Comprehensive Case Study on Capital Gains and Fringe Benefits Tax

This case study provides a detailed analysis of capital gains tax (CGT) and fringe benefits tax (FBT) implications under Australian taxation law. It examines various scenarios, including the sale of a vacant block of land, the loss of an antique bed, the sale of a painting and shares, and the sale of a violin, to determine CGT liabilities. Furthermore, the case study assesses FBT obligations related to an employee's use of a company car, car parking benefits, and a loan provided by the employer. The analysis references relevant sections of the ITAA 1997 and FBTAA 1986, as well as case law, to support its conclusions. This document is available on Desklib, a platform providing a wealth of study resources for students.

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 1:...................................................................................................................................2
Sale of vacant block of land:..................................................................................................2
Antique Bed:..........................................................................................................................3
Painting:.................................................................................................................................3
Shares:....................................................................................................................................4
Violin:....................................................................................................................................4
Answer 2:...................................................................................................................................6
Answer to A:..............................................................................................................................6
Issues:.....................................................................................................................................6
Rule:.......................................................................................................................................6
Application:............................................................................................................................7
Conclusion:............................................................................................................................8
Answer to B:..............................................................................................................................8
References................................................................................................................................10

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Answer 1:
As per “section 102-20 of the ITAA 1997” it has been seen with the significance of
IT which is assessable only on the capital gains. This is directly in relation to any event of
loss pertaining to CGT excerpts. In some of the cases assessment of tax can occur pertaining
to any other event but CGT. The legislation of “section 104-10 (1) of the ITAA 1997” holds
true for disposal of asset which results in CGT event A1. The significance of “Sara Lee
Household v FC of T (2000)”, demonstrate that as soon as the tax bill enters into a contract it
is significant to consider CGT. Moreover, it should not be regarded as a separate IT
component as it was always included under the taxpayer’s obligations (Davidson 2016).
In addition to this, the discourse of “section 102-5, ITAA 1997”, entails that the
taxpayers are needed to contemplate with the net CG under the charge of the learnings for a
particular financial year. In order to do so, the taxpayer can quarantine the capital loss to the
established as per CG value. The CGT needs to be considered only on the assets which are
held for acquisition on or after the 20.09.1985. Furthermore, capital loss needs to be carried
forward rather than held for deductions. As discussed in the “Section 104-20(1)” C1 occurs
at the time of damage any CGT asset (Richardson 2016).
Sale of vacant block of land:
As per the given situation, the vacant land was acquired for either investment purpose
or private purpose. Which is already the case, CGT is applicable on capital asset at the time
of sales pertaining to the land. Based on the current contract the land was initially acquired
for $ 100k and also needed to pay land tax during the period of ownership.
As per the Australian taxation legislation as the vacant land was owned by the
taxpayer is treated as capital asset it is exposed to CGT and such a tax is not claimable under
deductions even if it did not generate any revenue. Therefore, the expenses pertaining to

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water and sewage rates along with local council and water rates should be calculated for
assessment of CG during selling of the land (Graetz and Warren 2016).
Antique Bed:
The consideration of the several levels of information as per “section 108-10(2) of
the ITAA 1997”, clearly categorizes the duties of a taxpayer pertaining to quarantining of
capital losses. Moreover, based on this section the definition of collectables includes relics
such as medallion, artwork and antiques. However, as they are considered under rear
portfolio manuscript, the rules of taxation are different.
Any event of CL or CG should be excluded from the first element in case the cost
base of collectables is lesser than AUD 500. In addition to this, based on the given situation
the taxpayer declared that antique bed was taken away by thieves in a house. However, after a
thorough perusal of the case by the insurance Department, it was observed that the anti-Fed
was not included in her insurance policy. Henceforth, the insurance amount paid by the client
amounted to AUD 11,000 (McGregor-Lowndes 2016).
It needs to be also discerned that as per “section 104-20(1), ITAA 1997” expresses
the treatment for which that any case of damage or destruction of an asset which is owned by
the taxpayer leads to CGT C1. It is important to consider the time of CGT so as to specify the
compensation received for destruction or loss of property and in determination of CG or CL.
As the taxpayer did not include antique bed in her insurance policy, the compensation under
CGT event C1 was debarred (Berg, C. and Davidson 2015).
Painting:
The excerpt of “section 108-20(2), ITAA 1997”, has enumerated on the treatment of
personal use of asset. Moreover, “section 108-20(1), ITAA 1997” also enumerates that a
taxpayer should exclude CL pertaining to asset which was used as a personal property. The

