Question:
Discuss about the Taxation Law for Taxable Business Incomes.
1. Fringe benefits tax is the tax imposed to an employer for non-cash items or benefits that ABC provides to employees in relation to employment. (Warren, 2006)
Consequently, ABC Pty Ltd offers fringe benefits to its employees; therefore ABC will have to pay for all the fringe benefits while being exempted from others. All FBT may be classified as non-taxable, deferred tax or taxable benefits. Alan’s salary is taxable; mobile phone bill only used for work related purposes is a deductable expense to the business. Additionally, school fees payment is a business deductable expense. Handset cost is tax exempt to the business (employer). Dinner cost is also known as De minims fringe benefits which are small and insignificant in relation to occurrence and frequency is non- taxable.
Alan’s taxable pay
Details amount($)
Annual salary payable 300,000
Add; on-taxable fringe benefits
School fees 20,000
Total taxable salary 320,000
ABC Taxable Income
Details
Salary expense (300000*20) 6000,000
Add: taxable FB
School fees benefits 20,000
Mobile phone fees (220*12) 2640
Tax exempt -mobile (0%* 2000) 0
Non-taxable FB –party 0
The answer is related to the fact that knowledge generates a series of “external benefits” (positive externalities), which are not always considered by people when making their decisions and therefore ABC does not appropriately reflected.
ABC hires Alan and others generate costs and benefits, which can be private or external. For example, a person studying at a university makes a profit for himself, for example a better salary. That is the private benefit. But a series of external benefits are also generated, ie, benefits accruing to someone else.
How a would differ if only 5 employees
The taxable fringe benefits would be relatively small due to a small number of employee therefore less taxable business incomes for ABC Pty Ltd.One way that you could generate an income to compensate your effort is patenting the leaf, and then sell it according to your demand. The patent would ensure that may limit its use, only you have the right to copy it and sell it. This would allow it to cover its costs and even make a profit, which will provide incentives to continue to create products of this type, but also the number of people reached by the blade will be reduced, so that the overall welfare of the group is also reduced. Maybe not all colleagues to achieve a services.
As explained above, the fringe benefit taxation required by the law does not offer an appropriate solution. It is necessary then government intervention. So government involvement should aim to enforce the party money accounting effectively, but also create mechanisms that allow equitable access to the benefits of this kind.
Costs are expressed in monetary units but one must remember that represent an opportunity cost. the company actions to tackle the external costs Taxpayers who receive income from work of two or more employers, and that together exceed the exempt amount, shall submit annual statement IR earned income, and settle and pay the corresponding IR. The settlement, declaration and payment will be made before the DGI after ninety (90) days after the end of the fiscal period. Taxpayers who make use of their right to the deductions referred to in, or to claim credit balance to return, accreditation or compensation arising deductions, excess deductions, variable annuities or incomplete fiscal
ABC Taxable Income
Details
Salary expense (300000*20) 6000,000
Add: taxable FB
School fees benefits 20,000
Mobile phone fees (220*12) 2640
Tax exempt -mobile (0%* 2000) 0
Non-taxable FB –party 0
If clients attended the party
If clients attended the party, it means that the amount to be used will be high. Taxation of de minims fringe benefit is insignificant therefore non-table. However, if the amount increases it will be taxable since the amount will be significant for tax purposes.Actually the price and therefore the tax base should be the market value when you do the operation. The book value you would not have an impact on the clients party on , but knowing that it should be known to be used the accounting and financial recording.
If the end of year is made with GST because the subject to all accounting practises, regularization would have no effect is applied. In the case of transaction not subject by applying the regularization as in the case of free end year party when it is made and deduction is lost. Only save the years have passed regularization.
I understand that the commercial route of delivery is not affected by GST. Or it is not subject if the art is applied. 7 or is subject and not exempt for not fulfilling what is stated in this article.
If the regulation harms, as do the subject and not exempt, then ABC company is that GST deducted. It will be just a matter of cash flow problems for the company.
That’s the problem, the employer does not have liquidity to pay GST on the sale, so the option of See if you clarify what I can. Companies that have pro rata deduction system should be checked every year if you have a difference of more than 10 points in the proportion because that would force regularize the investment goods that are in a period of adjustment.
Companies not subject to pro rata, must review only sales of investment goods. If they sold subject and not exempt GST. Handset cost is tax exempt to the business (employer). Dinner cost is also known as De minims fringe benefits which are small and insignificant in relation to occurrence and frequency is non- taxable.
The problem may occur, as was your case, when not subject or exempt are transmitted. In these cases as to acquire goods GST was deducted but not transmit accrues taxes, that requires checking the regularization of good.
