UNSW TABL 5551 Taxation Law: Comprehensive Report on Tax Implications

This report provides a detailed analysis of the tax return consequences for a taxpayer who experienced capital gains from share sales but was subsequently defrauded. It delves into the implications of Fringe Benefit Tax under the FBTAA 1986 and elucidates how different incomes are taxed based on the transaction's nature. The report includes financial details and tax calculations related to Ron, the taxpayer in question, with calculations grounded in the ITAA 1997, classifying the capital gain as ordinary income. It addresses the taxability of capital gains, potential tax offsets, and the treatment of dividend income, referencing relevant case law. Furthermore, it offers guidance on reporting capital gains or losses in income tax returns, emphasizing that losses can only offset capital gains, not other forms of income.

Executive Summary:
In this report, an honest attempt is made to determine the tax return consequence for a tax
payer who made capital gain from selling of shares which got stolen by a fraudster company
rather a trust. Other parts of the problem will be dealing with the consequences of Fringe
benefit tax under FBTAA 1986. Moreover, the report will shade light on the way incomes are
taxed depending on the situation and nature of the transaction. Lastly, all the financial details
and tax calculation is shown relating to Ron, who is the party in this case, calculations are
based on ITAA 1997 as it is a part of ordinary income even though it is termed as Capital
gain.
Answer to Question 1:
According to income tax laws, any disposal or selling off assets gives rise to capital gain or
loss and becomes part of assessable income. So, whenever there is capital gain it attracts
taxation on that income which is called capital gains tax. That selling or disposing of assets
giving rise of capital gain is also known as CGT event. Share is an asset for the shareholder
whose disposal gives rise to a CGT event resulting in capital gains or losses. Capital gains are
taxed under Australian taxation laws. Different kinds of CGT event are given under section
104 of ITAA 1997. The time when a taxpayer makes a capital gain or misfortune is typically
when he enters into the contract for transfer, not when settled. So, on the off chance that
taxpayer signs a contract to offer a venture property in June 2017, and settle in August 2017,
that individual have to report the capital gain or misfortune in your 2016– 17 government
form.
In case the individual is an Australian occupant, CGT applies to his advantages anyplace on
the planet. For Norfolk Island inhabitants, CGT applies to resources obtained from 23
October 2015. Remote inhabitants make a capital gain or misfortune if a CGT occasion
happens to an advantage that is 'assessable Australian property.
To
The Taxpayer,
Sub: Advise on tax return consequence
Respected Ron,

This is to inform you that, the capital gain that occurred from selling shares
are liable to be taxed under ITAA 1997. Though, Ron was frauded by the cash management
trust in Singapore and he lost the whole amount he gained from selling off his shares in Zinc
Mines Ltd. The purpose of such sell was to gain profit resulting to CGT event A1 under
ITAA 1997. Here in this situation it might be possible to claim tax offset provided:
 The tax paying party is not a trust or partnership, in which case the treatment will
differ, because trusts under general tax laws are not considered when they make
profit. To elaborate, we can say that, the gain a trust makes is not considered profit as
trusts and NGOs are non-profit organisation.
 When the issue of shares does not amount of acquiring of ESS interest under
employee share scheme.
 When the party in question, does not own more than 30% of equity shares in a
company.
Now as the facts states that, dividend was received by Ron when he held shares of the
particular company, thus the source of such dividend income has to be determined. In the
famous case of Esquire Nominees Ltd v FC of T 73 ATC 4114, it was held that, the person
paying tax was a Norfolk Island company and was acting as a trustee. The court gave a
conclusion that, the source of dividend must not be determined by considering the
distributions through the whole line of companies. However, the source has to be determined
considering the source of the profits from which the dividend was paid. Thus, it can be said
that, the interest amount that Ron received was certain. So, Ron needs to report capital gains
or losses in his income tax return and pay tax on the amount of capital gain made. In case of
loss, Ron cannot claim it in relation to other incomes and it will reduce the amount of capital
gain.
Thanking You
Dated:
Regards,
Tax Advisor