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discourse under “section 108-20(2), ITAA 1997”, also elaborates that personal use of any
asset except for collectible needs to be considered under private use of taxpayer however,
such benefit is not applicable for land and building. Moreover, “section 118-10(3), ITAA
1997”, discusses that CG from personal use of any asset should be excluded when the price
of the asset is below $10,000 (Cao et al. 2015).
The information provided by the client suggests that obtaining of painting was done
with an amount of $2000 on 2.05.1985. In addition to this, such an item needs to be assessed
as pre-CGT. The rationale for such an evaluation is due to the fact that it was purchased
before 20th September 1985. Therefore, the taxpayer needs to exclude CG pertaining to sale
of the painting as it is pre-CGT in nature.
Shares:
The CGT imposition is applicable to securities similar to any other asset as prescribed
by the Australian legislation. At the time of CGT occurrence during the selling process, the
investors are seen to be making CG on the shares. Therefore, at this stage ordinary income is
generated as per the profits obtained pertaining to selling of the shares. As stated in the above
sentence, the reporting of CG was evident as a result of shares which were disposed for
Common Ltd, PHB Ltd and Build Ltd. The taxpayer can however claim for offsetting the CL
against CG as there was a certain loss incurred on disposing the shares of Young Kids
Learning Ltd (Hashimzade and Epifantseva 2017).
Violin:
The various excerpts stated under “Subdivision 108-C”, clearly defines the
jurisdictions for personal usage of an asset. The assets which are of personal use is to be
considered as a non-collectible entity. Such non-collectible assets comprise of the electrical
goods, furniture and boats. The discussions under “Section 108-20(2), ITAA 1997” also

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states that there are certain subdivisions which comprises of the rights and options in case a
taxpayer has used an asset for personal enjoyment. The CGT should not be included as the
purchase of the assets were less than $ 10,000. This is based on the statements under
“Section 118-10(3)”.
There is more evidence which suggests that despite of selling the violin at a profit, it
was mainly used by the taxpayer for his personal enjoyment. Therefore, the cost base of the
purchaser of asset of less than $ 10,000 is still applicable even if the violin was sold for
$12,000. This is directly under the legislations of “section 118-10 (3), ITAA 1997”, which
states that such a CG should be excluded from IT assessment (Burton and Karlinsky 2016).
The computation of net CG is depicted as follows:

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Answer 2:
Answer to A:
Issues:
The important concerns for consideration of FBT are seen as per “FBTAA 1986”.
The consideration of significant issues under “section 7, FBTAA 1986” shows if the car used
for personal use needs to be regarded for FBT. The consequence of “subdivision A of
FBTAA, 1986” for loan FB. This is to be considered directly for assertion.
Rule:
The legislations of FBT presents that tax should be considered in case benefit is
obtained is as a result of payments made by the employee from their salary. The legislation
for that constitutes that the advantages provided to the employee may considering the
employment status. This significantly shows that fund is provided to someone just as they are
employed (Lang et al. 2018).
The inclusion of excerpts from “sub-section 136 (1), FBTAA 1986” applies to the car
used by employee in the course of his employment is related to the availability of use and it
shall be treated under FBT. Moreover, there was no instance of gaining access of income by
using the car. Therefore, the taxpayer should be treated with the travelling from his place of
employment to business under “Federal Commissioner of Taxation v Lunney (1958)”.
The discussions under “Subdivision B 22A of the FBTAA 1986”, additionally relates
to FBP associated expenses. The origination of such an expense payment is held at the time
employer is seen to reimburse an employee with expense which they incur. This sort of cost
may be both business or private in nature or a combination. In this case, the general rule is
applicable which shows that no expense had taken place at the time then there was consistent

