Taxation And Accounting Issues Discussed In Practice Questions

Calculating Net Capital Gain/Loss

The question takes into consideration the issues which shows is a taxpayer able to make assessment for capital gain or capital loss which needs to be set off under “Section 108-10 of the ITAA 1997”.

1. “Section 108-20 of the ITAA 1997”
2. “Section 108-10 of ITAA 1997”

The present circumstance of the tax payer has been state on the losses which has been sustained as per the sale of the sound system which has been not seen to be approved for the purpose of set off. This has been mainly depicted due to the losses which have taken place due to the selling of the home sound system as it is having the characteristics of personal asset and will not be allowed for set off. The main form of the guiding ruling has been suggested with “section 108-10 of ITAA 1997” providing the main evidence which are seen to be collectible in nature and not considered for offsetting of ordinary gains obtained with the selling of the shares and will not be allowed for the setting off. The “section 108-10 of the ITAA 1997”, has been identified with the consistency. It has been further discerned that Eric has been able to produce the profit in terms of the sale of the assets which are ordinary in nature with no existence in any form with the pertinent reductions. This has been consequently seen with the capital gains for Eric observed with $15,000 (Rootes 2014).

Conclusion: 

The various conversations has showed that Eric was not able to set off the loss sustained with the collectibles and solely derived from the selling off the assets and are seen to be ordinary in nature.

The introduction of the issue has been able to deal with the computation of the FBT has been defined with the “fringe benefit act as per 1986” (Ti?n and Mba 2013).

1. “Fringe Benefit Tax Act 1986”
2. “Taxation Rulings TR 93/6”

The rulings has been based on the understanding of the guidelines as per the “Taxation Rulings of the TR 93/6”, financial institutions such as loan making companies or banks which   have been considered with the offsetting of the interest taken with the customers. The various types of the rulings has been taken with the incurring of profit which would not be required to make the tax payments which from the derived income. The account of the guidelines which has been defined under the “Taxation Ruling of the 93/6” as per the circumstance which showed that Brain has been able to discharge the amount from the bank based on the payment of the interest at the end loan period and as Brian has been not identified with the will to pay tax (Armstrong et al. 2015).

Determining Taxable Value of a Fringe Benefit

Conclusion: 

The given conversation has showed the understanding of the loan interest which is seen to be payable at the end of the loan period and not income tax needs to be paid to the bank.

The given matter has been seen to be associated with the distribution of loss which is sustained as per the ownership by the tax payers along with the context of the rental property.  

1. “FC of T v McDonald”
2. “Section 51 of the ITAA 1997”
3. “Taxation ruling TR 93/23”

The main conformity with the “Taxation Ruling TR 93/32”, seen with the rulings which has been  provided with the different types of the explanations based on the income or the loss derived with the property rent and the joint property owners. Additionally, the various types of the discussions have been able to show the guidelines gauging as per the assessable position of the co-owners and is not seen to be accountable for the purpose of carrying of the business as per the defined objectives. In the given context Jack and Jill has been able to evaluate the various types of the considerations which has been able to show the assessable position as per the rented property. In the given context Jack has been seen to be eligible with 10% of the profits derived from the Jill in getting of 90% of the rented property (Richardson, Taylor and Wright 2014).

The various types of the considerations has been further seen to be defined under the “TR 92/32”, with the joint ownership considered with the property rented as per the partnership and defined as per the general notion of the general law. The ruling has been further seen to not include the various types of the joint ownership of any business which has been able to comply with the taxable income. The loss of the income has been seen to be sustained with the ownership of the rented property with the foundation of the income tax and was not taken into account as per the partnership and the principles of the general law (Hasseldine and Morris 2013).

