Taxation On Sales Of Assets And Fringe Benefit Tax Consequences

Question 1

The report work has elaborated on the treatment in respect to the assets as per the Australian Taxation Laws. In addition the project work has also provided for the analysis of the Fringe benefits tax in accordance to the Australian Taxation law. For the purpose of the better understanding and knowledgethe case law has been referred so as to compute the compensation of the regulatory authority. The overall report has been conducted as per the amended laws so that the proper analysis on all the aspects and capital gains can be grasped in a proper manner. This will assist the authorities in the determination of the taxable income of the individual. The overall project work will provide suitable assistance to the user in the ascertainment of the taxable income under varied heads so that to have better command on the work operations.

While for the ascertainment of the capital gain it has been assumed that the client is residing in Australia and is an Australian resident. For the purpose, the process of calculation has been done accordingly. Further the authority responsible for the effective and suitable supervision resides with the Australian Taxation Office so that to attain better work operations leading to greater level of transparency.

The vacant land was acquired at the value of $120000 that includes the amount of water, sewerage and land taxes of that land that is $100000 and $20000 respectively. The value at which the land is acquired will be adjusted to the current selling price. As such the income that will be earned when the contract of the sale has been made in the same year (Austill, 2018).Therefore, it can be analyzed that the income which is received as the compensation in the first year will be treated as the owner of capital assets. Further provided, it has been observed that after September 1999 the vacant land will be taken into consideration. As such the treatment will be done in different and distinct manner. Further since the land was acquired on January 1, the discount method has been used to calculate the taxation. For the purpose, the 50% of the discount will be allowed as per the provisions of the Australian Taxation Laws(Australian taxation office, 2018).

On 21^st July 1986, she purchased an antique bed at a cost of $3500 that was kept with her for the long prospects of time that is for a period of more than 1 year. As such it can be concluded that the long term capitalgain will be arise from the antique bed. For the purpose, of adjusting the amount at which the antique bed was acquired the method of inflation index has been used. The selling price through the indexation method will be considered so as to compute the actual capital gain (Austill, 2018).

Block of vacant land

The computation of the capital gain that that is ascertained through the discounted method will be taken into consideration as its value is less than the value obtained from the method of indexation.

As per the given scenario it has been observed that the painting has been sold in art auction at a value of $125000 in the current year. As such the amount of sales that have been received will be treated as the capital gain(Austill, 2018). This is because this depicts the actual selling price. For the purpose of the given scenario, the method of indexation will also be used for the ascertainment of the taxable income.

As per the Australian Taxation law, the amount that will be treated as the capital gain for the sale of the painting will be liable for the taxation that is $123,000.

As per the given context, it has been analyzed that the user is having the substantial share portfolio and is engaged in the business of sales and purchase of shares. As such, the client purchase and sale the shares to various organization concern (Australian taxation office, 2018). Therefore, the income earned from the sale of such shares will not be treated as capital gain. This is because the client is conducting such operations with regards to the objectives for which the company and not for any other purpose.  As such the income computed under this aspect will be shown under the head income from business and profession and not under the income from capital gain. Therefore, the client will not be liable on the capital gain taxes (Moretto, Kendall, Whitty, Byrnes, Hills, Gordon, Turkstra, Scuffham, and Comans, 2014).

Further provided, as per the provisions of the Australian Taxation Laws the brokerage fees and the costs of stamp duty that is to be paid by the client will be the part of the preliminary price of the shares. Accordingly, for this purpose the treatment will be done. It has been reviewed that the main perspective of the client is to earn the profit with the aid of dividend or other sources. The value that will beobtained by the client from the transferability of the shares will be shown under the head income received as profits(Moretto, et. al., 2014). This will not be depicted as capital gain.

(a) Securities of Common Bank Ltd

Sales Price = Selling Price of Each Security * Total Number of Shares

= $47 * 1000 = $47,000

Antique bed

Total Purchase Cost = Purchase Price of Each Security * Total Number of Securities

= $15 * 1000 = $15,000

Cost of Brokerage Charges = $550

So, by putting the above values in the formula of capital gain:

Capital gain on Shares of Common Bank Ltd = 47,000 – 15000 – 550

= $30,700

(b) Capital gain or loss on sale of securities of PHB Iron Ore Ltd

Purchase Price of Shares = Purchase Price of Each Stock * Total Number of Stocks

= $12 * 2500 = $30,000

Value of Sales of Shares = Per Security Selling Price * Number of stocks/ securities

= $25 * 2500 = $62,500

Cost of Brokerage Charges = $1,000

Stamp Duty Paid on the Stocks of PHB Iron Ore Ltd = $1,500

So, value of capital gain on the sale of shares of PHB Iron Ore Ltd can be ascertained through use of following formula:

Capital Gain = Total Sales Price – Total Purchase Price – Brokerage Cost – Cost of Stamp Duty

= 62,500 – 30,000 – 1,000 – 1,500

= $30,000

(c) Capital Gain or Loss on the Sales of Shares of Young Kids Learning Ltd

Total Purchase Price = Per Share Purchase Price * Total Shares Purchased

= $5 * 1200

= $6,000

Total Sales Price of Young Kids Learning Ltd Shares = Per Share Selling Price * Total Shares

= $0.50 * 1200 = $600

Cost of Stamp Duty Paid = $500

Cost of Brokerage = $100

So, by putting the above values in formula of capital gain:

Capital Gain = Total Sales Price – Total Purchase Price – Brokerage Cost – Cost of Stamp Duty

= 600 – 6000 – 100 – 500

= -$6000

(d) Capital Gain or Loss on Sale of Shares of Share Build Ltd

Total Purchase Price = Purchase Price for Each Share * Total Shares Purchased

= $1 * 10,000 = $10,000

Total Sales Price = Selling Price of Each Share * Total Shares Sold

= $2.50 * 10,000 = $25,000

Expense of Stamp Duty faced on the Shares = $1,100

Cost of Brokerage Charges Faced on the Shares = $900

So, by putting the above values in the formula of capital gain:

Capital Gain = Total Sales Price – Total Purchase Price – Brokerage Cost – Cost of Stamp Duty

= 25,000 – 10,000 – 900 – 1,100

= $13,000

In the given case there will be capital gain as the variation between the selling prices of the violin and the market value of the violin that has been sold to the neighbor in Queensland is much less. However with this the violin the capital gain will also arise and the profit will also be earned from the sale of violin (Australian taxation office, 2018).

Painting

The indexation factor = CPI for the section which has ended September 1999/ CPI in which the expenditure incurred

However for the purpose of determining the net capital gain or net capital loss, all the capital gains that have been grasped from all the sources will be summed up (Moretto, et. al., 2014).

As per the context provided, it can be observed that the entire workforces are getting varied sets of the benefits from taxes. Firstly, the fringe benefit tax is the tax that is being provided by the employer to the employee (Moretto, et. al., 2014).  However the value of the benefit will be computed as per the Australian Taxation Laws. The value of FBT is determined by the consideration of the various factors. This is due to the fact that the valuation of the taxable income is computed through the actual value of FBT. As such it has been observed that the various methods of valuation will provide different values for FBT. As per the given context, there will be some cases in which GST will be charged while in some cases GST will not be applicable(Australian taxation office, 2018).

For the aspect of the fringe benefits the special tax provision has been used. FBT will also be computed as per the Australian Taxation Laws.

Management of the Expenses which are incurred in the care facility:

In accordance with the laws of the Australian taxation, the amount of tax is applicable as per the km the car has been used for the purpose of travelling. As per the given context the car has been used by the Jasmine for the personneluse. In addition the car has been travelled for 10000 km. As such the distance will be charged accordingly (Carnegie, 2014).The rat of tax as per the Australian Taxation Law is 12%. However, GST will not be applicable on the car as per the given scenario.

The value of car = 33000*100/110

=$330000

Fringe Benefit = 30000*20/100

=$6000

The $500 which has been incurred is inclusive for the GST amount

Therefore, for it the fringe benefit will be $500

= (550-[550*1/11])

Interest Income Treatment:

In accordance with the Australian taxation law the part of the loan that is taken for the purpose of personnel use will not be taken into consideration. However the interest on such loans will be taken into consideration and would be used for the purpose of deduction(Carnegie, 2014).

Interest =$450000*4.25/100

=$19125

For the purpose of analyzing the income the amount of interest will be deducted and can be claimed.

Heater Treatment

Since it has been observed that the selling price of the heater is more than the price for which it was purchased. As such it has been observed that there is fringe tax benefit. The worth for the same is $1300.

Taxable value= (Car Value*2.0802) + (repair expenses * 2.0802) + (Interest on loan * 1.886)

= (6000*2.0802) + (500*2.0802) + (19125*1.8868)

= $49606.35

The FBT will be charged for the following case at the rate of 47%

Fringe benefit tax = 49606.35*47/100

      = 23314.98

Fringe Tax liability = Tax on the benefit –GST credit

= 23314.98 – 3050

 = $20264.98

In this aspect the treatment varies, when the shares were purchased by the Jasmine for his personal use instead of selling it to the husband.

Conclusion

From the discussion and calculation provided in the overall report work it can be concluded that all the values in respect of the assets are done as per the Australian Taxation law. In addition the report work concludes on the varied and altered requirements to be taken into consideration while computing and assessing the taxable income of an individual. Further provided, the report work has concluded on the amount to be considered for the determination of the capital gain. For the purpose the report work concludes on the two methods for better understanding that involves indexation factor and the discounted factor. The overall project thus concludes on the in-depth understanding of the Australian Taxation laws for the purpose of the assessment of the taxable income of the individual.

References

Austill. (2018). INCOME TAX ASSESSMENT ACT 1997 – SECT 82.135 Payments that are not employment termination payments. Retrieved from: https://www5.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s82.135.html Australian taxation office. (2018). Amounts not included as income. Retrieved from: https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Amounts-not-included-as-income/

Australian taxation office. (2018). Capital gains tax. Retrieved from: https://www.ato.gov.au/General/Capital-gains-tax/ [Accessed 13 September 2018].

Carnegie, G., (2014). Pastoral accounting in colonial Australia: a case study of unregulated accounting. Germany: Routledge.

Moretto, N., Kendall, E., Whitty, J., Byrnes, J., Hills, A.P., Gordon, L., Turkstra, E., Scuffham, P. and Comans, T., (2014). Yes, the government should tax soft drinks: findings from a citizens’ jury in Australia. International journal of environmental research and public health, 11(3), 2456-2471.

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