Taxation Theory, Practice and Law Assignment - Finance Module

This document presents a comprehensive solution to a Taxation Theory, Practice and Law assignment, addressing various aspects of tax law and financial principles. The assignment analyzes case studies focusing on capital gains and losses, fringe benefits tax, and loss distribution from rental property, referencing relevant sections of the ITAA 1997 and Taxation Rulings. It also examines tax avoidance strategies and the assessment of income from the sale of felled timber, providing detailed explanations and conclusions for each issue. The solution incorporates legal precedents and rulings, offering a thorough understanding of the complexities of taxation.

Running head: TAXATION THEORY, PRACTICE AND LAW
Taxation Theory, Practice and Law
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1TAXATION THEORY, PRACTICE AND LAW
Table of Contents
Answer to Question 1:.....................................................................................................................3
Issue:............................................................................................................................................3
Laws:............................................................................................................................................3
Application:.................................................................................................................................4
Conclusion:..................................................................................................................................5
Answer to Question 2:.....................................................................................................................5
Issue:............................................................................................................................................5
Laws:............................................................................................................................................5
Application:.................................................................................................................................5
Conclusion:..................................................................................................................................8
Answer to Question 3:.....................................................................................................................8
Issue:............................................................................................................................................8
Laws:............................................................................................................................................8
Application:.................................................................................................................................8
Conclusion:................................................................................................................................10
Answer to Question 4:...................................................................................................................10
Answer to Question 5:...................................................................................................................11
Issue:..........................................................................................................................................11

2TAXATION THEORY, PRACTICE AND LAW
Laws:..........................................................................................................................................11
Application:...............................................................................................................................11
Conclusion:................................................................................................................................12
References:....................................................................................................................................13

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Answer to Question 1:
Issue:
After evaluation of the case study, it could be stated that focus is on ascertaining capital
gain or loss gathered from selling asset in conformance to the “Section 108-20 of the ITAA
1997”.
Laws:
i. “Section 108-10 of the ITAA 1997”
ii. “Section 108-20 of the ITAA 1997”

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Application:
“Section 108-20 of ITAA 1997” states that a loss of $1,000 from selling the sound system
has been incurred on the part of Eric and hence, there is no need for set off. Due to this, no loss
consideration has been made regarding loss based on the asset disposal for personal utilisation.
As per the “Section 108-20 of ITAA 1997”, no set off is inherent for collectible losses in
opposition to the common gains in the form of share sale (Barkoczy 2016). In addition to this,
the offset could be taken under consideration, in accordance with “Section 108-20 of ITAA
1997”. Therefore, Eric has handled in making profit with the disposal of ordinary asset and
hence, ordinary capital is absent in the existing year or other sorts of minimisations that could be

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applied (Snape and De Souza 2016). $15,000 has been obtained as the overall capital gain in the
context of Eric.
Conclusion:
Based on the above discussion, it could be concluded that the entire loss could not be
offset on the part of Eric, which are obtained from the collectibles. This is because the profit is
earned through disposal of the ordinary assets solely.
Answer to Question 2:
Issue:
Based on the case study, it could be stated that the particular issue focuses on ascertaining
the fringe benefits tax with adherence to the “Taxation Ruling of TR 93/6”.
Laws:
i. “Taxation Ruling of TR 93/6”
Application:
Computation of fringe tax benefits (FBT):

6TAXATION THEORY, PRACTICE AND LAW

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Based on the “Taxation Ruling of TR 93/6”, plans are often created on the part of the
financial companies. The intention is to offset the account pertaining to loan such intention could
be termed as an agreement related to interest offset (Braithwaite 2017). The product structuring
is carried out in such a manner for offsetting the interest spent on the client’s part. Hence, there is
complete absence of any liability on the part of the client in order to pay any amount of income
tax and this is associated with the profits obtained from such account. Besides this, the “Taxation
Ruling of TR 93/6” clearly lays out that if Brian does not have to pay the interest on the overall
loan amount, it would help in refraining from paying any income tax amount (Saad 2014).

