Taxation Law Assignment: Partnership, Fringe Benefits, and Tax

This taxation law assignment addresses two key questions. The first question involves determining the net income of a partnership, analyzing business transactions, allowable deductions (such as car expenses, electricity bills, and repairs), and disallowed expenses (like private consumption drawings), with detailed calculations of receipts, expenses, and net income. The second question focuses on fringe benefits tax (FBT), specifically expense payment and housing fringe benefits, explaining relevant legislation (FBTA Act 1986) and applying it to scenarios involving payments for an employee's child's school fees and the provision of accommodation. The solution includes computations for the taxable value of the fringe benefits.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
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Table of Contents
Answer to question 1..................................................................................................................2
Answer to question 2:.................................................................................................................7
References:...............................................................................................................................10

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Answer to question 1
Issues:
The issues involves establishing the net income of the partnerships under “division 5
of the Partnership Act 1936”.
Rule:
Denoting the explanation made in “division 5 of ITAA 1936” a partnership is not held
as the distinct entity under the general law and the partnership does not pays tax. Instead it is
the partners that pays tax on the distributed profits from the partnership (Lee 2015). The net
income of the partnership is determined under “section 90” as if the partners are Australian
resident. The definition of partnership refers to the carrying on the business as partners that is
in receipt of the ordinary income or statutory income together under “section 995-1 (1),
ITAA 1997”.
Importantly under “section 6-5, ITAA 1997” a receipt is not treated as the ordinary
income until and unless it meets certain perquisites (Mumford 2017). This includes that the
receipts should be cash or convertible into cash and it should be real gain to the taxpayer.
“Section 6-5 of ITAA 1997” defines ordinary income as the income in respect of the ordinary
concepts. As held in “Scott v CT (1935)” ordinary income is interpreted in accordance with
the ordinary concepts.
As a general rule “section 8-1” possess the potential of being implemented to any
taxpayer (Borden 2015). Under “section 8-1”, a loss or the expenses may be allowed for
income tax deduction if the outgoings are incurred in producing the taxable income or it is
necessarily occurred while carrying on the business for obtaining or producing the taxable
income. The court in “Amalgamated Zinc Ltd v FCT (1935)” held that the gaining or

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generating assessable income must be interpreted in the due course of producing the taxable
income (Mellon 2016).
While an expenses or losses is not allowed for deduction under the general deduction
rule given the expenses meets the negative limbs of “section 8-1 (2)”. This includes the
expenses that are capital or private or domestic in nature (McNulty and McCouch 2015).
“Subsection 25-10” allows a deduction for outgoings incurred for repairs on the
premises or the depreciating assets that is used for generating taxable income (Picciotto
2015). As per “section 25-10” certain forms of repairs are considered as repairs such as
painting the plant or the business premises to resolve the current corrosion and also to prevent
the premises from deteriorating further.
Costs incurred on replacing the items of permanent fixtures that is installed on the
premises for producing income is held as deductible repairs under “section 25-10”. However,
the replacement should be of worn out unit by the new unit of identical design for restoring
the efficiency function and should not involve improvement (Sikka 2017). Finally, ATO
states that a taxpayer is allowed to claim deduction for the cost of business assets installed on
the premises that is below $20000. An immediate deduction is permitted to taxpayer under
this circumstances.
Applications:
The mixed business carried on by Daniel and Olivia is termed as partnership under
“division 5 of ITAA 1936”. In other words, Daniel and Olivia are carrying on the business as
partners that is in receipt of the ordinary income or statutory income together under “section
995-1 (1), ITAA 1997”.
For the duration of partnership their business transactions included the cash receipts
from sale and debtors payments. Referring to “Scott v CT (1935)” these receipts are treated

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as the ordinary income under “section 6-5, ITAA 1997” (von Haldenwang and von Schiller
2016).
Additionally, for the duration of partnership their business transactions also included
outgoings such as car expenses, electricity bill, rates, insurance etc. Citing the interpretation
of “Amalgamated Zinc Ltd v FCT (1935)” these partnership expenses are treated as
allowable deduction because they are incurred in the due course of producing the taxable
income.
Daniel and Olivia also withdrawn cash and took items from the bottle shops for their
private consumption. The drawings made by each Daniel and Olivia is excluded from
deductions because these expenses meets the negative limbs of “section 8-1 (2)” which is
private or domestic in nature.
Repairs and maintenance expenses in the form of shop painting and refrigerator motor
replacement was made from the partnership business. The shop painting is allowed for
deduction under “section 25-10” because the painting was done on business premises to
resolve the current corrosion and also to prevent the premises from deteriorating further.
Furthermore, replacing the refrigerator motor parts also amounts to deductible repairs under
“section 25-10” because the replacement was for the worn out unit by a new unit of matching
design for restoring the efficiency function of the refrigerator. Finally, the purchase of new
restaurant freezer will be allowed for immediate deduction because the cost of asset is below
the ATO prescribed limit of $20,000 and it is entirely used for business purpose.