The taxation ruling has been further able to state about the ruling of the “TR 92/32” which has been provided with the explanation has per the joint ownership of the property rented and not treated as per the partnership with the general law. The agreement of the partnership has been taken with Jack and Jill who has been contained with the written, ethical or oral agreement, which is not seen to be having any effect on the share of the income as per the property rented (Taylor, Richardson and Taplin 2015). The clause of the agreement has been accountable with 100% of the total loss which has been derived as per the rental property. It has been further discerned that the various types of the considerations for the case of “FC of T v McDonald (1987)”, has been considered with the agreement as per the Mr McDonald entitled with 25% of the profits, on the contrary McDonald has been seen to be entitled with 25% of the profits whereas Mrs McDonald   is seen to be acquiring 75% of the total profit derived from the property. The loss of Mr McDonald needs to be shouldered with 100% of the total loss. The same has been primarily done as per the advancement of the income to wife and indemnifying such loss (Whait 2014).

Allocation of Loss for Tax Purposes

Comparably, the present aspect of the partnership has been seen to be taken between Jack and Jill and this partnership is not considered as per the legal aspects and the losses arising with such rented property, which needs to be shared between them equally (Taylor and Richardson 2014).

Conclusion: 

The discussion of the scenario has been seen to be understood as per the share of loss arising out of Jack and Jill considered on equal basis with the joint ownership and does not account for the partnership.

4: The most important ruling of the subject has been further able to decide of the avoidance of tax which has been accepted with the legal case laws of “IRC v Duke Westminster (1936)”.  It has been further discerned that the wages to Duke of Westminster has been seen to be considered on weekly basis and the same has been entered into the contract with the drew up of the covenant agreement which has been made with an equivalent amount. Despite of this, Gardener has yet received the amount identical to the wages, however Duke has been able to particularly gained with the benefits of the tax and the amount of the wages which has been gained in advantage with the tax benefits stated under the law and applied at the same time when the covenant has been able to reduce the liability of Duke to surtax (Permani 2013). The given case has been able to define the eligibility of the individual for the various affairs of the taxation seen with the sole objective of assigning of appropriate laws which would have been otherwise lower.  The individual cannot be eligible in order to make payment for the increased taxation amount.

The present age principle has been further able to define the purpose of obtaining of the result with ingenuity of not forcing the individual to pay the increased sum of the tax.  The various decisions of the individual have been seen with the opportunity to reduce the tax liability in agreement of the financial framework with the law (Lennox, Lisowsky and Pittman 2013).

the important question has shown with the application of “subsection 6 (1) of the ITAA 1997” for the curtailment of timber.

1. “Subsection 6 (1) of the ITAA 1936”
2. “McCauley v FC of T”

Based on the present assessment it has been seen that Bill has been considered to be owner of the land with several pine trees. In the initial stages the land has been subjected to clearance for grazing sheep however on being approached by the logging companies, which has agreed to pay a total amount of $1000 for every 100 meter of the timber acquired from logging of the firm form the Bill’s land (Richardson, Taylor and Lanis 2015).

Principles established in Duke of Westminster case

The “Taxation ruling TR 95/6”, has been seen to determine the income tax rulings based on the activities taken from the primary production and forestry. It has further defined that the various types of the considerations made with the individual deriving income has been further defined based on the forestry activities which is assessable. The various rulings have been further seen to be applicable as per the individual taxpayers, who are seen to indulge in the various types of the forestry activities like disposing of timber. The consideration of the explanation as per “Subsection 6 (1) of the ITAA 1936”, the individual taxpayer is seen to be associated with the operations of forest and the same needs to be treated as per the producer of  income tax and the forest activities which are viewed with the performing of the business activities (Meng and Pham 2017).

The primary production activities has been further seen to be referred with the planting of the trees and tending down of the trees in a particular plantation as per “subsection 6 (1) of the ITAA 1997” aimed to be considered as per the cutting down of the vegetation. As per the present context, the primary production for tending down of the pine trees has been considered with the large portion of the land which is owned by him. In addition to this, the forest operations are seen to be usually considered for the operations with the planting or tending of the trees in the vegetation and taxpayer was not seen to originally plant the trees.