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Conclusion:
Based on the above evaluation, it is evident that there is no need for Brian to pay any
liability of income tax, if the bank excuses the individual to refrain from repaying the overall
interest amount on loan.
Answer to Question 3:
Issue:
After critical assessment of the provided case, it has been evaluated that this particular
issue deals with the loss distribution accumulated from rental property. Jack and Jill jointly own
the stated rental property, as identified from the case study.
Laws:
 “Taxation Ruling of TR 93/32”
 “Section 51 of ITAA 1997”
 “F.C. of T v McDonald (1987)”
Application:
Based on the “Taxation Ruling of TR 93/32”, it could be stated that description has been
provided in relation to divisionary loss or gain from the property between the above two stated
owners (Taylor and Richardson 2013). Besides this, the ruling is taken into account mainly with
analysing the taxable condition of the owners, which could not be held accountable to conduct
the values pertaining to actions. The present scenario of Jack and Jill takes into account
assessment of the taxable condition in relation to the rental property. Jill is the owner of 90% of
the rental property and Jack is the owner of the remaining 10% of the rental property.

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According to the “Taxation Ruling TR 92/32”, the shared ownership of the property is
adjudged as income tax partnership. However, this could not be considered as a sole partnership
under the general law along with the ownership accounts to carry out value for any business
practice. According to the case study, shared partnership is called the partnership for satisfying
the income tax purpose only (Petty et al. 2015). The loss suffered due to the property is managed
through shared property ownership along with the apportionment of gains accumulated from
losses and partnership. The existing scenario of Jack and Jill denotes the joint ownership
between these two persons in relation to rental property depending on income tax. In addition,
this could not be considered as partnership in line with the general law (Novikov, Ling and
Kordzakhia 2014).
As per the “Taxation Ruling of TR 92/32”, the joint property owners could not be stated
as partners, since the general law does not permit the same. The provided case clearly lays out
that agreement could be made either orally or in writing and there would be absence of any
impact on the shared value of the gain or loss obtained from such property. Henceforth, Jill and
Jack would cling on to the asset in the form of shared renters based on a sole common influential
dynamic (Lang 2014).
It has been observed from “F.C. of T v McDonald (1987) ATR 957” that the person
incurring tax and his wife have the legal right on two strata units. These units are associated with
the title in the form of joint renters. There has been an inveterate agreement between the two
parties and the agreement states that 25% of the overall income would be handed over to Mr
McDonald and the remaining would be provided to Mrs McDonald. In this particular case, Mr
McDonald needs to bear the entire loss amount (Bird and Zolt 2014).

10TAXATION THEORY, PRACTICE AND LAW
Conclusion:
The above evaluation clearly states that the loss needs to be allocated equally on the part
of Jack and Jill, and shared ownership could not be taken into account in the form of partnership
business.
Answer to Question 4:
The incidence associated with avoiding tax is laid and this is adhered to the “IRC v Duke
of Westminster [1936] AC 1”. The formulation of a doctrine is inherent in this case and it
denotes all individuals are permitted for affair orders in order to allow the taxation assignment
and this has been depicted in the Fitting Act. Such distribution of taxation is lower as opposed to
the same (Douglas et al. 2014). There has been depiction of court instance in future phases,
which are greatly restrictive and these are adopted in accordance with the “WT Ramsay v IRC
principle”. The transaction has been pre-arranged artificially and the provision of service is for
commercial purpose (Davis et al. 2015). The effective regulation is to impose tax for extension
of the transactions as entire fact.
In the current situation, the principles within nation represent that if an individual
achieves success in obtaining the outcomes, the Inland Revenue might be of the move and they
could not be allowed to spend any increased amount of tax (Kerin and Findlay 2015). Excepting
this, the organisations and individuals are enabled to modify the financial reports in relation to
stagnant objectives for reducing the liabilities of tax depending on the overall tax structure.

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Answer to Question 5:
Issue:
According to the current situation, the income assessment from sale of felled timber is
analysed according to “Subsection 6(1) of the Income Tax Assessment Act 1936”.
Laws:
 “McCauley v The Federal Commissioner of Taxation”
 “Subsection 6(1) of the Income Tax Assessment Act 1936”
Application:
In the existing situation, it has been observed that Bill owns a large land where large pine
trees are present. Bill aimed to use the land in order to graze sheep, as the intention is to clear the
same. The individual has found out a logging firm that pay $1,000 for every 100 metres of
timber. In exchange of this transaction, the firm could obtain a portion of the property of Bill.
According to the “Taxation Ruling TR 95/6”, the consequences of income tax have been laid out
in relation to the generation of primary activities of forestry and production (Richardson, Taylor
and Lanis 2013). Such ruling gives the limit to which the receipts have been gathered from
selling timber. Such aspect constitutes of assessable income in ascertaining whether there is
involvement of the taxpayers into the activities of primary sector. According to “Subsection 6 (1)
of the Income Tax Assessment Act 1936”, there is involvement of the taxpayers into the
activities of forest operations considered as the primary sector.
In compliance with “Subsection 6 (1) of the Income Tax Assessment Act 1936”, the
primary production is explained as the planting of trees within plantation required for felling
forest (Tran-Nam, Evans and Lignier 2014). As observed from the case study, Bill is considered

