Answer to question 1:
It needs to be discerned as per “Section 108-10 of the ITAA 1997” the total amount of loss or gains of capital which needs to be set off.
- Section 108-20 of the ITAA 1997
- Section 108-10 of ITAA 1997
As per the present situation of the taxpayers it can be discerned that the main reason of losses have been sustained from selling of sound system. It is a further asserting that this sale activity was not approved for set off. As a result of this sale of sound system is seen to be having the nature of the personal asset which cannot be allowed for setting off. With reference to rulings under “section 108-10 of ITAA 1997”, the various types of loss as a result of ordinary gains from shares selling cannot be taken under the purview of setting off the cost. Based on the aforementioned rulings Eric has obtained the profit as a result of ordinary course of ordinary assets sale and there are no reductions allowed for the same. The total capital gain of Eric is discerned to be $15,000.
Based on the given consideration it has been found that Eric solely obtained the revenue from selling of ordinary assets which cannot be held for set off.
Answer to question 2:
Based on the given scenario the main question has been considered with the FBT assessment and its consideration under “fringe benefit act 1986”.
- Fringe Benefit Tax Act 1986
- Taxation Rulings TR 93/6
Computation of Fringe Benefit Tax
Under the purview of “TR 93/6” it has been discerned that individuals are provided with the opportunity to offset the interest of the customer as per the policies set by financial institutions. The different types of rulings set by the financial institutions ensure that on event of making any profit such income will not be considered for taxation. From the aforementioned rulings it can be discerned that Brian has been discharged by the bank for payment of interest after the completion of loan period and he shall not have to bear any tax.
The study has shown that in case the loan interest is payable after the completion of loan tenure then income tax is not required to be paid by individual to the bank.
Answer to question 3:
The main question here is distribution of loss which has been sustained as a result of joint ownership from a rented property by the taxpayers.
- FC of T v McDonald
- Section 51 of the ITAA 1997
- Taxation ruling TR 93/23
By the application of taxation rulings under “TR 93/32” the various types of losses derived from a rented property by joint owners and the consideration of the same for income can be discerned. The rulings also suggest the overall assessable position for the co-owners which are not considered accountable for executing a business based on defined activities. In the given context, Jack and Jill are being considered for evaluation at but their property rented. In the given situation Jack seemed to be eligible for a total of 10% of the profits and Jill 90% of the profits obtained from the rented property (Kenny, 2013).
As per the consideration of “TR 92/32” the joint ownership as a result of the rental property clearly shows the main purpose of income tax although it is not considered under the partnership as for the definitions of general law. It has to be for the scene that the ruling does not considered the joint ownership of any business which adheres to the purpose of income tax. The loss of income as a result of rented property is to be administered with the help of joint ownership and allocation of losses and profits. Jack and Jill were the joint owners of the property form the main foundation of income tax will not be accounted for partnership in the general law.
The main principle of the taxation ruling with reference to “92/32” suggests that the joint ownership should not be treated as partnership. The partnership deed consists of either written or verbal agreement it does not have any impact on the loss of income from share of the rented property. Just before the discerned that the agreement clause clearly shows that Jack and Jill needs to be accounted for the full loss which has taken place from the rental property.
As per discerned in the case “FC of T v McDonald (1987)” the main argument was signed so that Mr McDonald shall be entitled to receive 25% of the profits however he would be getting 75% of the profit from his property. Henceforth, on an event of loss Mr McDonald would need to be the entire portion of it. This has been primarily done with the motive to advance the income to his wife and indemnify for such losses.
Similar to this, for the present partnership between Jack and Jill on event of loss from the rented property the same should be shared on equal basis.
Based on the aforementioned discussions from the aforementioned case it can be understood that there needs to be an equal sharing of losses by Jack and Jill as the joint ownership does not account as a partnership.
Answer to question 4:
The rulings of “IRC v Duke Westminster (1936)” have been evident to confirm tax avoidance. Based on the given case “Duke of Westminster” has been seen to pay his wages on weekly basis and enter a contract by which he did not pay for wages and later on view of the covenant agreement to be an equivalent sum. The gardener all the received identical amount in form of wages or remuneration but on the course of this Duke benefited from the tax as covenant was seen to be having lower liability of surtax. The case has been presented to show that any individual is entitled for ordering his tax affairs with the motive to attach appropriate acts which is lower than the same and the individual cannot be forced to pay the increased tax amount.
The application of these principles show that a person is successful in obtaining benefits from ingenuity from tax payment and the increased some of tax. As per the aforementioned case law the individual with opportunity of decreasing the tax liability in the argument of financial framework of law needs to be considered.
Answer to question 5:
The important issue has been taken into consideration by assessing the case of cutting down of timber under “subsection 6 (1) of the ITAA 1997”.
- Subsection 6 (1) of the ITAA 1936
- McCauley v FC of T
As per the given case Bill is identified as owner of the land of pine trees. During the initial stages Bill has decided to empty the land for the purpose of grazing. However, on being opposed by a logging firm who agreed to pay $1000 for every 100 meter of timber, he the agreed to hand over his land.
The application of “TR 95/6” shows the taxation laws for forestry and primary production. The aforementioned legislation also defines the extent to which an individual gaining income from forestry activities can be assessable for taxation. This ruling is applicable for both business and individual taxpayers were involving production activities such as timber disposing. As for the explanation of “Subsection 6 (1) of the ITAA 1936”, and individual involved in forest operation needs to be treated as primary producer for income tax and the activities are viewed as business activities.
Planting and tending of the trees can be referred to as the primary production as per the subsection 6 (1) of the ITAA 1997 which has been originally seen for tending of vegetation trees. Bill has been treated as the primary producer however he did not originally planted the trees.
Based on the aforementioned scenario the saleable amount of the timber needs to be considered for taxation. Although the sale has been comprised only on portion or entirely on the assets it is having commercial value which needs to be included for taxation under “subsection 36 (1)” (Jover-Ledesma, 2014).
As for the given scenario the individual taxpayers paid an amount of $50,000 by assigning the lodging companies for cutting down the necessary quantity for timber and this can be considered as “Royalties”. As per “section 26 (f)” these are to be considered for tending of timber and needs to be considered for taxable income during the year of tending. Henceforth, the Royalties received by Bill needs to be treated as a part of carrying out forest operations. As evident in the case “McCauley v The Federal Commissioner of Taxation”, the various types of payments received by grantor has been seen with the right of tending the timber. Henceforth, the amount received by Bill should be included for taxable income with reference to section 26 (f).
As per the given scenario the amount received by Bill shall be considered taxable and an alternative case can be assumed that the amount is received for branding the right needs to be entitled for royalties.
Jover-Ledesma, G. (2014). Principles of business taxation 2015. [Place of publication not identified]: Cch Incorporated.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.