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Particulars Amount ($)
Receipts
Business sales 1,50,170.00$
Debtors Cash payments (Notes 1) 33,715.00$
Total Receipts 1,83,885.00$
Expenses Eligble for Deductions
Electricity Bill 1,176.00$
Council rates (Notes 6) 310.20$
Business Insurance 1,250.00$
Mobile Bills (Notes 6) 633.60$
Union Bills 284.00$
Account Charges 595.00$
Repair Expenses (Notes 7) 1,780.00$
Loan Expenses (Notes 4) 5,500.00$
Purchase of Fixed Asset 3,500.00$
Cost of Sales (Notes 3) 30,525.00$
Van (Notes 5) 1,134.00$
SUV (Notes 5) 1,230.00$
Repayment to Creditors (Notes 2) 1,28,168.00$
Installation of Air-Condition 1,200.00$
Depreciation Expenses(Notes 8) 726.20$
New Restaurant Freezer 3,500.00$
Total Expenses Eligible for Deductions 1,81,512.00$
Net Income From Partnership 2,373.00$
Computation of Partnership Net Income
For the year ended 30th June 2017
Working Papers:
Depreciation Schedule Base Value Total Days Held Depreciation
New Restaurant Freezer 3,500.00$
Less: Trade In Value @ 500 3,000.00$ 333.00$ 547.40$
Air Conditions installation 1,200.00$ 272.00$ 178.85$
Total Depreciation 726.25$
Working papers
Notes 8

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Notes 1
Debtors at 1st July 2016 3,925.00$
Debtors Cash Payments 32,800.00$
Debtors at 30th June 2017 3,010.00$
Debtors Net 33,715.00$
Notes 2
Creditors at 1st July 2016 6,500.00$
Add: Repayment to Creditors 1,28,678.00$
Less: Creditors at 30 June 2017 7,010.00$
Creditors Net 1,28,168.00$
Notes 3
Cost of Sales
Stock on 1st July 2016 9,120.00$
Add: Purchase 31,155.00$
Less: Stock on 30th June 2017 9,750.00$
Notes 4 30,525.00$
Loan Repayment
Business Loan 8,500.00$
Less: Reduction of loan 3,000.00$
Net Loan Re-Payment 5,500.00$
Notes 5
Cost of Maintainance
Van 1,260.00$
Less: Business use 90% 1,134.00$
SUV 2,050.00$
Less: Business use 60% 1,230.00$
Total cost of Maintainance 2,364.00$
Notes 6
Mobile Bills 704.00$
Less: 90%Business Use 633.60$
Electricity Expenses 1,470.00$
Less: 80%Business Use 1,176.00$
Council Rates 517.00$
Less: 60%Business Use 310.20$
Notes 7
Repairs Expenses 1,780.00$
Add: Shop painting 150.00$
Add: Motor replacement expenses 140.00$
Total Repairs 2,070.00$

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Conclusion:
The income made by the partners under partnership will be distributed with reference
to “section 92 of the ITAA 1936” and will be accountable for paying tax on such
distributions made.
Answer to question 2:
Issues:
Whether making any payment for discharging of the whole or in portion the
obligation of the person gives rise to the expense payment fringe benefit under “sec 20,
FBTA Act 1986”?
Rule:
There is an explanation made under the “sec 20, FBTA Act 1986” that when it is
found that the provider or the employer makes the payment on behalf of the recipient for
discharging of the obligations either in parts or wholly for paying the amount to the third
party in relation to the expenses that is occurred by the recipient gives rise to expense
payment fringe benefit (Ashcraft 2016). An expense payment fringe benefit also arises when
the recipient is reimbursed by the employer either in full or in parts in relation to the amount
of expenses that is occurred by the recipient.
An explanation has been regarding the taxable value of expense payment FBT under
“sec 23 of FBTA Act 1986”. In view of that, the chargeable amount includes the value
provided to the recipient during the year of taxation relating to the expenses payment fringe
benefit occurred through the taxation year (Soled and Thomas 2016). In other words, the
taxable value of the expenses payment fringe benefit refers to the amount that the employer
pays or reimburses to the employee.

