Calculation of Net Capital Gain or Loss
1: Here the issue that crop up is linked with the evaluation of gain that is derived from the sale of assets under section 108-20 of the ITAA 1997. Here the laws that are applicable are under section 108-20 of the ITAA 1997 and section 108-10 of the ITAA 1997.
Application of the above mentioned laws shows that under law section 108-20 of ITAA 1997, loss of $1000 that is incurred from the sale of home sound system is not considered for set off, as losses incurred from the disposal of personal assets that are used cannot be considered. Now the law section of 108-10 of the ITAA 1997 shows that the losses which is incurred cannot be set off against the gains that are obtained from the sale of shares. Moreover, the offset can be considered according to the law section 108-10 of ITAA 1997. Here in this case study, Eric earned profit from the disposal of the assets and there are no current year ordinary capitals applicable for reductions. Eric thus gained profit of $15000 from the sale of his assets. Thus conclusion that can be drawn from this case is , Eric cannot offset the loss that he gained from collectibles and this is because he has gained profit from the disposal of assets.
2: The issue that can be seen from this case is concerned with the ascertainment of FBT in accordance with the “Taxation Ruling of TR 93/6”.Thus the law section which is applicable here is “Taxation Ruling of TR 93/6”.
Application of the above stated law taxation rulings of TR 93/6 shows that financial organizations makes plans regarding the offset of the loan account that is considered as interest offset agreement. These products are prearranged for offsetting the interest which is incurred by clients. Therefore, the clients are not accountable for paying any amount for the income tax with respect to earnings gained from the account. According to the Taxation Rulings of TR 93/6, if the bank discharges Brian from refunding interest on loan then no amount of income tax Brian will be accountable for payable. Thus it can be concluded that Brian will not be liable to pay any amount of income tax if he is unconstrained from paying interest by the bank.
Calculation of Taxable Value of Fringe Benefit
3: The issue that arises here is concerned with the allocation of loss derived from the rental property as the joint ownership by Jack and Jill. Laws that applicable in this case are :Section 51 of the ITAA 1997, Taxation rulings of TR 93/32 and F.C. of T. v McDonald (1987) .According to the taxation rulings of TR 93/32, net income that is obtained from the rental property must be distributed between the co-owners of the considered property. Moreover, the ruling mainly considers the evaluation of taxable situation of Co-owners who are not responsible for carrying their values within actions. This current case in Jack and Jill considers the estimation of taxable position of the rental property. Jack is entitled for 10% of the property while Jill is entitled for 90% from the property. Now according to the Taxation rulings, TR 92/32, Co-ownership of rental property is considered as one partnership for income tax purpose but this is not considered as one partnership under the general law except the ownership accounts for carrying value of any business practice, where the Co-ownership is considered as the partnership for fulfilling the purpose of income tax only. The loss of income that is derived from the rental property is managed through the Co-ownership of rental property as well as from the allocation of partnership profits and losses. The situation of Jack and Jill shows the co-ownership for the rental property which is based on the income tax purpose and cannot be considered as the partnership in consideration with the general law. The taxation rulings of TR 92/32 enacted shows that co-owners of the rental property usually not considered as partners at general law. This case the partnership agreement is either in the form of writing or oral that does not impact on the shared value of income or loss from the property. Therefore, Co-owners of the rental property Jack and Jill will hold the property as the joint renters. Now the case of F.C. of T. v McDonald (1987) 18 ATR 957 shows that the taxpayer’s wife and he officially owned two strata title units as the joint renters. The agreement established between them states that the net profit earned from the rental property will be distributed as 25% to McDonald and 75% to Mrs McDonald. Now the total loss amount will be borne by Mr McDonald. Thus it can be concluded that both Jack and Jill are required to distribute the losses equally and joint ownership does not accounts as partnership business (Kenny, 2013.)
