehensive solution to a HI6028 Taxation Theory, Practice & Law individual assignment from T2 2017. The assignment addresses five key issues: tax implications of asset sales, taxability of fringe benefits (loans), tax consequences of rental property ownership, the concept of tax evasion vs. tax planning (IRC v. Duke of Westminster), and the tax implications of timber sales. Each question includes an issue statement, relevant tax regulations, applicability analysis, and a conclusion. The solution references various books and journals to support the analysis, offering a detailed understanding of Australian taxation law concerning capital gains, fringe benefits, property, and business income. The assignment covers CGT, FBT, partnership, and income from timber sales, providing a thorough overview of taxation principles and their practical application.

HI6028 Taxation Theory, Practice
& Law
T2 2017 Individual Assignment

TABLE OF CONTENTS
Question 1..................................................................................................................................3
Issue........................................................................................................................................3
Regulations.............................................................................................................................3
Applicability...........................................................................................................................3
Conclusion..............................................................................................................................3
Question 2..................................................................................................................................3
Issue........................................................................................................................................3
Regulations.............................................................................................................................3
Applicability...........................................................................................................................4
Conclusion..............................................................................................................................4
Question 3..................................................................................................................................4
Issue........................................................................................................................................4
Regulations.............................................................................................................................4
Applicability...........................................................................................................................5
Conclusion..............................................................................................................................5
Question 4..................................................................................................................................5
Issue........................................................................................................................................5
Regulations.............................................................................................................................5
Applicability...........................................................................................................................6
Conclusion..............................................................................................................................6
Question 5..................................................................................................................................6
Issue........................................................................................................................................6
Regulations.............................................................................................................................6
Applicability and Conclusion.................................................................................................7
References..................................................................................................................................8

QUESTION 1
Issue
Tax implications regarding the sale of assets by Eric in preceding twelve months.
Regulations
In the above-described case method of CGT, discount and indexation will not be applicable
because holding period of an asset is less than 12 month. Thus; another method will be
applied (Cao and et al., 2015).
One other method is there, which is considered to be the easiest method out of this three, in
order to calculate capital gains (Saad, 2014). Individuals must make use of this method so as
to compute their capital gains, when they have purchased or sold their assets in a year or less,
usually, for CGT (capital gains tax) events are not inclusive of assets (Tran‐Nam and Evans,
2014).
Usually, to make use of the other measure, the individual has just to subtract their cost from
their capital profits. The profit amounts have been left over is the capital gain.
Applicability
Net Capital Gain of
Antique Vase
Selling price – Cost
of purchase
$3000.00-$2000.00 $1000.00
Net Capital loss of
Antique Chair
$1000.00-$3000.00 -$2000.00
Net Capital loss of
Painting
$1000.00-$9000.00 -$8000.00
Net Capital loss of
Home Sound System
$11000.00-$12000.00 -$1000.00
Net Capital gain of
Shares
$20000.00-$5000.00 $15000.00

Conclusion
As per above calculations, $6000 capital gain will be taxable. Due to lack of
information regarding other income, it is assumed capital gains are sole income and tax rate
will be 10%, so the tax will be $600.
QUESTION 2
Issue
Taxability regarding Fringe benefit, i.e. loan provided at a special rate.
Regulations
Fringe benefits tax is the amount paid on some of the benefits which employers offer
to employees instead of wages or salaries (Mishra and Ratti, 2014). All the FBT along with
the value of taxes according to the Fringe Benefits Tax Assessment Act 1986, excluding
fringe benefits of tax-exempt body entertainment, are solely responsible for the payroll tax
(Burkhauser, Hahn, and Wilkins, 2015).
In case the benefit is not liable, excluding of the Superannuation Holding Accounts
Special Account deposits, or contains zero value will not be responsible for the payroll tax
(Mishra, 2014). The individual needs to state the real value of the entire fringe benefits for
every month. However, individual can make use of estimate method for every month, if they
have payments of fringe benefits for 15 months or more than this (Bond and Wright, 2017).
If not, then the individual should provide the real amounts of fringe benefits. It can be
performed on a monthly basis by adding up all the benefits further multiplying the total Type
1 and Type 2 by the appropriate Type 2 rate of gross for the particular year (Woellner and et
al., 2016). The interest rate of the benchmark can be used in order to estimate the taxable
value of the following:FBT provided in the way of loan, FBT of a car, when employees want
to measure the benefit by making use of operating cost method.
Statutory Rate
FBT year Benchmark rate Reference
1 April 2016 to 31 March 2017 5.65% TD 2016/5

Applicability
Particulars Amount
A Interest to be paid Note 1 $10000
B Interest as per
statutory rate
Note 2 $56500
C The taxable value of
loan fringe benefit
A-B $46500
Note 1
$1000000*1%
Note 2
$1000000*5.65%
Conclusion
Taxability will not be affected if the amount of interest is paid annually instead of monthly
instalments.
QUESTION 3
Issue
Jack and his wife had purchased property for rental purpose with the written
agreement that Jack is entitled to 10% profit and remaining will be availed by his wife.
However, they are not sure about tax consequence in case of revenue as well as capital loss.
Regulations
TR 93/32
Income tax: distribution of net profit and loss among co-owners
By a general proposal, it will be more suitable to distinguish the rental property
owners in terms of Beaumont J in McDonald's case at ATR p.969 and ATC p 4552 for co-
owners, instead of being partners in business management (Braithwaite, 2017). As a result,
rental property co owners are usually not considered as partners by the general law as they