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According to the subsistence of “sect 25, FBTA Act 1986” a housing fringe benefit
occurs for whole or part of the year of taxation when the employer grants the housing rights
to the employee shall be taken to have constituted a benefit that is provided by the employer
to the recipient during the year of taxation (Givati 2015).
In order to determine the market value of the housing right under “section 27, FBTA
Act 1986” the market value of the employee’s present right to accommodation in relation the
housing fringe benefit where the employee is entitled in respect of the housing right that
requires the employee to make payment to the second person (Mallone 2016). This includes
the payment made in discharge of either full or in parts as the obligation of the person to the
amount to the third person in respect of the expenditure occurred by the employee.
Application:
In context of John employed as the senior executive with the printing firm is paid by
his employer for his child school fees. The child school fees is provided by the employer as
the part of his remuneration package that amounts to $15,000. In pursuant to “sec 20, FBTA
Act 1986” the employer here makes the payment on behalf of John for discharging of the
obligations in respect of his child school to the third party in relation to the expenses that is
occurred by the recipient. This ultimately gives rise to expense payment fringe benefit for the
employer of John under “sec 20, FBTA Act 1986” (Givati 2015).
In view of that, the chargeable amount includes the value provided to the John during
the year of taxation by the employer, relates to the expenses payment fringe benefit occurred
throughout the taxation year. In other words, the employer of John will be liable taxable
value of the expenses payment fringe benefit under “section 23, FBTA Act 1986” that the
employer paid as the part of John remuneration package.

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Later, a housing right is granted by the employer here to John when he was provided
with the accommodation in Sydney apartment all through the year of taxation. In subsistence
of “sect 25, FBTA Act 1986” a housing fringe benefit occurred for whole of the year of
taxation when the employer grants the housing rights to John.
John as the part of his housing right is required to make contribution of $100 per week
for the Sydney apartment that has the market value of $800 per week. Under “section 27,
FBTA Act 1986” the taxable value of the housing fringe benefit can be measured for the
employer in reference to the market value of the right granted to the employee reduced by the
contributions made by John that are in effect of the rental payments (Mallone 2016). In other
words, the employer of John will be taxable for the market value of the housing fringe benefit
reduced by the contributions made by John.
Particulars Amount ($)
Rent Per Week 800.00$
Annualized Market Value 41,600.00$
(800 x 52 weeks)
Less: Employee’s Contribution
(100 x 52 weeks) 5,200.00$
Taxable Value 36,400.00$
Computation of Taxable value of rent
Conclusion:
The employer of John will be liable for taxation under “section 23” and under
“section 27” for the expense payment fringe benefit and housing fringe benefit provided
during the year of taxation. The employer can claim in income tax deduction relating to the
cost of providing the benefits and the amount of fringe benefit tax he pays.

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References:
Ashcraft, K.L., 2016. Fringe benefits? Revisi (ti) ng the relationship between feminism and
Critical Management Studies. In The Routledge companion to critical management
studies (p. 93). Routledge.
Borden, B.T., 2015. Rethinking the Tax-Revenue Effect of REIT Taxation. Fla. Tax Rev., 17,
p.527.
Givati, Y., 2015. Googling a Free Lunch: The Taxation of Fringe Benefits. Tax L. Rev., 69,
p.275.
Lee, N., 2015. Revenue law: principles and practice. Bloomsbury Publishing.
Mallone, G., 2016. New tax incentives on occupational welfare benefits in the budgetary law
for 2016: new opportunities for workers and employers. Social Policies, 3(2), pp.359-362.
McNulty, J. and McCouch, G., 2015. Federal estate and gift taxation in a nutshell. West
Academic.
Mellon, A.W., 2016. Taxation: the people’s business. Pickle Partners Publishing.
Mumford, A., 2017. Taxing culture: towards a theory of tax collection law. Routledge.
Picciotto, S., 2015. Indeterminacy, complexity, technocracy and the reform of international
corporate taxation. Social & Legal Studies, 24(2), pp.165-184.
Sikka, P., 2017, December. Accounting and taxation: Conjoined twins or separate siblings?.
In Accounting forum(Vol. 41, No. 4, pp. 390-405). Elsevier.
Soled, J.A. and Thomas, K.D., 2016. Revisiting the Taxation of Fringe Benefits. Wash. L.
Rev., 91, p.761.

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von Haldenwang, C. and von Schiller, A., 2016. The politics of taxation: introduction to the
special section. The Journal of Development Studies, 52(12), pp.1685-1688.