Taxation Theory, Practice and Law - Solution Week 6

A Fringe Benefit is a form of pay for the performance of services. If the employee receives taxable fringe benefits from the employer then they should be included in the salary in the year in which benefit is received.

  1. In this question, Mason course fees was borne by his employer. Education benefit is allowable only up to $5250 per year. Here Mason has received benefit of $12000. Hence the excess amount of benefit of $6750 received by Mason is treated as taxable fringe benefit and should be included in his salary & also to be reported on Form W-2.
  2. Similarly, market value rent for the apartment is $500 per week, whereas Mason is paying $100 per week. Hence the excess amount of $400 per week is taxable fringe benefit and should be included in his remuneration and reported in Form W-2

A house FBT may arise if an employer gives accommodation to their employees which is rent free or at lower rent then market rate. Fringe Benefit value shall be equal to 75% of fair market value less any payment received, if residence is in Australia but not in remote area.

In this case, rent per month is 500*4= $2,000

FB value= 75%*2,000-4*100= $1,100

FBT tax on house fringe benefit = 47%*1,100= $ 517

A house FBT may arise if an employer gives accommodation to their employees which is rent free or at lower rent then market rate (including a right, privilege, service or facility) that doesn't fall into one of the specific categories of fringe benefits.

In the given case, payment of tuition fees by employer of $12,000 is fringe benefit and tax shall be 47% of $12,000= $5,640.

Taxation Theory, Practice and Law - Solution Week 7

A) Computation of Profit/loss on sale of property:

Sale value at auction

$1,400,000

Less:

a) Cost of land

(110,000)

b) cost of construction

(100,000)

Profit on sale

$1,190,000

i) Computation of Capital gains as per Discounted method:

As per Australian government, Discount rate is 50%

The property should be purchased before 12 months and more

Capital gain as per discounted method

= 50% of profit on sale

=1,190,000×50%

=$595,000

ii) Capital gains as per Indexation method:

Assuming that the capital gain tax happened before the 11.45 am which as per law in the act (by legal time in the ACT) on 21 September 1999, calculation of capital gains will be as follows:

A) CPI for quarter ending as on 30th Sep 99

68.7

B) CPI in the quarter for which exp are incurred

114.8

C) Indexation factor =A/B

0.5984

Capital gain

= Profit on sale indexation factor

1190000×0.5984

$712,134

B) If owner of the property is a company instead of Alex;

Indexation method will be preferred and capital gains will be $712,134, because for company’s this benefit of 50% discounting factor is not available they need to pay tax on full value. And Calculation will be same as above Assuming that the capital gain Tax event happened before 11:45 am (by legal time in the ACT) on 21 September 1999, we calculate capital gains as follows:

A) CPI for quarter ending as on 30th Sep 99

68.7

B)CPI in the quarter for which exp are incurred

114.8

C) Indexation factor =A/B

0.5984

Capital gain

= Profit on sale × indexation factor

1190000×0.5984

$712,134

 

Taxation Theory, Practice and Law - Solution Week 8

GST Law of Australia, clear provisions are laid to deal with return of goods in this case Bowens Pty Ltd and Builders Pty Ltd both follow accrual system of bookkeeping and have to make adjustment with regards to GST. And kind of their turnover they have both can be assumed as registered seller and buyer.

In case a customer returns goods to the retailer who sold the goods it is considered as a cancellation of original order and sales. As the seller would have paid the GST on the sales , the customer would have claimed the credit for GST both need to adjust that.

If seller is registered under GST for the goods and services it sells in generally include GST in the price unless they are GST free of input taxed.

As per case study if the goods are returned by a registered recipients then the registered seller will issue a credit note to the buyer and will also declare about this transaction in its GSTR1

If the buyer is not a registered recipient then the registered seller will show it in its consolidated list of sales and will declare that in GSTR1

Another option with registered buyer is to treat as a supply and pay tax amount after netting of with input credit , here in this case Bowens Pty Ltd can treat is a outside sale and can receive a credit note from Builders Choice Pty Ltd., for the return of goods.

Taxation Theory, Practice and Law - Solution Week 9

As Per Provisions of ITAA 1997/ ITAA 1936

As per Section 47 of ITAA 36, Distributions by liquidator to a shareholder of a company during its liquidation to the degree that they reflect income obtained (before or after the liquidation) from a corporation other than income reasonably used to offset a loss of paid-up capital are considered to be dividends paid by the shareholder by comp for the purposes of this Act.

In the scenario given, Paul received dividends from the company that was declared insolved and wound up. That is why for the company the above scenario is true. The company has paid Mr. Paul unfranked dividends of $3,000 in investment of $4,000, as can be seen here. This means that the dividend received by him is $0.75 per share. The taxability of the same relies on the dividend type; That is, Franked or Unfranked. Franked dividend has a tax credit attached whereas an unfranked dividend does not have a tax credit attached.

When firms pay a portion of their income as dividends, shareholders pay marginal tax on their income. But if it has paid income tax at the level of the company already, the tax bureau will give a personal tax credit to shareholders called a "franking credit." Industries pay 30% tax, leaving 70% cash which can be returned to shareholders as a dividend. When the dividend is franked, it requires a 30% credit, which is the tax already paid by the corporation. Whereas, on the other hand, it does not include any tax credit if it is a non-franked dividend. This means that the $3,000 in total is treated as investment revenue and Mr Paul will be taxed on his total revenue and respective slab rates.

Taxation Theory, Practice and Law - Solution Week 10

A Partnership is not a taxable entity in Australia. But it has to file return of income at the year end. Based in this, the partners will be taxed on their individual income which is derived by looking at their share of profits/losses from the firm.

Steve and Alex are equal partners generating revenue from sales in Australia and New Zealand. Since Steve is a resident for tax purposes, his total global income will be taxed in Australia. So $150,000 (300,000 x 50%) is taxable for Steve. But Alex is a non-resident tax payer in Australia, so only that part of income which is earned in Australia is taxed for him. Alex is taxed for $90,000 income ($300,000 x 60% x 50%).

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Taxation Law Assignment Help

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