are not based not the applicable general law to a partnership comprising the distribution of
gains and losses from the rental property.
Applicability
In accordance with the cited provisions, there is no existence of partnership according
to the general law among the respondent and their spouse. The relationship among them was
said to be of co ownership, and if they agree to partnership under subsection 6(1), this
situation will be stated as irrelevant, as their unreal partnership will carry such consequences
that they have to treat each other as a pure partner for some specific purposes (Long,
Campbell and Kelshaw, 2016). It will not practise the deduction responded will make on the
loss of business. They can only subtract the interest of the individual in the loss of partnership
(Arnold and et al., 2014). The individual interest is that interest which is allowed entirely to
the partner, be compared with their joint interest in the property as a whole: in this aspect
case of FCT v Whiting (1943), 68 CLR 199 at 204; 2 AITR 421 at 425-6 can be referred.
Conclusion
Thus, it is essential to identify either both the respondent and his wife are just only
notional partners for the intention of the Act or are pure partners according to the general law.
By considering their deed partners will be liable for proportionate loss and can claim for the
same.
QUESTION 4
Issue
IRC v. Duke of Westminster carried out an agreement of covalent with his associates
inclusive of household helpers, servants, gardeners etc. In the particular agreement, Duke
obliged to pay his fellow some money in exchange for their work. A letter was submitted to
the fellows declaring that Duke will pay wages on extra sums, if there is any, for their
services. Still, the servants received the same wage as before, however Duke was benefitted
from this as he earned tax benefit under the law that applied at that time period, and the deed
decreased Duke's liability to additional charges.
Regulations
For this case, handed over to the House of Lords, the judge Lord Tomlin said that;

Each and every person is allowed, if they arrange their own affairs so that the tax been
attached according to the suitable action would be less than it should be (AO, M.D.A., 2015).
If they get success in arranging them then they can safeguard the outcome, however, then no
appreciation by the fellows or Inland Revenue Commissioners might be of their initiatives,
and are not bound to pay surplus taxes (Barkoczy, 2017).
Applicability
This case cited that the tax evasion will only be accepted if it practices initiated statue
law or act that will reduce the liability of Duke, if it is allowed and do deed in accordance
with the yearly payment. It is declared that if any company adopts such tools will be
responsible for tax profit reductions, or else will not be allowable. Further, the court must
look upon the broad economic jurisprudence and states in order to keep it up, in context with
tax planning which will be introduced for tax evasions. Hence, the court must declare this
principle as invalid.
Conclusion
This case provides clear guidance regarding drawing difference better tax evasion and
fair tax practices to ensure viable regulatory compliance.
QUESTION 5
Issue
In this case, Bill is the owner of a large parcel of land in which there are various tall
pine trees. He has been offered to get paid $1,000 for every 100 metres of timber on this land
by a logging company. Now he wants to know about tax implications of receipt and
consequence if lump sum amount is paid for granting the right to the logging company.
Regulations
Rule of taxation
TR 95/6
Standing timber’s disposal, but not in regular business course
If a taxpayer owns a disposal of timber, which is planted for the reason of sale might
lead to the value of those trees inclusive in the assessable income of the taxpayer, according
to the subsection 36(1), during the period when disposal will take place (Blakelock and King,

2017). This might be either the taxpayer is running the business of forest operation or not,
since the taxpayer is running the business and there is no disposal in the regular business
course. The main thing being required is the trees comprise the total asset of business as a
whole.
Either or nor a specific deed results in a tress disposal, been said by the distinct, from
the sale of a land’s interest, rely on the basis of interpretation of that deed. The Subsection
36(1) will not be applicable if the trees are planted on leased land and if the lessee doesn’t
contain entire ownership on trees were planted on the leased land (Lam and Whitney, 2016).
Rights disposal to standing timber
A tax payer running a business of forest operation might sell its standing timber via giving a
right to any individual to remove or cut the standing timber, if there will be right or not to cut
the timber is practised (Barkoczy. 2016). The profits earned from that sale are assessable in
accordance with subsection 25(1).
Applicability and Conclusion
By considering regulatory provisions, if Bill get a receipt of $1000 then income will
be assessed as per provisions of 36(1) and if lump sum amount is paid then taxability will be
as per subsection 25(1).

REFERENCES
Books and journals
AO, M.D.A., 2015. Modernising the Australian Taxation Office: Vision, people, systems and
values. eJournal of Tax Research, 13(1), p.1.
Arnold, B.R., Bateman, H., Ferguson, A. and Raftery, A., 2014. The size, cost and asset
allocation of Australian self-managed superannuation funds.
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Barkoczy, S., 2017. Core Tax Legislation and Study Guide. OUP Catalogue.
Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data matching. Proctor,
The, 37(6), p.18.
Bond, D. and Wright, A., 2017. A Snapshot of the Australian Taxpayer.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax
record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and
Wende, S., 2015. Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP, 1.
Lam, D. and Whitney, A., 2016. Taxation and property: Practical aspects of the new foreign
resident CGT witholding tax. LSJ: Law Society of NSW Journal, (21), p.84.
Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in
Australia. St Mark's Review, (235), p.94.
Mishra, A.V. and Ratti, R.A., 2014. Taxation of domestic dividend income and foreign
investment holdings. International Review of Economics & Finance,31, pp.218-231.

Mishra, A.V., 2014. Australia's home bias and cross border taxation. Global Finance
Journal, 25(2), pp.108-123.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Tran‐Nam, B. and Evans, C., 2014. Towards the development of a tax system complexity
index. Fiscal Studies, 35(3), pp.341-370.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.