HI6028 Taxation Theory, Practice and Law: Tutorial Questions Analysis

This assignment addresses several key areas of Australian taxation law. It begins by analyzing the Fringe Benefits Tax (FBT) consequences of an employee's remuneration package, including the calculation of FBT payable and strategies to minimize it. The assignment then delves into Capital Gains Tax...Read More

TAXATION THEORY, PRACTICE AND LAW

Q1. Advise the FBT consequences of Mason’s remuneration package.
Based on the tax provisions that track the tax on support services, the manager is at risk of
paying FBT on the available estimate of the support services paid. to the employee throughout
the year from April 1 to March 31. The company is obligated to provide data relating to Fringe's
benefits in reducing employee's allowances if the tax estimate of Fringe benefits exceeds $ 2,000.
There are two strategies to network the benefits of Fringe to maximize the value available.
2.0802 if the boss can guarantee GST credit on Fringe benefits and 1.8868 if the boss cannot
guarantee GST on fringe benefits. The tax on Fringe benefits is determined at 47%.
In the given situation; since the above course is not a place identified by Mason's work, the
assessor’s reasoning is not accessible to him for such. As a result, $ 12,000 will be considered a
fringe benefit. Mason is also given housing and pays a $ 100 a week lease even though the rental
market estimate is $ 500 a week.
So the annual estimate of contingent benefits is:
$ 12,000 + ($ 500 - $ 100) * 52 = $ 12,000 + $ 20,800 = $ 32,800
Assuming the boss receives no GST credit, a net rate of 1.8868 will be used:
Fringe benefit tax estimate = $ 32,800 * 1.8868 = $ 61.887,04
Therefore, the Fringe benefit tax = $ 61,887.04 * 47% = $ 29,087
$ 61,887.04 will be included in the employee pay package as which Mason returns $ 61,887.04
in compensation according to the FBT of $ 29,087 should be recalled for the cost of the pay
package.
Q2.
a. Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both
Discount method and Indexation method.

As indicated by Section 110-25 (2) of ITAA 1997, the market estimate of the CGT Fund or the
amount paid for the gain must be indicated as the cost basis of the CGT Fund. Section 110-25 (5)
of the 1997 ITAA states that if any use is made to protect the estimate of the CGT Fund, it must
be incorporated into the cost basis. In the specific case, Alex estimated the land in 1986 as $
110,000 and shot $ 100,000 for development to motivate him to build the change upstairs in a
building suitable for rent. The total cost base for Alex is therefore $ 210,000. Alex sold the
property for $ 1,400,000 as of March 1, 2019. Assets are held for one year along these lines and
therefore a proprietary deal is subject to a capital increase.
Calculation of Net Capital gains by discounted method:
Particulars Amount $ Amount $
Sale price $ 1,400,000
Less:
Market value of land $ 110,000
Add: Amount spent for construction $ 100,000
Total cost $ 210,000
Capital Gain $ 1,190,000
Less: 50% discounted factor $ 595,000
Net Capital Gain $ 595,000
Calculation of net capital gain according to the index method:
The index method is applicable if the fund is received before September 21, 1999 and is held for
more than 12 months. Alex meets both situations.
The CPI for the September 1986 quarter is 43.2
Thus the index cost base will be $ 210,000 * 43.2 = $ 9,072,000
Particulars Amount $ Amount $
Sale price $ 1,400,000
Less:
Indexed Purchase cost $ 9,072,000
Net capital loss -$ 7,672,000

b. How would your answer to a) differ if the owner of the property was a company instead
of Alex?
As indicated by the provision of personal costs, act of adding capital for an organization that
provides, if a non-profit organization is required, to pay the capital gains costs in case of removal
of the capital gains using for commercial purposes. , for organizations, the capital gains tax does
not use the limited eligible strategy where half of the capital gains are reimbursed. The agencies
are authorized indexing techniques to determine the capital increase and bad luck and are paid
for by the assessment of the annual rates. So in the case offered the answer will differ only in
terms of a limited strategy which is irrelevant. In this way there is a net capital increase / deficit
for the organization:
Particulars Amount $ Amount $
Sale price $ 1,400,000
Less:
Indexed Purchase cost $ 9,072,000
Net capital loss -$ 7,672,000
Q3. With reference to relevant laws, discuss the GST consequences of this arrangement for
both Bowens Pty Ltd and Builder’s Choice Pty Ltd.
Bowens Ltd purchased 110 compact blenders from Builder's Choice Pty Ltd for $ 660 per head
(remembered by GST) in October. The total amount paid by Bowen including 10% GST is $
72,600. But the GST amount quoted for the above exchange is $ 6,600 ($ 72,600 * 10/110).
As indicated by the method of collection, both entities must determine the GST risk at the same
time the exchange occurred regardless of whether the money was received or not. According to
the provisions of GST law, any company with an annual turnover of more than $ 20 million must
support a month-on-month BAS / GST return unfairly imposing the GST obligation and GST
entry credits separately for that month regardless of whether the allowance is received as the
accounting collection is continued.

