Discuss about the Taxation for Capital Gains Tax&Fringe Benefits Tax.
Fred is an inhabitant of the Blue Mountains in Australia. He has a lovely home there in the Blue Mountains. But in August last year he decided to sell that lovely holiday home and also signed a contract. Finally the sale was settled in this year February between Fred and the buyer. Fred sold the holiday home for $800,000. But after the sale Fred paid for the legal fees which was $1100 and the commission of the real estate agent of $9000, all the payments were including GST. In the year of 1987 Fred brought his holiday home for $100,000 and then he paid for the transfer fees in the stamp duty and legal fees $2000 and $1000 respectively. While living in that house Fred also built garage there in 1990 January which cost him $20,000.
Under this circumstances,
As per the taxation laws of Australia, depending on the difference between the selling price and actual price of any asset, the capital gains or losses are being calculated. If the selling price is higher than the actual price then it is called as Capital Gain and vice-versa. Now when the amount of profit or loss is being determined than the taxation part comes. Depending on the loss or profit the seller have to pay the taxes to the Australian government, that tax is known as Capital Gains tax. Now if there was capital loss for the seller then the loss will be adjusted on the next year ending capital gain tax. In the present case Fred has made capital profit and also had capital loss from last year. So only the capital gains needs to be looked in here adjusting the lost amount.
In case of the assets which are used in business and less lifespan, the CGT is not applicable. It is only applicable on personal assets like car, furniture, home etc. As per the law any citizen of Australia have to pay the tax if he or she is not in the country but still have a capital gain. In this Fred is liable to pay for CGT under the rules and laws of taxation.
As per the above case study Fred has sold the home for $800,000 in this year which he sold for $100,000 in the year 1987. There was no rent in there and Fred lived there with his family the whole time. So he is liable to pay the CGT in this year’s yearend.So the calculation are derived below:
Fred sold his house this year in February to the buyer.
Total selling amount of the house = $800,000
He paid for the Legal fees and commissions to the agents.
Legal fees and Agent commission were = ($9,900 + $1,100) = $11,000
So the net disposal amount was = ($800,000 – $11,000)= $789,000.
Fred purchased the holiday home for $100,000 in the year 1987.
Now the purchasing cost = $100,000
Stamp duty paymentexcluding GST was= $2,000
Legal Fees paidexcluding GST = $1,000
Home construction Cost = $20,000
Total cost disposed by Fred for the holiday home during his ownership of the house =
($100,000 + $20,000 + $2,000 + $1,000) = $123,000
Now Fred’s capital gain was = ($789,000 – $123,000) = $666,000
Now discount in CGT is 50%, so the amount is = $666,000 * 50%
= $333,000
His amount of capital loss from last year was $10,000 due to loss in the shares.
So total taxable amount for CGT is $323,000.
The issue was if the loss was made by selling of an antique vase except of the actual lose reason of selling shares then the effects on the CGT amount. In case of selling and buying of antique goods there are different laws of the Australian government. The taxation for the antique business was different before. Before 26th June, 1992 there was no tax need to pay for the business of antiques. But after that day the taxation rule changed for this business and tax was levied on it. So the loss of Fred due to the selling of antique vase was way after that rule change. He needed to pay for the taxes definitely. But he actually had loss in that business in the last year and after calculation of the capital loss the amount was $10,000. So this amount would be deducted from the capital gain tax of this year because he suffered that loss last year. After discussing the provisions and laws it is sure that the loss would be deducted for sure under any circumstances.
Conclusion
After analyzing all the taxation laws and rules of Australia, Fred will be paying Capital Gains Tax for this year end. As per calculations according to the law the amount is $323,000 for the sale of his home in the Blue Mountains of Australia. It has also been considered and exclude that all the payments made my Fred was included GST. In the second part of the case the assumption of capital loss due to the sale of antique vase is enlightened. The proper evaluation and calculation is being done in this regard. So the amount of Capital Gain Tax is legal and appropriate as per the law. In this regard the Capital Gains Taxation rules and calculation of it is done in aillustrated and convenient way in this report according to the case study.
FBT or Fringe benefit tax can be referred as the tax that has been actually accustomed from the perspectives of the management as well as the employers has sufficed the additional benefits which have been embedded by the other employees. In context to the respective operation, it can be said that the fringe benefit tax has been applied regarding the irrelevant for the tax offered by the administration to the respective employees. Generally fringe benefit tax can be differentiated from the Income tax and both the perspectives are different in nature. As per the significance it can be said according to the perception of Income Tax Act 1997 that the fringe benefit tax has been charged at 47% regarding the benefits and the employees are affected on the charges from 1st April or as 31st march of the respective year of assessment. Regarding the significance of benefits received from the fringed tax, it can be segmented that the overall perception has followed the instances that the gross amount regarding the fringe has always exceeded the overall amount at $ 2000 regarding the ascertained assessment year.
