Issue
The issue is regarding the measurement of the sustainable amount that can be obtained from the loss or gain of the capital. The issue has to be discussed according to the Section 108-(10) of the ITAA 1997.
- “Section 108-(20) of the ITAA 1997”
- “Section 108-(10) of ITAA 1997”
From the figures obtained from the taxpayer, it is clear that the loss that has been incurred by selling the sound system is not enough to get approval to set off. The sound system is known as personal asset. Thus, the loss that has been incurred from its sale is not eligible for set off. The evidence for this discussion stated above is present in the guiding principles of “Section 108-(10) of ITAA 1997”. The section states that the loss which is collectable in nature is not considered for offset against the gains of ordinary nature that has been obtained from the sale of shares and hence will not be allowed for set off (Dabner 2014). Keeping in mind the principles of the “Section 108-(10) of ITAA 1997” profits were produced by Eric by selling ordinary assets which did not have any existing yearly capital or reductions that can be relevant. As a result, Eric incurred a capital gain of $15,000.
Conclusion
From the discussion above, it can be stated that Eric cannot set off the loss that he incurred from the collectibles as the revenue was already received by him by selling the ordinary assets.
The problem in this case is in computing the taxable value for the FBT year 2016/17, the concept of which is described under the “Fringe Benefit Tax Act 1986”.
- “Fringe Benefit Tax Act 1986”
- “Taxation Rulings TR 93/6”
From the guidelines stated in “Taxation Rulings TR 93/6” it can be understood that different types of banks or companies that provide loans makes different plans to offset the interests in the loan accounts of the people (Cane and Atiyah 2013). The guidelines of the rulings mainly state that the customers will not be required to make any tax payments for the income that has been derived by offsetting the interest. Taking into account this ruling and the figures obtained from Brian’s accounts, he will not have to pay any interest at the end of the period of loan and thus will not have to pay any taxes.
Conclusion
Thus, from the discussion done above, it can be concluded that Brian will not have to pay any income tax if the interest that is payable for his loan is payable at the end of the loan period.
The issue described in this question relates to the loss distribution, which the taxpayers incur from joint ownership of rental property.
- “FC of T v McDonald”
- “Section 51 of the ITAA 1997”
- “Taxation ruling TR 93/23”
The guidelines described in “Taxation Ruling TR 93/32”, the income tax division or any kind of loss that has been incurred from a rented property amongst the joint owners of the property has been described (Althaus, Bridgman and Davis 2012). However, the ruling described above states that rule for judging the measurable position of the co-owners which cannot be considered valid for running a business within the defined curriculum. Thus, in this case the assessable positions of Jack and Jill are measured from the property that they have rented. It has been observed that the Jack will be earning 10% of the profit and his wife Jill will be earning the remaining 90% of the profit from their rented property.
Laws
According to the TR 92/32 ruling, joint ownership can be indicated as a partnership business which will influence the income tax to be paid by a taxpayer. The idea of the general law defines that income tax is not concerned with partnership (Althaus, Bridgman and Davis 2012). This concept of joint ownership in any kind of business is not considered in paying the income taxes. If the company suffers from a loss in income from the property that is rented, then the loss will be determined in accordance to the joint ownership and distributed according to the profits and losses suffered. From the situation of Jack and Jill described in the question, it can be clearly understood that according to the general law, the income tax accounted for the joint ownership of the rented property will not be distributed as the partnership. However, it can be said that the basis of the income tax has been framed by the joint ownership but the distribution of the income tax payable is not dependent on the percentage of ownership.
The guidelines provided in “Taxation ruling TR 92/32” helps to understand the fact that under the general law, joint ownership of the leased property will not be considered as a partnership business (Aust 2013). In this problem, the agreement of the partnership between Jack and Jill, which can have some written document or can be oral, thus has no impact on the income shares or loss that has been achieved by renting the property. In the article of the agreement, it was stated that the person who will be responsible for the total loss incurred by renting the property is Jack. This case resembled somewhat the case of Mr. McDonald. In the case of “FC of T v McDonald” (1987), it was stated that Mr. and Mrs. McDonald would have 25% and 75% of the profits earned from their property (Palan, Murphy and Chavagneux 2013). Thus, when there will be any loss from the property, Mr. McDonald will bear the total loss and the income of his wife will prevent his wife to compensate for such loss. This will result in the advancement of his wife’s income.
Just like the plan of Mr. McDonald, the partnership of Jack and Jill will not be considered under the general law and thus any loss incurred from their business can be shared equally amongst them so that no one is overburdened.
Conclusion
Thus, from the discussions above, it is clear that Jack and Jill will be sharing the loss incurred by their renting business equally amongst them and the joint ownership of their business will not be considered as a partnership business.
