Taxation Theory, Practice and Law - Solution Week 6

AS per ATO , ITAA1997, Divison 7

Fringe benefit is the compensation paid by the employer to employee against their performances and positions. Sometimes it is also paid by third party with an arrangement with thee employer. And separate taxable value is calculated for Fringe benefit for tax purpose.

For Course fee of $12000 paid by Mason’s employer will be treated as Fringe benefit and will be part of taxable income for Mason, and tax deductible for his employer.

For Apartment , he FBT will be calculated on the balance amount of ($500-$100), week or may be a lower amount as well depending on the actual valuation of rental value of that apartment.

FBT is paid by employer on making available certain facilities either at free of cost or at lesser than market value to employees as perquisite. FBT is payable even if the benefit is provided by a third party under an arrangement with the employer.

A housing fringe benefit may arise if an employer provides their employee with accommodation rent-free or at a reduced rent where the accommodation is the employee's usual place of residence. 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 residual fringe benefit may arise when you provide an employee with any benefit (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 tution 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

Sec 110-35(2) and 35(10) of Income Tax Assessment Act of 1997, it can be used to calculate his taxable income and tax liability as follow:-

Section 6-10 assessable income

a) Profit on sale

Sale value of Property $1400000

Cost of land ( $110000)

Construction Cost ($100000)

Profit $1190000

As per ATO , ITAA 97 , if a property is more than 12 months old 50% discount rate is given . So under Discounted rate method the Profit is $595000

Capital gain on Induction Method is if the capital gain tax event happened before 11.45 Am (as per the Act) on 21 Sep 1999

1) As per CPI for the quarter ending 30th Sep 1999 68.7

2) CPI as per quarter exp was incurred 114.8

Index Factor 1/ 2 = .598 0r .6

b) If is a company engaged in the property business Discounted method is not available and as indexation method

Profit is $712134.15

Taxation Theory, Practice and Law - Solution Week 8

if goods are returned by registered recipient, then registered seller will issue a credit note to the buyer. The seller must declare this in his GSTR 1

If the recipient is not registered the seller will show a consolidated list of sales return in his GSTR 1 Alternatively to reduce the complications the returning recipient can treat it as a supply and pay the tax amount after netting of with input credit.GST Law provides that where goods received as an inward supply is returned by the recipient to the supplier within six months from the date of the relevant invoice, the tax payable on such supplies shall be equal to the input tax credit availed earlier on such inward supply. If goods are returned after six months of the date of the original supply invoice, the rate of tax applicable will be the rate prevailing on date of such return.

In this case Bowens pty ltd can treat it as a outside sale or Builders choice pty can issue credit note to Bowens pty ltd.

Taxation Theory, Practice and Law - Solution Week 9

Watson Co becomes insolvent and placed into voluntary liquidation by its directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up of the Watson Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of Watson Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to the provision of Income Tax Assessment Act 1963, section 47(1).

Watson co is insolvent due to natural calamity and director have placed it for voluntary liquidation Section 47(1) of Income Tax Assessment Act 1963 deals with Distribution of Income Deemed Dividend as per Tax Law:

Distribution to Shareholder of a company by a liquidator in the course of winding up of the company, to the extent income derived by the company before or during the liquidation other than income which has been properly applied to replace a loss of paid-up share capital, shall, for the purposes of this Act, be deemed to be dividends paid to the shareholders by the company out of profits derived by it.

Taxation Theory, Practice and Law - Solution Week 10

A partnership asset is owned by the partners in the proportion of agreed ratio. Share of the capital gains relating to CGT events occurring for partnership assets must be disclosed on the partner’s tax return.

A partner who is not a resident of Australia is not taxed on the share of net income of the partnership attributable to sources outside Australia.

In the given case, Steve shall be liable to offer his entire share of income i.e. $150,000 as taxable whereas Alex shall be liable to offer only share in the income generated by Partnership from Australia i.e. (300,000x60%/2= $90,000).

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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