Generally tax on fringe benefits has been accustomed as well as allowed only for the perception of the different non monetary benefits regarding the circumstances upon which the overall management perception has developed the responsible feasibility for paying the tax regarding the fringe benefits and it has been segmented underneath:
It has been assessed that the overall tax has been exempted from car, waiver of loans, loans on property as well as real estate, facilities of parking the car, facilities upon the meal, expenses regarding entertainment and allowance from the home. Thus the list of respective income exempted from tax has generated the features of the respective employees upon which the overall tax on the fringe benefits has not been levied that has been segmented are downward:
The aspect if wages as well as salaries with the contributions adhered on superannuation. The aspects of employee stock option in adjustments to loanable funds. The overall reallocation of employee as well as benefits valuing $ 300 as well as cost regarding the equipments has embedded the circumstances regarding the tax accustomed through fringe benefits.
The recent benefits from fringe tax concerning the car has been used by Emma in the country of Australia has been revealed underneath:
As per the significance, the car has been regarded as sedan with a panel van for accumulating the station wagon. Other respective vehicles have carried not more than 9 passengers at a respective time period. The overall goods have been carried in the vehicles that have owed the respective capacity for carrying 1 tons regarding the goods as well as fewer perspectives to generate the carrying capacities.
Therefore, it can be easily said from the overall significance that Emma has used the car for the respective personal loan and the conditions are adjusted according to the feasibility that are as:
Utilization as per the perspectives of the employee regarding the personal use and made them as per the availability so as to reach the measurement irrespective of the constraints that have been actually happened or have been abolished.
The overall computation has been prevailed concerning the tax of fringe benefits so as to ensure the business regarding the employees upon the adjusted gross value concerning the fringe benefits. Here it can be easily said that Emma is showing her diligence in accumulating the instances in Periwinkle Ltd as the car has been allotted as per the significance of the company regarding the purpose of the work which has been categorized concerning the exclusion regarding the category of the respective expenses in the corporate level. The particular value of the tax has valued an enhanced amount of $ 2000 and the justification has measured liability towards the employees as per the respective tax returns. It is considered as the most imperative perspectives of the management so as to calculate the aspects of the fringe benefits and has to be accounted considering the annual measurements of the salaries for the respective employees. Nevertheless, the instances has developed the significance regarding the fact of government of Australia in order to provide facility of treatment concerning the medical activities which is enlisted to be charged as the tax regarding fringe benefits.
As per the significance, Emma has been charged with the correspondence of tax regarding the fringe benefits as the car has been used for both the purpose, for official as well as household. Thus the implication of the tax has been propounded upon Emma in the recent year of assessment. Thus the overall calculation has been ascertained that have been estimated underneath:
|
Total valuation of the car according to the benefits regarding fringe = |
{Actual cost regarding the care * 2 * (350/1/2)} / 365 – contributions accustomed as per the employees = $ {33000 * 2 * 175} / 365 – Nil = $ 31643.83 = $ 31644 (rounded off) N.B: Personal use made by Emma on car has subjected to 50% |
|
Liabilities achieved in total on Fringe benefit Tax = |
$ 31644 * 47% = $ 14872.68 |
|
Providence given to Emma towards the adjustments of tax on fringe benefits according to the loanable amount = |
Funds according to the respective loan = $ 500000.00 Chargeable rate of interest = 4.45% Rate of interest on the respective loan as per the standard in Australia = 5.95% The extra tax has been filed according to the fringe benefits Therefore, the instances of the tax regarding the fringe benefits upon the tax leading the loan = principle value of the amount * difference in the margin of rate of interest * time taken = $ [ 500000 * (5.95 -4.45)% * 6/12] = $ [500000 * 1.5 * 0.5] = $ 375000 |
|
Benefits received upon selling the respective bathtub = |
Overall selling price adjusting the bathtub = $ 2600 Cost regarding the expected Acquisition = $ 1300 Cost of Proposed Manufacturing = $ 700 Respective values of the adjusted benefits from Fringe = Selling price –cost regarding acquisition Procurement of Fringe benefit = $ 1300 |
|
The overall sum of the three cases abducted by Emma are = |
= $ [31644 + 375000 + 1300] = $ 407944 |
Considering the factors of given scenario it can be said that the Emma has to use 50000 dollar for the purchase of respective share leading to the consideration of the husband upon the fringe benefit tax. Thus the respective calculations are as follows:
The loanable value regarding the fringe benefits = $ [450000 * (5.95 -4.45) % * 6/12]
Respective gross value of the amount propounded as the fringe benefits are subjected to = $ 337500.
Thus the tax has subjected the valuation according to the fringe benefit tax as per the Income Tax Act for the year 1997.
References
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