Losses from the Sale of Personal Assets
The main issue has been identified with the fact whether the capital sustained in form of gain or loss needs to be set off as per “Section 108-10 of the ITAA 1997”.
- “Section 108-20 of the ITAA 1997”
- “Section 108-10 of ITAA 1997”
| Computation of net capital loss for the year | |
| Particulars | Amount ($) |
| Loss on sale of Antique Chair | 2000 |
| Loss on sale of Painting | 8000 |
| Less: Gain on sale of Antique Vase | 1000 |
| Total Collectable loss to be carried forward | 9000 |
| Asset Description | Cost Base | Capital Proceeds | Capital gains | Capial loss |
| Antique Vase | 2000 | 3000 | 1000 | |
| Antique Chair | 3000 | 1000 | 2000 | |
| Painting | 9000 | 1000 | 8000 | |
| Home Sound System | 12000 | 11000 | 1000 | |
| Shares in listed company | 5000 | 20000 | 15000 |
| Computation of Net capital gains for the year | |
| Particulars | Amount ($) |
| Gains on sale of shares | $15,000 |
The present circumstance for the taxpayer has been able to state on the losses which has been sustained as a result of selling off a sound system and henceforth it shall not be approved for set off. The main rationale for this is due to the losses as a result of selling of home sound system has the characteristics of personal asset which cannot be set off under the prescribed guidelines. With reference to section “108-10 of ITAA 1997”, various types of evidences for the losses which are of collectible nature cannot be offset as per the ordinary gains from the selling of shares and cannot be allowed for setting off. As per section “108-10 of the ITAA 1997”, Eric has been able to withdraw profits as an outcome of selling off an ordinary asset with non-existent reductions. Similarly, the total capital gains amounted to $15,000 (Devos 2014a).
Conclusion:
As per the conversation it has been discerned that Eric was unable to set off the various types of losses as a result of collectible as the on the revenue by selling an asset which was ordinary nature.
The main consideration of the issue has been able to bring forward FBT assessment prescribed under “Fringe Benefit Act 1986”.
- “Fringe Benefit Tax Act 1986”
- “Taxation Rulings TR 93/6”
| Taxable value of the loan fringe benfit | ||
| In the books of Brian for the year ended 2016/17 | ||
| Computation under statutory interest rate and actual Interest rate | ||
| Statutory rate | Actual rate | |
| Particulars | Amount ($) | Amount ($) |
| Amount of Loan | 1000000 | 1000000 |
| FBT Amount 40% business use | 400000 | 400000 |
| Statutory Interest rate @ 5.65% | 2825.00 | 500.00 |
| (Amount of loan x Statutory interest rate) – (Amount of loan x Actual interest rate) / 12 x 60% business use | ||
| Taxable value of the loan fringe benfit | 2325 |
| FBT on end of the loan on payment of interest at the end of loan | ||
| Statutory rate | Actual rate | |
| Particulars | Amount ($) | Amount ($) |
| Amount of Loan | 1000000 | 1000000 |
| FBT Amount 40% business use | 400000 | 400000 |
| Statutory Interest rate @ 5.65% | 33900.00 | 6000.00 |
| (Amount of loan x Statutory interest rate) – (Amount of loan x Actual interest rate) x 60% business use | ||
| Taxable value of the loan fringe benfit | 27900 |
The main guidelines for the rulings of taxation is as per “TR 93/6” for financial institution has been generally devised to provide an individual with the opportunity to offset the interests incurred by the customers. Various types of rulings has been able to provide the fact that customers on event of profit-making does not require any tax payment for such type of derived income. And considering the various types of guidelines under the “TR 93/6” it has been inferred that Brian is discharged by the bank from the recess of consideration of paying interest at the end of loan then you and he will not have to pay any tax (Carlon, Tran and Tran-Nam 2013).
Conclusion:
The discussions have been able to state that in case loan interest is payable during the end of loan tenure then no income tax needs to be paid by him to the bank.
FBT Assessment
The main issue has been considered with the last distribution which has been incurred by the taxpayer as a result of joint ownership from a rental property.
