Taxation Law Assignment: Principles, Issues, and Applications

This taxation law assignment addresses several key issues within Australian taxation. The first question examines the offset of losses from personal assets against capital gains, referencing Section 108 of the ITAA 1997. The second issue concerns Fringe Benefits Tax (FBT) related to interest payments, citing Taxation Ruling TR 93/6 and the FBT Act 1986. The third issue focuses on the partnership status of joint owners of rental property, analyzed through the lens of FC of T v McDonald (1987) and Section 51 of the ITAA 1997. The fourth issue addresses tax avoidance principles, referencing IRC v Duke of Westminster (1936). The fifth issue explores the tax liability for the sale of timber as a primary producer under Subsection 6 (1) and Subsection 36 (1) of the ITAA 1997, and Taxation Ruling TR 95/6, as well as McCauley v FC of T (1944). Each issue is analyzed with relevant laws, applications, and conclusions, supported by a reference list.

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

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Table of Contents
Answer to question 1:.................................................................................................................3
Issues:.........................................................................................................................................3
Laws:..........................................................................................................................................3
Application:................................................................................................................................3
Conclusion:................................................................................................................................4
Answer to question 2:.................................................................................................................4
Issue:..........................................................................................................................................4
Laws:..........................................................................................................................................4
Applications:..............................................................................................................................5
Conclusion:................................................................................................................................5
Answer to question 3:.................................................................................................................6
Issue:..........................................................................................................................................6
Laws:..........................................................................................................................................6
Application:................................................................................................................................6
Conclusion:................................................................................................................................6
Answer to question 4:.................................................................................................................7
Answer to question 5:.................................................................................................................7
Issue:..........................................................................................................................................7
Laws:..........................................................................................................................................7
Application:................................................................................................................................7

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Conclusion:................................................................................................................................8
Reference List:...........................................................................................................................8

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Answer to question 1:
Issues:
Are the taxpayer in this context is liable to offset the loss derived from the sale of
person al asset.
Laws:
I. Section 108 (10) of the ITAA 1997
II. Section 108 (20) of the ITAA 1997
Application:
The taxpayer in this question has suffered loss from the sale of the home sound
system and as per section 108 (20) of the ITAA 1997, loss from personal asset cannot be
offset. Section 108 (10) of the ITAA 1997 additional states that collectibles losses cannot be
offset against gains from sale of share (Harris et al. 2013). So Eric cannot offset loss from
collectibles ageist capital gains from sale of shares.

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Conclusion:
Losses from personal asset are not permitted in this context to be offset against capital
gains.
Answer to question 2:
Issue:
Are the taxpayer is liable to FBT from paying interest after the end of loan period.
Laws:
I. “Taxation Ruling TR 93/6”
II. “FBT Act 1986”

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Applications:
Brian in context of Taxation Ruling of 93/6 upon being released by bank from paying
interest at the end of loan period will not be required to pay income tax. Such offset of
interest payment are regarded as Fringe Benefit under the FBT Act 1986 (Morgan, Mortimer
and Pinto 2013).
Conclusion:
The interest-offset program is regarded as fringe benefit and no tax liability arises for
Brain since he is not required to pay interest on loan.

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Answer to question 3:
Issue:
Are the joint owners of the rental property would be regarded as partners under the
“Section 51 of the ITAA 1997”.
Laws:
I. “FC of T v McDonald (1987)”
II. “Section 51 of the ITAA 1997”
Application:
Co-owners of rental property in the situation of Jack and Jill will not be viewed as
partners under the general law though the partnership accounts carrying on of a business for
income tax purpose. The partnership of Jack and Jill does not bear any agreement of sharing
profit and loss and does not qualifies for the execution of business functions. The contract
between defines that Jack will be allocated 10% of the share of profit while Jill will be
allocated a share of 90% of the profit from rental property. Loss will be entirely burdened by
Jack. Thus, the judgement in “FC of T v McDonald (1987)”, has been adopted in this case
because Jack purposely pursued to increase the income Jill as he indemnified her from any
form of loss (Nethercott et al. 2016). With reference to “section 51” there must be an equal
allocation of loss and no deductions is allowed by virtue of contract.
If Jack and Jill decides to sell the property then the cost base must be accounted and
the capital gains or loss should be allocated among them equally.
Conclusion:
To end with, section 51 defines the loss should be shared equally among Jack and Jill
since their joint ownership is not a partnership under the general law.

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Answer to question 4:
On the event of Tax avoidance the principles of “IRC v Duke of Westminster 1936”
is quoted. The principles defines that no man shall be forced to pay more tax and have every
right to order for their tax affairs (Sadiq 2016). The federal court later took an additionally
restrictive approach by citing the examples of “WT Ramsay v. IRC” to make sure that the
tax outcome is solely for the business purpose.
In the modern day of Australia, taxpayers cannot be compelled to pay more tax and
should structure their tax agreement within the legal context of the framework.
Answer to question 5:
Issue:
Are the taxpayer assessable for the sale of timber as the primary producer under
section 6 (1) of the ITAA 1997.
Laws:
I. “Subsection 6 (1) of the ITAA 1997”
II. “Taxation Ruling TR 95/6”
III. “Subsection 36 (1)”
IV. “McCauley v FC of T (1944)”
Application:
Bill is the owner of large land where large number of pine trees. He wanted to use the
land for cattle grazing but a lucrative offer of $1000 by a logging company for every 100
meter of timber made him change his decision. The taxation ruling of TR95/6 is applied as
bill was engaged in selling of timber from the forest operations (Woellner et al. 2014). In
respect of subsection 6 (1) of the ITAA 1997 Bill will be observed as primary producer and

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will be liable for taxation for engaging himself in the forestry activity. Even though Bill did
not planted the pine trees but tending of timber and selling the same would be assessable
under subsection 36 (1) of the ITAA 1997 (Morgan, Mortimer and Pinto 2013). The sales of
timber is observed as the part of his business asset and income from such sales would be
treated as taxable income.
If bill is paid with lump sum of $50,000 for granting the right to the logging company
for taking the desired amount of timber from his land the such receipts would be treated as
royalties under section 26 (f) of the ITAA 1997 (Sadiq 2016). As observed in “McCauley v
FC of T (1944)” receiving payment by granting right of cutting timber is treated as royalties
and this will attract tax liability for Bill.
Conclusion:
Amount received by bill is assessable income since he engaged in the forestry activity
while granting the right of cutting the desired amount of timber would be taxed under section
26 (f) of the ITAA 1997.
Reference List:
Harris, J., Graw, S., Gilders, F., Kenny, P. and Van der Waarden, N. (n.d.). 2013 Theory and
law in the regulation of business.
Morgan, A., Mortimer, C. and Pinto, D. (2013). A practical introduction to Australian
taxation law. North Ryde [N.S.W.]: CCH Australia.

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Nethercott, L., Devos, K., Gonzaga, L. and Richardson, G. (2016). Australian taxation study
manual. Melbourne: Oxford University Press.
Sadiq, K. (2016). Principles of Taxation Law 2016. Pyrmont: Law Book Co of Australasia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. (n.d.). 2014 Australian
taxation law.