12TAXATION THEORY, PRACTICE AND LAW
as the primary producer, since he has been associated with the procedures of primary production
in compliance with “Subsection 6 (1) of the Income Tax Assessment Act 1936”. The operations
related to forestry consider the felling of tress in forest or plantation; however, the taxpayers are
not worried at all about the planted trees (Niazi and Krever 2017).
Based on the above evaluation, Bill owns a large piece of land; however, there is no
plantation made on the part of the individual. The overall amount of receipt that Bill has obtained
from selling the overall felled timber constitutes of the taxpayer’s assessable income, which are
disposing in relation to the trees not planted necessarily on the taxpayer’s part along with
rendering for the sale objectivity. This creates the part of assessable income (Eccleston and
Smith 2015). The sales revenue comprise of either entire or partial business assets, in which the
trees are considered as assessable income of the taxpayers, according to “Subsection 6 (1) of the
Income Tax Assessment Act 1936”.
On the contrary, if the taxpayer has spent $50,000 by surrendering the right to the logging
firm for removing the required timber amount. In such case, the amount received would be
considered as royalties. In compliance with “Section 26 (f)” the royalty receipt from the taxpayer
to grant denotes the right of declining the timber on land, which the taxpayer has accumulated.
Conclusion:
It could be concluded that the income received from the fall of timber would be taken
into consideration according to “Subsection 6 (1) of the Income Tax Assessment Act 1936”.

13TAXATION THEORY, PRACTICE AND LAW
References:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice.
Routledge.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-
Social and Behavioral Sciences, 109, pp.1069-1075.
Taylor, G. and Richardson, G., 2013. The determinants of thinly capitalized tax avoidance
structures: Evidence from Australian firms. Journal of International Accounting, Auditing and
Taxation, 22(1), pp.12-25.
Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M., 2015. Financial
management: Principles and applications. Pearson Higher Education AU.
Davis, A.K., Guenther, D.A., Krull, L.K. and Williams, B.M., 2015. Do socially responsible
firms pay more taxes?. The Accounting Review, 91(1), pp.47-68.
Novikov, A.A., Ling, T.G. and Kordzakhia, N., 2014. Pricing of volume-weighted average
options: Analytical approximations and numerical results. In Inspired by Finance (pp. 461-474).
Springer International Publishing.
Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.

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Bird, R.M. and Zolt, E.M., 2014. Redistribution via taxation: the limited role of the personal
income tax in developing countries. Annals of Economics and Finance, 15(2), pp.625-683.
Douglas, H., Bartlett, F., Luker, T. and Hunter, R. eds., 2014. Australian feminist judgments:
Righting and rewriting law. Bloomsbury Publishing.
Kerin, P. and Findlay, C., 2015. An efficient land levy could fund cuts to costly stamp duties and
company taxes. The Australian, 29, p.29.
Richardson, G., Taylor, G. and Lanis, R., 2013. The impact of board of director oversight
characteristics on corporate tax aggressiveness: An empirical analysis. Journal of Accounting
and Public Policy, 32(3), pp.68-88.
Tran-Nam, B., Evans, C. and Lignier, P., 2014. Personal taxpayer compliance costs: Recent
evidence from Australia. Austl. Tax F., 29, p.137.
Eccleston, R. and Smith, H., 2015. Fixing Funding in the Australian Federation: Issues and
Options for State Tax Reform. Australian Journal of Public Administration, 74(4), pp.435-447.
Niazi, S.U. and Krever, R., 2017. Romance and Divorce between International Law and EU
Law: Implications for European Competence on Direct Taxes. Stan. J. Int'l L., 53, p.129.