Bowens Ltd will receive a $ 6,600 GST credit for the long term in October, while Builder's
Choice with a $ 6,600 GST obligation is due to the government. But in December it was
discovered by Bowens that 12 compact blenders purchased in October were broken and the same
was returned to the manufacturer's decision promising the full discount. The full discount was
paid by Builder's Choice for the same. Now, as per section 19 - Opportunities for adjustment of
GST, section 19-B specifically governs the modification of provisions, for example change of
GST allowance and the credits identified by the article review or return to the supplier. .
Area 19-A, 19-10 clearly states that the times of change include the arrival of the goods to the
supplier of an item, or a piece of the given item (regardless of does the arrival involve a change
in the responsibility of the thing) Subdivision 19- B, 19-40 states that the meetings have a change
of grace if GST was due to previous spending time and in the manner this requires the expanding
or reducing changes to be made in the month in which the change occurred. Bowens returned 12
mixers to a Builder decision in December where barren GST is $ 720.
In the December movement statement both collections must make changes that match the sterile
GST when the mixers arrive. As a result, Builder's Choice will make a reduction adjustment
subject to a $ 720 money-back guarantee that it has just paid to GST Net in October to be paid by
him in December and to give Bowens a change note to him. Bowens is expected to repay the $
720 GST credit required by making an ever increasing adjustment to the net GST amount they
are in danger of paying.
Q4. With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the
tax consequences of the above scenario for Paul.
Section 44 of the 1936 Annual Spending Act states that if there is a possibility that any profit
will be paid by the group from its benefits, then it will be added to the payment of the
shareholder valuation. First of all, if it is released. made by the seller at the time of liquidation,
these group benefits are not paid.
At least section 47 (1) of a similar presentation, clearly refers to that payment issued by investors
if the seller's eventuality is declared as a deemed profit and therefore these lines will be taken
into account for the evaluable payment of the investor. Portions of the investor are eliminated in

the event of liquidation / organization ceasing. Any dispersion caused by the uprising will trigger
CGT C2 periods which will lead to capital upheavals / misfortunes.
This means that the seller's courier volume should be reminded of the actions that have fallen.
The cost basis of the offers held in the exchanged group is the amount originally paid for the
offers plus any additional expenses paid. In accordance with section 118-20 of ITAA 1997, the
measure of the capital increase on the withdrawal of the offers is reduced by the amount of
distributions (capital that continues to be assessed in any case) received by the investor in an area
47 of the income law of 1936, for example any observed profit.
In the case presented, Paul received $ 7,200 for a total of $ 3,000 in unregistered profits and $
4,200 for his exceptional offers (cost $ 4,000 paid). Therefore, according to the above agreement,
Paul will receive a $ 200 capital gain on continuing capital ($ 7,200 - $ 4,000) less than $ 3,000
received in profit.
Q5. With reference to relevant provisions of ITAA 97/ITAA 36, discuss how the
partnership income is taxed.
As indicated by section 91 of the income tax law, 1936, no business is to be paid by an
Australian registered association company while they go through the products and in this way
will the subscribers paying much wages.
The organizing company only needs to return the product for such. As indicated by area 92, a
beneficiary's salary must include all salaries received by the winning organization inside and
outside Australia. The Australian resident who is an escort in a society must pay the costs for his
or her total salary.
The deferred duty compensation for any remote assessment is paid for money earned outside
Australia. The non-resident Australian is not burdened by the wages received from Australia,
however subject to the equipment being returned. In that case, the total salary of the society is $
300,000 where 60% ($ 180,000) was generated in Australia and another 40% ($ 120,000) was
generated in New Zealand.

Bothe Steve and Alex are 50-50 participants. Therefore, being a resident of Australia Steve is
subject to a personal assessment of a large amount of salary earned worldwide, for example $
150,000. You must pay the excess for any annual expenses paid by New Zealand's external
salary. Be that as it may, non-resident Alex is not at risk of paying an annual tax on many wages
received from Australian sources, for example $ 90,000 (half of $ 180,000) but must return the
deduction for the like.

REFERENCES
1. Calculation your FBT – Available at
https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/calculating-your-fbt/. (2020)
2. Calculation your FBT – Available at
https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/calculating-your-fbt/. (2020)
3. A new Tax System (Goods and service tax) Act 1999- Available at
https://www.legislation.gov.au/Details/C2014C00008. (2020)
4. Income Tax Assessment Act, 1936 – Available at
https://www.legislation.gov.au/Details/C2017C00242/Controls/. (2020)