Discuss about the Foundation of Taxation.
The case study concerns with the implication of learning the Australian’s government taxation laws and other schemes according to the Income Tax Assessment Act of 1997 for analyzing the net capital gain and the aspects covering the transaction. Here, Fred is the example of study where all the attributes of his transaction will be examined after his engagement in buying a home. It is plainly understood that Fred’s home functionality, building and other renovations come under the assessment of important laws of calculations for net capital loss/gain (Dubert & Merrill, 2001). And hence, computation (Lind, 2005) is performed as per the assessment act. The report is a personal analysis of facts and figures set as per the explanation which is imperative to discuss the details of capital gain/loss method. Well, it is a point to note that not all transactions obey the law in the computational technique of capital net research (Faccio, Marchica & Mura, 2016). As every layout is set upon a specified tool, computation is applicable only after a proper understanding of the terms superannuation and capital gain/loss. The conceptual definition of the terms varies with the personal opinions of different scholars (Csikós, 2007). With learning the details of the three concepts, it is quite clear that net capital gain measure is succeeded when net long term capital benefit surpasses the net short term capital loss for the year, but net capital, on the other hand prevails when the overall capital amount is deduced (Kahn, 1997). The third kind of classifying or superannuation process is the kind of sorting people generally performing for collecting capital funds and the providing people at the time of retirement.
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Computation Of Capital Gain For FRED For The Year Ended On 30 June |
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Particulars |
Amount (in$) |
Total Amount (in $) |
|
|
Add: |
#Proceeds of selling holiday home in the current year |
800,000.00 |
|
|
Less: |
Cost Base of holiday home in 1987 |
||
|
100,000.00 |
|||
|
700,000.00 |
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|
Less: |
Total legal fees |
2100.00 |
697900.00 |
|
Add: |
Cost base of garage |
20,000 |
717900.00 |
|
Less: |
Cost of garage after indexation 20000*123.4/71.3 |
34,614.30 |
683,285.70 |
|
Less: |
Agent commission |
9900.00) |
673,385.70 |
|
Less: |
Stamp duty payable on acquisition |
(2000.00) |
671,385.70 |
|
Less: |
Previous Year Capital Loss Deduction |
(10,000.00) |
|
|
Total capital gain |
661,385.70 |
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|
Less: |
50% discount for using property for more than 12 months |
(330692.85) |
|
|
Net capital gain |
330692.85 |
Let’s you see some example that do not follow any capital profit or loss. Cars or an automobile doesn’t relate with capital gain and it possessed for 10,000 or less is scorned (Goh et al., 2013). Like the Assets necessary before 20 September, repayments for specific illness or injury, family homes that are detached from the main residence. Other examples include people owning private properties that are $10,000. Painting cost $ 500 is another set of items that do not enter into computation (Enthoven et al, 1998).
Anyways, the answers would be different if loss is ensuing from the auction of an antique vase. If my opinion is concerned, Fred faced net capital loss because of selling of the antique case (Graham, Leary & Roberts, 2015). My conclusion comes from the loss of share he encountered for his personal pleasure and use and hence his net capital is above $10,000 (Blum, 2009).
It is known matter of fact that tax results from the fringe benefits and hence the introduction deals with understanding it more vividly. The topic of discussion relates to the fringe benefits and fringe benefit tax, previously that is discussed and stated by many scholars. Fringe benefits with additional benefit mean the enrichment of an employ’s salary (Poterba, 1992). Company car, Financed meals, health insurance and more some of the example. Fringe Benefit, according to an employer’s viewpoint, is called as independent partner or contractor who is a middle man between to employees. In certain cases, tax is excused.
All those who attain a fringe benefits tax, must have an impartial market value for the year. It is noteworthy to quote certain examples of fringe benefits under taxation sanction (Hanlon, Maydew, & Saavedra, 2014). The employees and their families and other associates are largely benefited by the fringe benefit (Evans, 2003). The benefit can be either from their income or wage package (Poterba, 1992). Fringe benefit, unlike income tax, is calculated on the basis taxable value and is allotted every year from 1st April to 31st March. Fringe benefit Tax Act, 1998 Australia, functions the fringe benefits tax (FBT). FBT in recent years have been segregated into varied sections, as mentioned below-
Living away from home fringe benefits is generally denoted as LAFTA and is also called as living-away-from-home payment. This is a case of vivid disadvantage, where the employer gives the employees which occur due to the employee living away from his residence for his responsibilities and duties (Walton, 1995).
Board Fringe Benefit that enables the employees to have payment connected to two meals per day and accommodation.
This type of benefit allows the employee to have an authority on accommodation, rent and even license. This aspect permits the employee and the unit as a whole to avail the residential rights.
Property Fringe Benefits
In this case, the employer gives the employee a free discounted property seen in the case of Emma. She buys a bathtub at price of $1300 whose market price is actually $2600. This is how she gets a discount of 50% from the company (Enthoven et al, 1998).
Expense Fringe
In this type of benefit, the employ is associated with the third party which will either make the employee answerable or employee recompense for the cost met out at the end. Emma will attain the fringe benefit resulted out of the compensation made for vehicle and hence succeeds the expenses out of it (Walton, 1995).
