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Taxation Laws : Fringe Benefit Tax

Question:

Describe about The Taxation Laws for Fringe Benefit Tax.

Answer:

Part A:

1:

Cost incurred on communication of $1,000 by GHTY will be considered for the fringe benefit tax since the cost is borne by GHTY for its employee Lisa. While on the other hand $3000 is paid to Lisa for her childcare provider named “Happy Kidz”. The cost is assessable under the Fringe benefit tax since this cost is borne by the company on each quarter of the financial year. GHTY also incurs the cost of protection gears such as a pair of $250 for capped boots, 150 for lead lined and a pair of $350 for safety goggles. Therefore, at the time of computation of Fringe benefit tax these expenses will form a part of the remuneration pack.

According to the Bureau of Labour Statistics in respect of Australian taxation employee benefits forms the part of indirect expenses incurred by the organisation[1]. The Australian taxation laws provide that the accounting benefits is a valuable consideration, it does takes into consideration the reasons behind an organisation to offer benefits to its employees. These benefits are mandated by regulation or market or market forces and that create an employee prerogative right or expectations.

2.

FBT Liability of GHTY

 

 

Particulars

 

Amount

Communication cost

1000 X 12

$12,000

Childcare cost

3000 X 4

$12,000

Safety cost

 

 

Capped boots

 

$250

Apron

 

$150

Safety Goggles

 

$350

Total taxable value

 

$24,750

FBT Taxable amount

 

$12,746.25

Tax Payable

 

$6,181.931

3.

Computation of fringe benefit tax of Lani

 

Particulars

Amount

Gross Salary

$65,000

Allowance non-separable 

$12,000

Child care cost

$12,000

Tools of Trade & Protective Clothing

$750

Less: Loan

$19,000

Less Interest on loan

$682.5

Total taxable value

$70,067.5

Fringe benefit taxable amount

$136,053.4

Tax Payable

$65,985.9

Part B:

Michal started the business of wine in the year 2011 and made their first batch of wine to sell them in local population. The tax consequences of selling wine are as follows;

Inherent tax: It is worth mentioning that inland revenues has made it understandable that the value of wine for inheritance tax will not be considered at their cost price. Under section of 160 of IHTA 1984 the Inherent tax will be determined as per the value of the property[2]. Therefore, it is noteworthy to denote that the value for inheritance will be valued in accordance with the open market.

Capital gains tax: Under section 44 (1) of the Capital gains tax act 1992 defines the wasting assets at the time of acquisition should not exceed the period of 50 years[3]. Hence, the revenues generated from the bottled wine purchased are considered in the computation of capital gains tax. The inland revenues will be taxed for Michael.

2. Ordinary income is usually characterised as income other than long-term capital gain. Ordinary income usually consists of the income arising out of the wages, salaries, tips and other types income. Ordinary income in respect to the capital gains is the sale of capital assets[4]. In contrast to the give case, Michael if considers the sales considerations offered to him by the large Australian wine maker would not be considered as the ordinary income since he has conducted the business operation. By contrast, Michal may sell of the land and the income would be considered for capital asset.
 
3.
 

Details of purchase of property

Amount

Financial year of purchase

2008

Cost of inflation for the acquisition year

551

Purchase price of property

30,00,000

Add: Expenses relating to acquisition

0

Total cost of acquisition of property

30,00,000

Details of sales of property

 

Financial year of Sale

2,015

Cost inflation index for the year of sale

1081

Full value consideration received for sale

420,00,000

Less: Expenses incurred on transfer

0

Net value of consideration

420,00,000

Long-term capital gains

361,14,338

 

Reference List:

Auerbach, Alan J. "Retrospective capital gains taxation." (1988).

Barkoczy, Stephen. "Core tax legislation and study guide." OUP Catalogue(2016).

Clark, John. "Capital gains tax: historical trends and forecasting frameworks." Economic Round-up 2 (2014): 35.

Cohen, Jeffrey, Gil B. Manzon Jr, and Valentina L. Zamora. "Contextual and individual dimensions of taxpayer decision making." Journal of Business Ethics 126.4 (2015): 631-647.

Goode, Richard B. The individual income tax. Brookings institution, 2014.

Hegemann, Annika, et al. Impact of capital gains taxation on the holding period of investments under different tax systems. No. 183. arqus-Arbeitskreis Quantitative Steuerlehre, 2015.

Kania, Beatrix. "Capital Gains Tax." Steuerstandort Großbritannien. Springer Fachmedien Wiesbaden, 2013. 128-156.

Kaplan, Richard L., and Dawson J. Price. "Change and Continuity in Fringe Benefit Taxation: Seeking Sense and Sensibility." NYL Sch. L. Rev. 59 (2014): 281.

Mihaylov, George, et al. "Tax compliance behaviour in Australian self-managed superannuation funds." (2015): 2016-05.

Santhanam, R. "51_Salaries and Income-Tax." (2016).

Surrey, Stanley S. "Definitional Problems in Capital Gains Taxation." Harvard Law Review 69.6 (1956): 985-1019.

Walrut, Bernie, John Tucker, and Paul Ingram. "Tax files: A submission on the proposed review of SA's tax laws." Bulletin (Law Society of South Australia) 37.4 (2015): 36.

Woellner, Robin, et al. Australian Taxation Law 2016. Oxford University Press, 2016.

 

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