The most commonly quoted ruling, which states that avoiding tax can be legal and accepted, has been mentioned in the “IRC v Duke Westminster (1936)”. The wages of the gardener of the Duke of Westminster was paid weekly. Now he made a contract and drew up the covenant agreement of paying weekly wages to the gardeners. He instead started paying them an equivalent amount. As a result of this contract, the gardeners were happy as they as they have been receiving an equivalent amount as their wages but the Duke started to gain tax benefits. This was because of the law with the help of which the liability of the Duke to surtax was lowered by the covenant (Braithwaite, Murphy and Reinhart 2013). The situation discussed above describes that every person can lower the tax affairs than what he had to pay by implementing certain plans to do so. It cannot be made compulsory for a person to pay a higher amount of tax that what he had to pay.
Conclusion
With the application of this law discussed above in today’s life, it can be said that if a person becomes successful enough to implement this law in his life, then the taxpayers genuinely cannot be forced to pay taxes that are higher than what he had to pay (Burkhauser, Hahn and Wilkins 2015). A person gets an opportunity to reduce their liability of taxes by agreeing to the financial terms of the law with the application of this concept described above.
The issue of this question is to provide an assessment which relates to deforestation and cutting down of timber under “Subsection 6-(1) if ITAA 1997”.
- “Subsection 6-(1) of the ITAA 1936”
- “McCauley v FC of T”
- “Taxation Rulings of TR 95/6”
- “Subsection 36-(1)”
- “Section 26-(f)”
From the present issue of Bill it is discovered that Bill is the proprietor of the land in which there are a lot of pine trees. He initially planned to clear the land and start to graze sheep. In the process, he was approached by a lodging company and they agreed to pay an amount of $1000 for each meter of timbre that can be taken from the land by the lodging firm.
According to the taxation ruling described in “Taxation ruling TR 95/6”, the rulings of income tax start from the performances of the initial production and forestry (Saad 2014). This law also explains the extent to which an income of an individual from the activities of forestry can be assessed. The taxpayers who are involved in any sort of primary forestry business such as timber disposal also falls under this taxation ruling. According to the information provided in “Subsection 6-(1) of the ITAA 1936” any taxpayer who is working on forest operations is considered as a basic producer of income tax. This will be applicable only if the individual can provide proper document to establish that forest operations is a part of his business (Saad 2014).
The initial production of this business can be regarded as tree plantation and nurturing them as required according to the “Subsection 6-(1) of the ITAA 1936” (Norbury 2015). In the situation described in this question, Bill is a primary producer as he is involved in the work of cutting down the pine trees of his own land. Forest operations include planting and cutting down of trees for vegetation. The taxpayer in this case has no role in planting or cutting them down by himself.
Thus, from the above discussion, it can be said that Bill did not plant any pine tree, neither did he cut them down by himself. However, the income that is made by Bill by selling the timbre is an assessable amount for tax. Thus, according to the “Subsection 36-(1)” the sum of money earned from this timbre business will fall under the taxable income of bill.
The income can be considered in another way. A very large amount of $50,000 was made to the taxpayer as he was assigned by a company to cut down the timbre that will be necessary for them. For this, tax payer can receive the amount as “Royalties”. According to the “Section 26-(f)” the royalty received by a taxpayer from the company will also fall under the assessable yearly income for income tax (Norbury 2015). Now, in this scenario, if Bill receives royalty from the company for cutting down trees and providing them with timbre, this will be a proof of running a business in forest operations. Thus, the income of Bill by selling the timbre in this situation will be included in his tax assessment income at the end of the financial year according to “Section 26-(f)”
Conclusion
The discussion above thus provides the information that the income of Bill by cutting down and selling the timbre to the company will be assessed for income tax. In the second scenario, the huge amount of money received by Bill for selling the timbre to the company will be royalty which the company will be paying Bill for selling his timbre.
References
Althaus, C., Bridgman, P. and Davis, G., 2012. The Australian policy handbook. Allen & Unwin.
Aust, A., 2013. Modern treaty law and practice. Cambridge University Press.
Braithwaite, V., Murphy, K. and Reinhart, M., 2013. Taxation threat, motivational postures, and responsive regulation. Law & Policy, 29(1), pp.137-158.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2), pp.181-205.
Cane, P. and Atiyah, P.S., 2013. Atiyah’s accidents, compensation and the law. Cambridge University Press.
Dabner, J., 2014. Commentary on 108-A of ITAA 1997: CGT asset rules. In Australian Tax Practice. Thomson Legal and Regulatory.
Norbury, M., 2015. Track and the CGT small business concessions. Taxation in Australia, 49(10), p.622.
Palan, R., Murphy, R. and Chavagneux, C., 2013. Tax havens: How globalization really works. Cornell University Press.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
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