Debt Waiver Fringe Benefits
In this type of benefit accumulation, the employer lets off the employee from paying any debt.
Car Fringe Benefit
An employee, in this case, gets a car either he has to rent for private purpose or is a personal asset.
This is a case which is implemented for a number of situations: if a car exceeds the mentioned time frame of car parking like four hours, if the car is leased by an employee, if the car is parked near to the employee’s place, in case of a commercial parking that is available from a radius of 1km ground from the worker’s job place, or if parking is done as per employment basis (Dubert & Merrill, 2001).
Under loan fringe benefit, the employee gets an interest less than the current banks. In case of Emma, she got a loan of $500000 with an additional interest of 4.5% which is generally not ensued like that the existing banks. This is 47% as the FBT rate (Enthoven et al, 1998).
Emma gets a car benefit for personal purpose according to the provision of FBTA, s7. This is a vivid FBT outcome for the company (Enthoven et al, 1998).
Dependent on the cost basis strategies and certain additional information, the constitutional methods used here is:
Taxable value = (0.2 * $33,000 x 330/365) = $5,967
This is considered for the expense payment fringe advantage but is excused under FTBA, s 53.
Allowance of the loan is a “loan fringe benefit”: FBTAA, Div 4
Taxable value = $500,000 x (5.95% – 4.45%) x (212/365) = $4,356
The bathtub for $1,300
Fringe benefits taxable amount = ($5,967x 2.0802) + ($4,356x 1.8868) = $12,413+ $8,219 = $20,632.
Fringe benefits tax liability = 47% x $20,632 = $9,697
Hence, Periwinkle must pay FBT of $9,697 in relation to the above items.
In case Emma buys herself the shares
If Emma buys the share all by herself using the $ 50,000 loan amount, then the cost can be utilized by for making income. They take the bonus from the company and will be made to produce income and get the cost of deduction from that of the equivalent interest rate. As per the deductible rule given under s 19 of the FBT Act, loan fringe benefits get lower by 10% ($ 50,000/$50,000) (Blum, 2009).
Conclusion and Suggestions
The detail case study of Emma and Periwinkle Company, it is quite clear the Emma attains benefit from the company to pay below fringe benefit subjected according to this benefit. To sum up, Fringe benefit as additionally given high standard service to the employer. The workers, according to me, has worked efficiently and produced productive work out after the encouragement. The FBT, this is why, must be reduced for encouraging the employers (Yagan, 2015). The employees are under a constant stress tension of FBT and there are chances for this to lead to non-attendance and refraining from of job. This will largely affect the country’s economy and result in low income availability, as per negative point of view. As productivity back-up persuades productivity, fringe benefit is put down so that they can motivate the employees to carefully allow employee to keep substantial price at hand. The study hence, talks of Emma and Fred’s case and makes it quite clear that learning the laws of institution is important because the situations applied are always not the same and hence it is imperative on your part to know the basics of the taxation policies (Enthoven et al, 1998). The detail analysis of the project by quoting example intends to make the concept clear of the students. By such citing of situations, it gets easier on the part of the explainer to explain and analysis the essentials related to the topic. The capital gain/loss situation mentioned wouldn’t have been easier to understand if the varied examples are not given (Kahn, 1997).
This allows the students and people associated with the concerns of this field to properly read and analysis the case study, enabling them to figure out the personal problem and issues. It strives for better acknowledging of the fact and facilitating the theme pervading the study, making it out loud clear. The basics and the explanations mentioned are sufficient enough to understand the terms and subject matter in proper (Ralph, Allett & Joss, 1999).
References
Blum, J., 2009. How escape from taxation and regulations by moving” offshore” ruined world’s economy”, contribution at conference of Heinrich-Boell-Foundation.
Dubert, C. and Merrill, P. 2001, Taxation of US Corporations Doing Business Abroad: US Rules and Competitiveness Issues (Morristown, NJ: Financial Executives Research Foundation and PricewaterhouseCoopers, 2001).
Evans, C., 2003. Studying the studies: An overview of recent research into taxation operating costs. eJournal of Tax Research, 1(1), pp.64-92.
Faccio, M., Marchica, M.T. and Mura, R., 2016. CEO gender, corporate risk-taking, and the efficiency of capital allocation. Journal of Corporate Finance.
Kahn, D. 1997, Federal Taxation of Gifts, Trusts and Estates. Federal inheritance taxes were in force for a total of, 17, pp.2-3.
Lind, S.A. ed., 2005. Fundamentals of Business Enterprise Taxation: Cases and Materials. Foundation Press.
Poterba, J.M., 1992. Taxation and housing: Old questions, new answers (No. w3963). National Bureau of Economic Research.
Ralph, J.T., Allett, R. and Joss, B., 1999. Review of Business Taxation: A Platform for Consultation: Discussion Paper 2, Building on a Strong Foundation.
Walton, P., 1995. Accounting rules, taxation and medium-sized business in the United Kingdom, France and Germany, a study for the Foundation for Manufacturing and Industry. British Library Document Supply Centre
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