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reimbursement of expenses of fringe benefit in nature. Therefore, this value is to reimburse
the employee (Anderson 2015).
The taxable value of car parking FBT stated under “Sub-Division B 39C of the
FBTAA 1986”. The fringe benefit pertaining to car parking can be identified with following
list
a) Utilization of the car from place of abode to the place of work at least once
b) Car parked in the employer’s properties
c) Parking is done within one-kilometre range
d) Facilitation of the car during the course of employment
e) Crossing the time limit of 4 hours of parking
As briefed under “Division 4 of the FBTAA 1986”, the occurrence of loan fringe
benefit is evident when the terms of loan are agreed between the employer and employee.
This is also depicted with the purpose of “subsection 136 (1), FBTAA 1986” which is
designated to signify the repayment of the tax sum to another person. The reduced rate of
return for interest often shows that taxpayer is maintaining lesser than statutory taxation rate
(Eccleston and Krever 2017).
Application:
Based on the current case of Rapid Heat Pty Ltd it needs to be identified that Jasmine
is an employer of this organisation. Since her joining, she has been provided with a vehicle as
her job role involves lot of travelling for the purpose of employment. In addition to this, she
has used the car not only to restrict its use is only for work but also private activities as well.
The excerpt of “sub-section 136 (1), FBTAA 1986”, has been able to identify that the car
fringe benefit was provided to as a repercussion of her employment. Therefore, “FC of T v

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Lunney (1958)”, held the usage of car beyond the scope of work and it shall be treated as
FBT as per “FBTAA, 1986” (Daniel et al. 2016).
During the later stages it was found that she used the expense of $ 550 for trivial
repairing jobs. However, Jasmine compensated these expenditures for Rapid Heat Pty Ltd.
the car repair needs to be assessed as per “subdivision B 22A of the FBTAA 1986”. It also
identified that during the end of the financial period, she parked the vehicle in the premises of
commercial airport. Therefore, she did not use the car for a tenure of 10 days after it first part.
Such a situation will not be considered for FBT as neither the car was parked at the company
nor it was situated within the 1 km radius of parking place in commercial property (Parker
2018).
Rapid Heat Pty Ltd offered Jasmine the total amount of $500,000 for the statutory
interest rate. The total sum was held as a loan which was to be disbursed to Jasmine. This
needs to be taken into account as per the various types of the important considerations related
to the statutory interest rate. The application of “Division 4 of the FBTAA 1986”, will be
also applicable for assessment of value to loan benefit of FBT (Picard et al. 2016).
Conclusion:
The study can be concluded by observing the various types of advantages for Jasmine
as per “section 7 of the FBTAA 1986”. Furthermore, the vehicle used by Jasmine needs to be
considered for FBT as per the rulings of “sub-section 136 (1), FBTAA 1986”. The collection
of facts about other benefits may be observed with reimbursement of loan and repairing
expenses as suitable with “FBTAA 1986”.
Answer to B:
The extraction of evidences as per “section 8-1 of the ITAA 1997”, recommends that
the paye of tax is entitled to deductions which are permissible with the expenditures

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involving to cohort of assessable income. Moreover, deductions can be claimed by the
taxpayer during the publishing process of as a double income.
In case, Jasmine had considered the left-out part of the loan amount ($ 50,000) then
she could have claimed for the deductions as prescribed in “section 8-1, ITAA 1997”.
Therefore, as it is evident that the left-out part was borrowed by her husband for purchasing
shares, she is not authorised to claim for deductions associated to interest present in the loan.
This could have been otherwise considered for exemption as per “section 8-1, ITAA 1997”.

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Hashimzade, N. and Epifantseva, Y. eds., 2017. The Routledge Companion to Tax Avoidance
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