The method leads to if the acquisition had a deductible tax and selling not have accrued, will lose part of the deductible GST which had in the acquisition. I a reduction of deductible I have Unauthorized Deductions: Contributions or contributions in any of the social security schemes; and contributions or contributions to savings funds and / or pension other than social security, provided that such funds have the endorsement of the competent authority.
From inclusive, a deduction supported by invoices or receipts, equivalent to 25% of expenditure on education, health and employment of professional services, up to a maximum amount of five thousand per year per will allow the next four years, reaching an amount of twenty thousand
Rate; Resident taxpayers determine the amount of your IR to pay for labor income based on net income, according to the following progressive rate: If clients attended the party, it means that the amount to be used will be high. Taxation of de minims fringe benefit is insignificant therefore non-table. However, if the amount increases it will be taxable since the amount will be significant for tax purposes.Actually the price and therefore the tax base should be the market value when you do the operation.
The book value you would not have an impact on the clients party on , but knowing that it should be known to be used the accounting and financial recording. Deductions from gross income: are deductible costs and expenses incurred, general, necessary and normal to produce taxable income and to preserve its existence and maintenance provided that such costs and expenses are registered and backed by their corresponding receipts. Special valuation rules: The income tax, the rules on transfer pricing are contained, which will take effect from 2016. It also stipulates that expenses paid or credited by a resident taxpayer or a permanent establishment a non-resident, a person or entity resident in a tax haven entity subject to final withholding tax rate of Companies not subject to pro rata, must review only sales of investment goods. If they sold subject and not exempt GST. Handset cost is tax exempt to the business (employer). Dinner cost is also known as De minims fringe benefits which are small and insignificant in relation to occurrence and frequency is non- taxable.
2. The company bought the new machine for an initial cost of $ 1.1m. After 4 years of its 10 years effective life of 10 years the machine is sold for $330,000 and bought a new one at $2.2 m.
Tax consequences;- taxation of capital gains or losses (Rendleman and Shackelford, 2003)
Fiscal Period: The capital income and gains and capital losses, have given tax period, be taxed with final withholding when they are received, except when the Tax Administration authorized, upon request the taxpayer to offset losses with capital gains that have occurred in the same fiscal period, in accordance with to this Law.
for the company to pay for capital income and gains and capital losses is the amount obtained by applying tax rates to the tax base.
Compensation of employees: Employers natural or legal persons and retaining agents, are required to withhold monthly account of the annual IR labor income corresponding pay the worker, settlement and statement of annual IR earned income , it will be made no later than forty-five days after the end of the fiscal period.
What are the tax consequences of these arrangements
Where income and capital gains and capital losses, whether integrated or declared as income from economic activities, in accordance with Article 38 of this Law, the final retention will be considered as withholding income from economic activities . Capital Gains and Losses The income withholding and capital gain and capital loss should be aware of the tax authorities in the forms for this purpose shall supply the Tax Administration at taxpayer expense. The declaration and payment of the final withholdings made in a month shall be paid within the first five working days of the following month.
Where income and capital gains and capital losses, whether integrated or declared as income from economic activities, in accordance with Article 38 of this Law, the final retention will be considered as withholding IR income from economic activities .
ABC subject to the withholding of IR transmission of investment to be registered with a public office, settled, declare and pay the IR capital gains within a period not exceeding thirty subsequent days the whole of the retention. payment is made monthly to the Tax Administration within fifteen days following the taxable period or in smaller installments as 1. In the alienation of property, established in the Regulation of this Law; The importation or entry of goods, payment will be made under the relevant customs declaration form or prior to the withdrawal of goods or customs warehouse premises; On the subsequent sale to the importation of the machine with customs exemption, payment shall be made in accordance with the Regulation of this Law. The rate payable on income from capital gains and capital losses is:) Five percent for the transfer of assets provided in Ten percent ,for residents and non residentes, the transfer of property subject to registration with a public office, retaining the following rates apply to losses of IR account to income and capital gains and capital: This tax rate will be reduced by one percentage point per year from 2016 for the next five years, parallel to the reduction rate for earned income taxpayers and legal entities with less than or equal annual gross income to paid and cleared the IR to net income applying the following rate.
References
Rendleman, R. and Shackelford, D. (2003). Diversification and the taxation of capital gains and losses. Cambridge, Mass.: National Bureau of Economic Research.
Warren, N. (2006). Fringe benefit tax design. Sydney, N.S.W.: Institute of Chartered Accountants in Australia.
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