HI6028 Taxation Theory, Practice and Law Tutorial Questions Analysis

This document presents solutions to a series of taxation theory tutorial questions from a Finance course, HI6028, focusing on Australian taxation law. The assignment covers several key areas, including Fringe Benefits Tax (FBT) and its implications for employee compensation and salary sacrifice arrangements, Capital Gains Tax (CGT) calculations for property sales, and the application of GST to business transactions, including returns and credit notes. Furthermore, the assignment delves into the taxation of dividends, distinguishing between franked and unfranked dividends and their impact on individual tax returns, as well as the taxation of partnership income, outlining the tax treatment of partners and their assets. The solutions analyze specific case scenarios to illustrate the practical application of these tax principles, supported by references to relevant legislation and guidelines.

Taxation Theory Practice
and Law in Australia

Contents
Question 6........................................................................................................................................3
Question 7........................................................................................................................................3
Question 8........................................................................................................................................4
Question 9........................................................................................................................................5
Question 10......................................................................................................................................6
REFERENCES................................................................................................................................7

Question 6
FBT is different from income tax and has been compensated on those advantages offered to
workers or employees associate which are usually their families due to the job opportunities of
the contractor. In the respective case of Mason in which benefits to a matching super fund are
compensated, than his earnings foundation may well be decreased except as otherwise stated
mostly in salary sacrifice configuration. Mason earnings base is the percentage on which
Melbourne Collision Repair Centre will determine super contributions. Salaries lost super
investments are paid in the super fund according to tax laws expressly addressing this issue. This
is important that Mason fully recognize and negotiate with his manager on all the aspects of any
wage reduction agreement. If company employer pays for a fee as portion of Mason wage
package, for which he would normally receive a tax deduction, then they will not have to charge
FBT on the fee (FBT Consequences for remuneration package, 2020). The 'otherwise deductible
law' is recognized and appears in Mason federal income tax report he would not be entitled to
assert an income tax credit for this cost. As the employer measures the taxable amount of the
payment provided to Mason for FBT objective, the 'deductible component' of the cost.
Question 7
A) Net capital gain or net capital loss for the year to Alex
Profit on sale
Total Sales value 1,400,000.00
Less: cost of land (110,000.00)
Cost of Construction (100,000.00)
Profit on sale is 1,190,000.00
Capital gain on discounted method 595,000.00
As the discount price is 50 % according to Australian government,
The asset must be purchased prior to actually 12 months or above.
Capital gain on Indexation method 712,134.15

When the capital gain tax event occurred on 21
September 1999 prior to actually 11.45am (by time
range throughout the ACT), the following method is
used:
(Discount method and Indexation methos, 2020 )
A is the quarterly CPI
which ends 30 September
1999
68.7
B seems to be the CPI for
the quarter that involved
spending
114.8
C is the indexation factor 0.598
a/b=c 0.60
B) In case if company was the owner of property
Throughout this case, if owner of respective property is company than
discounted method will applicable or not?
Not Applicable
Indexation method 712,134.15
Question 8
In the respective case for both companies the supplier and manufacture there are some specific
guidelines and rules that are needed to be followed at the time of filling GST certificate for
relevant accounting year. Such as Bowens Pty Ltd will have to lodge GST on payment papers,
withhold and reimburse the correct withholding sum and Builder’s Choice Pty Ltd will disclose
the selling details at the moment the transaction was made, even though the selling document has
a specific due date. In general term, GST is recognised as the good and service tax which is
directly imposed over any sort of good and services provided by company (GST consequences,
2020). Moreover, in context of good returning by registered company than authorised seller will