- “FC of T v McDonald”
- “Section 51 of the ITAA 1997”
- “Taxation ruling TR 93/23”
As per the “Taxation Ruling TR 93/32” the various explanations has been stated on the division of income as any sort of loss which has been derived from rented property in lieu of joint owners of the property. In addition to this, the discussions have been able to ascertain the guidelines of assessable position of co-owners which cannot be held accountable for conducting of business operations within the defined activities. Based on the given context it has been discerned that Jack and Jill are evaluated as per their assessable position with the property that has been rented by them. In this particular context Jack shall be eligible for a total of 10% of the profits out of the property whereas Jill shall be apportioned with 90% of the total profit (Zodrow 2014).
As stated under “TR 92/32” the various of consideration for the joint ownership of the rental property needs to be defined as per the partnership for the income tax assessment and it shall not be defined as a notion of general law. The various types of rulings does not consider ownership associated to business practice which adheres to the purpose of IT. The various depictions of loss of income sustained from the rented property have been administered along with the assistance from joint ownership with the allocation of profits and losses. It needs to be further stated that as per the present context of Jack and Jill the main issue associated to joint ownership of rented property is able to form the basic foundation of IT and cannot be accounted for partnership in context of general law principles (ATO 2016).
It has been further discerned that “TR 92/32” has been able to explain the various types of joint ownership as a result of rented property which shall not be treated under the general law for partnership. Based on the considerations of the partnership agreement Jack and Jill has been seen to contain either oral or written form of agreement with no effect on the total share of income or loss which have been derived from the rented property. Based on the agreement of the clause Jack should be held accountable for entire loss which has been derived from the property. It has been further discerned that as per the case of “FC of T v McDonald (1987)” which shows that argument made between Mr McDonald and Mrs McDonald for apportionment of 25% and 75% of the profit arising out of the property respectively. This has been primarily able to highlight on the advance income of his wife and indemnify any sort of loss (Sexton 2014).
Joint Ownership of Rental Property
Similar to this context the different types of partnership made between Jack and Jill cannot be viewed under the general law and the losses arising as a result of rented property which should be shared on equal proportion among the two.
Conclusion:
On consideration of the aforementioned discussion it can be said that both Jack and Jill need to share the amount of losses on 50%-50% basis and not account for joint ownership as partnership.
4: The most prominent quotation from the ruling has been able to confirm on the issue of tax avoidance which is acceptable under the legislation of “IRC v Duke Westminster (1936)”. It has been discerned that “Duke of Westminster” has been able to pay the wages to gardener on a weekly basis and subjected a contract through which he stop the payment of wages and a great to pay an equal remuneration to the covenant. It needs to be noted that, the gardener has received identical amount as wages however Duke gained undue advantage of the tax benefit as per the law which was applied during the time when the covenant lowered the liability of Duke to surtax. The main depictions of the case has been able to define that the individual shall be considered to order for tax with objective of tax attachment under the appropriate acts than it would have been otherwise. It needs to be further considered that an individual cannot be compelled to pay an increased amount of tax (Devos 2014).
The application of the fact based on present age of these principles defines that a person is successful in ordering the purpose of obtaining the result of taxpayers as per their ingenuity which shall not force them to pay any amount as a result of increased some of tax. Based on the decision as per the given guideline provides an individual with the opportunity for minimising tax liability with the financial framework of the law.
The important issue has been identified with the cutting down of timber with reference to “subsection 6 (1) of the ITAA 1997”.
- “Subsection 6 (1) of the ITAA 1936”
- “McCauley v FC of T”
As per the present issue of bill it has been discerned that, Bill has been the owner of the land for many pine trees. During the initial stages will have decided to clear the land for grazing purposes of sheep part on being approached by company associated to logging, Bill has been agreed to pay an amount of 1000 for every 100 meter of timber which the login firm can consider from his land (Saad 2014).
Tax Avoidance
It has been further ascertain from the taxation ruling “TR 95/6” that the income tax ruling as a result of activities of primary production and forestry. Several definitions has been able to show that the degree of which an individual deriving the income from forestry activities can be assembled. As the ruling does seem to be applicable to both individual and business the primary production in disposing the timber needs to be ascertained. Based on the consideration as per “Subsection 6 (1) of the ITAA 1936”, an individual associated with forest operation needs to be treated like a primary producer for IT, provided that the forestry activities are considered as business operations (Marsh, Lewis and Chesters 2014).