Allocation of Loss for Tax Purposes
4: IRC v Duke of Westminster [1936] AC 1 quoted as the incidence of tax avoidance. This case established one theory that states each man is authorized to order his affairs for allowing the taxation handover which is made in fitting Act. This taxation handover is less than it . Though it cannot be stated that this ruling was very eye-catching for others who is looking for the tax avoidance with respect to law’s multifaceted structures and these are undermined by the subsequent cases where the courts have looked on the overall impact. Citing an example of the court in the upcoming stages is more uncertain and were adopted under the WT Ramsay v. IRC principle. In this case the transaction has predetermined artificially and this is served not in the form of commercial purpose . The rule was to impose tax for extending the transaction as a total fact.
In the current situation, this principle within Australia shows that if an individual achieves success while making this result secured, then the Inland Revenue might be of their proposal and they cannot be necessary to pay any increased amount of tax . Moreover, it is understood that this aspect allows individuals and corporations for pre-arranging the financial agreements with respect to their fixed objectives of reduced the tax liabilities based on their structures under laws ( Woellner, 2013).
5: In the current case evaluation of income from the sale of felled timber is analysed under subsection 6 (1) of the Income Tax Assessment Act 1936. Laws that are applicable in this case are :Subsection 6 (1) of the Income Tax Assessment Act 1936 &McCauley v. The Federal Commissioner of Taxation `
In the current situation, this is found that Bill owns a large piece of land where there are several pine trees. Bill primarily intended to use the land for grazing sheep and wanted to have it clean. Bill discovers a logging company that is ready to pay him $1000 for every 100 meters of timber. The logging companies can take hold of his piece of land. The taxation ruling related to 95/6, shows income tax consequences generating from the activities of primary production and forestry . The ruling offers the limit to which the receipts that is derived from the sale of timber. This aspect constitutes measurable income whether the tax payers are indulged into the activities of forestry industry. According to subsection 6 (1) of the Income Tax Assessment Act 1936 the tax payer is indulged into the activities of forest operations is known as the primary creator (ROBIN, 2017).
Principle established in IRC v Duke of Westminster
According to the subsection 6 (1), the Income Tax Assessment Act 1936, chief production is commonly defined as the planting of trees within plantation which is required for felling from. As an confirmation from the case study, the Bill regarded as the basic producer since he has indulged into the processes of primary production subsection 6 (1) of the Income Tax Assessment Act 1936. The forest operations include felling of trees in a forest or plantation though the tax payers are not concerned about the planted trees (Barkoczy, S., 2016).
Being the possessor of large piece of land, bill did not planted the trees but the whole amount of receipts that was derived by Bill from the sale of felled timber constitutes measurable earning of the tax payers disposes about the trees that have not inevitably planted by the tax payer and rendered for the goal of sale forms the part of measurable income. In spite of these facts, the considered sales combines either completely or partly assets of a business, trees are taken as measurable income of the tax payers under subsection 6 (1) of the Income Tax Assessment Act 1936(Braithwaite, V. ed., 2017).
Conversely, if the tax payer pay a lump sum of $50,000 by yielding the right to the logging organization for removing the essential amount of timber, then that receipt of sum will be considered as “Royalties”. 26 (f) receipt of shows “royalties” from the tax payer on granting the right to fell the timber on land obtained by the tax payer .Here this kind of situations, Bill will not be cautious as carrying on the trade of forest operations. Here it is considered that the tax payers did not planted the trees for sake of gaining profit from that. As held in McCauley v. The Federal Commissioner of Taxation payments obtained by the grantor is under the right of doing so. The amounts those are receipted by Bill as royalty combines assessable income under section 26 (f). Thus it can be concluded that income from cutting the timber will be measured as taxable proceeds under subsection 6 (1) of the ITAA 1997 (Braithwaite, V. ed., 2017).
Reference List:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Milton, 2013. The taxpayers’ guide 2013 & 2014. Qld.: Wrightbooks.
Morgan, A., Mortimer, C. and Pinto, D. 2013. A practical introduction to Australian taxation law. North Ryde [N.S.W.]: CCH Australia.
ROBIN, H., 2017. australian taxation law 2017. OXFORD University Press.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Woellner, R. 2013. Australian taxation law select 2013. North Ryde, N.S.W.: CCH Australia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.
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