be liable to provide a legal credit not describing each and everything related to deal.
Company GST property interest withheld balance would be assigned the interest for the sum
held. Whether there are various schemes, the credit is the comparable percentage of the
percentage that was deducted. It is the duty of seller to declare the same information in GSTR 1
and similarly the situation is vice versa. In addition, to lower the complication than the returning
party could make it like a supply deal and compensate the taxable amount just after receiving the
input receipt of seller. The law of GST states that whenever the items obtained as an inner supply
which is returned by the party who receive the goods to the supplier in period of 6 month from
the day when invoice was issued, then the taxable amount on such supplies must be equivalent to
input tax credit which is availed before on such inner supplies just time before. However if goods
are given back to the supplier after 6 month period to the date of initial supply bills then the
taxable rate which is applicable to such transaction will be the prevailing rate on the return date.
Thus it can be founded that Bowens Pty Ltd may consider the transaction as an exterior sale or
even Builder’s Choice Pty Ltd may issue a specific credit note to the manufacture company in
the respective time.
Question 9
In the context of the case of Watson Co, dividend is mainly obtained from the proportion of
profit on the investment which is made with company. Unfranked dividend are the sort of profit
part upon which any kind of taxes are not paid by the business firm on the amount obtained by
the respective stakeholder and due to which there are some specific deduction of tax that are
beneficial for them at the time of filling tax. As a result most of the stakeholders are obtaining
the unfranked dividend which is paid by the local company of Australia. Therefore, it is
determined that entire amount of such dividend must be involved within the tax return but due to
specific feature no tax are liable to be paid at the end of accounting year (ITAA 36, 2020).
Throughout the case of Wastson Co an Australian company which have gone under
voluntary liquidation so Paul as a previous investor has obtained $7000 at the time of liquidation.
The total amount is further categorise like $ 3000 as a unfranked dividend and the remaining part
is for the investment which was made by Paul within the share of Watson co on specific time 2 nd
Feb 2019. At the time of receipt of unfranked dividend Paul is not liable to pay any kind of tax
on these dividends but on $ 4000 which he received from investment that particular tax is
imposed and is counted at the end of year as a part of taxable income. In addition, Paul have also

get an extra amount of $ 200 from the liquidation that could be portion of the income for the
present year on which Watson Co have not paid any tax. Therefore, this amount is added to the
gross income upon which tax is imposed and Paul is required to pay tax on the $ 200 in current
year.
Particular Amount received Value in gross income Taxable income
Unfranked dividend $ 3000 $ 3000 -
Payment for
investment
$ 4000 $ 4000 -
Current year profit $ 200 $ 200 $ 200
Total $ 7200 $ 7200 $ 200
Question 10
In the Australian taxation system, it is determined that a partnership is not responsible for
any sort of tax in country because they are treated as tax free entity. However the income which
is obtained by the partner individually is subjected to the tax and following rates are applicable
as per the income received. In a partnership firm all the assets are owned by the following
partner in the agreed proportion or ratio on which income and losses are distributed. Moreover
part of the capital income related with CGT operations happening for these frim assets are
enclosed within the partner tax return. It is stated within the taxation system that a partner who is
not a proper resident of Australia is not liable to be taxed upon the share of net income within the
partnership attributed to the other sources outside the respective country (ITAA 97, 2020).
Thus in the context of case scenario, Steve is accountable to process the total earning as a
part of taxable income ( $ 150000) whereas Alex is responsible to provide only a specific share
of income which is produced under the partnership within Australia ( 300000 * 60 % / 2) = $
90000.

REFERENCES
Books and Journals
FBT Consequences for remuneration package. 2020. [Online] Available Through:
<https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/Exemptions-and-
concessions/FBT-changes-for-employees---Salary-packaged-meal-and-other-
entertainment-benefits/ >.
Discount method and Indexation method. 2020. [Online] Available Through:
<https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-
loss/Working-out-your-capital-gain/Choosing-the-indexation-or-discount-methods/ >.
GST consequences. 2020. [Online] Available Through:
<https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Property/GST-at-
settlement---a-guide-for-suppliers-and-their-representatives/ >.
ITAA 36. 2020. [Online] Available Through:
<https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/
Demergers-and-CGT/Availability-of-CGT-demerger-relief/Examples-of-how-section-45B-of-
the-ITAA-1936-applies-to-demergers/>
ITAA 97. 2020. [Online] Available Through:
<ato.gov.au/General/Trusts/In-detail/Distributions/Trust-taxation---reimbursement-agreement/>.