Based on the context of the above the explanation, Bill has not seen to plant trees and the sum is received with the selling of the timber and the same which has been considered for the assessment. Despite of this, the sales has been comprised with the portion of assets having commercial values and receipts of the taxable income considered as per “subsection 36 (1)”.

The alternate scenario has been further seen to be regarded with the taxpayer paying a large amount of $50,000 by the simple assignment of the right for the logging company to cut down the necessary quantities which has been able to receive the timber considered under “Royalties”. As defined in section 26 (f), the loyalties has been seen to be tending of the timber and the same will be treated in the assessable income included in the income year. The various types of the royalties received by Bill have been considered with felling of timber and the same is to be treated with the carrying of the forest business operations. Considering the rulings under the case of “McCauley v The Federal Commissioner of Taxation”, the payments have been procured with assignment through the right of tending the timber. Henceforth, the total amount will received by Bill in the various types of the alternative scenario considered from the selling of timber and which needs to be included in the taxable income comparable to “section 26 (f)” (Hasseldine and Morris 2013).

Conclusion: 

The aforementioned analysis has been seen to be considered based on the amount defined with the amount received by Bill and the consideration has been seen to be based on the alternative scenario for the sum received for the granting right and the amount which needs to be treated as royalties.

Reference list: 

Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D. and Larcker, D. F. (2015) ‘Corporate governance, incentives, and tax avoidance’, Journal of Accounting and Economics, 60(1), pp. 1–17. doi: 10.1016/j.jacceco.2015.02.003.

Hasseldine, J. and Morris, G. (2013) ‘Corporate social responsibility and tax avoidance: A comment and reflection’, Accounting Forum, 37(1), pp. 1–14. doi: 10.1016/j.accfor.2012.05.001.

Lennox, C., Lisowsky, P. and Pittman, J. (2013) ‘Tax Aggressiveness and Accounting Fraud’, Journal of Accounting Research, 51(4), pp. 739–778. doi: 10.1111/joar.12002.

Meng, S. and Pham, T. (2017) ‘The impact of the Australian carbon tax on the tourism industry’, Tourism Economics, 23(3), pp. 506–522. doi: 10.5367/te.2015.0514.

Permani, R. (2013) ‘Optimal export tax rates of cocoa beans: A vector error correction model approach’, Australian Journal of Agricultural and Resource Economics, 57(4), pp. 579–600. doi: 10.1111/1467-8489.12011.

Richardson, G., Taylor, G. and Lanis, R. (2015) ‘The impact of financial distress on corporate tax avoidance spanning the global financial crisis: Evidence from Australia’, Economic Modelling, 44, pp. 44–53. doi: 10.1016/j.econmod.2014.09.015.

Richardson, G., Taylor, G. and Wright, C. S. (2014) ‘Corporate profiling of tax-malfeasance: A theoretical and empirical assessment of tax-audited Australian firms’, eJournal of Tax Research, 12(2), pp. 359–382.

Rootes, C. (2014) ‘A referendum on the carbon tax? The 2013 Australian election, the Greens, and the environment’, Environmental Politics, 23(1), pp. 166–173. doi: 10.1080/09644016.2014.878088.

Taylor, G. and Richardson, G. (2014) ‘Incentives for corporate tax planning and reporting: Empirical evidence from Australia’, Journal of Contemporary Accounting and Economics, 10(1), pp. 1–15. doi: 10.1016/j.jcae.2013.11.003.

Taylor, G., Richardson, G. and Taplin, R. (2015) ‘Determinants of tax haven utilization: Evidence from Australian firms’, Accounting and Finance, 55(2), pp. 545–574. doi: 10.1111/acfi.12064.

Ti?n, N. and Mba, T. (2013) ‘A Review of Factors impacting Tax Compliance’, Australian Journal of Basic and Applied Sciences, 7(94), pp. 476–479.

Whait, R. B. (2014) ‘Exploring innovations in tax administration: A Foucauldian perspective on the history of the Australian Taxation Office’s compliance model’, eJournal of Tax Research, 12(1), pp. 130–161.

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