It has been further discerned that the primary production can be further referred as plantation of trees and tending down of the same in a particular way under “subsection 6 (1) of the ITAA 1997” it has been originally considered for tending or cutting down of trees in a vegetation. At present Bill is treated as the primary producer as he has been able to be engaged with the business as primary production for tending down of pine trees on a large piece of land. The various types of forest operations are usually considered with tending down of visitation or plantation of the same despite of this taxpayer did not originally involving plantation of the trees (Taylor and Richardson 2013).
Based on the aforementioned context, Bill has not been able to plant the trees however the total amount received by him as a result of sale of timber needs to be considered for the assessment purpose. Despite of this, the sale has been comprised of either entirely portion of the assets having commercial values or only a portion of the assets which needs to be treated as taxable income as per “subsection 36 (1)”.
An alternative to this context has been seen with taxpayer paying a large amount of $50,000 by assigning the right to the logging companies for being responsible to cut down the desired quantity of timber. In this case the receipts received from the timber shall be considered as “Royalties”. With reference to “section 26 (f)”, the receivable royalties as a result of ending of timber shall be considered as a part of a civilian, needs to be included during the year-end with the trees have been tended. The various types of varieties which are received by Bill as a result of felling of timber needs to be considered for carrying on with the business operation associated to forestry operations. Based on the findings of the case “McCauley v The Federal Commissioner of Taxation” it has been a enumerated that the payments are being received by the granter as a result of giving the right to tend timber. The amount received by Bill as per the alternative scenario needs to be included for the taxable income as per “section 26 (f)” as a result of selling of timber (Bell and Hindmoor 2013).
Conclusion:
As for the consideration the total amount procured by Bill for tending of timber needs to be considered for taxable income in the alternative scenario in case lump sum amount has been received for granting the right then it would be treated as royalties.
References
ATO (2016) ‘Luxury car tax’, Australian Tax Office, p. 5. Available at: https://www.ato.gov.au/Business/Luxury-car-tax/ .
BellS. and HindmoorA. (2013) ‘The Structural Power of Business and the Power of Ideas: The Strange Case of the Australian Mining Tax’, New Political Economy, 19(3), pp. 470–486. doi: 10.1080/13563467.2013.796452.
CarlonS., TranA. and Tran-NamB. (2013) ‘How close are taxable income and accounting profit? An empirical study of large Australian companies.’, Australian Tax Forum, 28(3), pp. 641–677. Available at:
https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91104114&site=ehost-live&scope=site.
DevosK. (2014a) ‘Do penalties and enforcement measures make taxpayers more compliant?- The view of Australian tax evaders’’, Journal of Business & Economics, 5(2), pp. 265–284. Available at: https://www.academicstar.us.
DevosK. (2014b) ‘Tax compliance theory and the literature’, in Factors Influencing Individual Taxpayer Compliance Behaviour, pp. 13–65. doi: 10.1007/978-94-007-7476-6.
MarshD., LewisC. and ChestersJ. (2014) ‘The Australian mining tax and the political power of business’, Australian Journal of Political Science, 49(4), pp. 711–725. doi: 10.1080/10361146.2014.954985.
SaadN. (2014) ‘Tax Knowledge, Tax Complexity and Tax Compliance: Taxpayers’ View’, Procedia – Social and Behavioral Sciences, 109, pp. 1069–1075. doi: 10.1016/j.sbspro.2013.12.590.
SextonT. A. (2014) ‘Property Tax Expenditures: Classified Property Tax Systems’, Public Finance and Management, 14(2), p. 221.
TaylorG. and RichardsonG. (2013) ‘The determinants of thinly capitalized tax avoidance structures: Evidence from Australian firms’, Journal of International Accounting, Auditing and Taxation, 22(1), pp. 12–25. doi: 10.1016/j.intaccaudtax.2013.02.005.
ZodrowG. R. (2014) ‘Intrajurisdictional capitalization and the incidence of the property tax’, Regional Science and Urban Economics, 45(1), pp. 57–66. doi: 10.1016/j.regsciurbeco.2014.01.002.
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