Question 1

In CGT discount method, the profits are reduced by half (ITAA 1997). For the current question, this method will be used to for calculating the capital gain. The below table contains purchase and selling price for each item and the net capital gain is calculated using the given data.

Elements	Selling price	Purchase price	profits
Chair	1000	3000	-2000
Painting	1000	9000	-8000
Shares	20000	5000	15000
Soundsystem	11000	12000	-1000
Vase	3000	2000	1000
Total			5000

 

According to the principle of CGT discount method, the net capital gain will be, 50% of 5000=2500.

The payable CGT duty will be, 2500 dollars.

Question 2

For calculating the fringe benefit for sale, here the benefit received from employer is used. However, one can receive such benefits from employer only when the amount payable exceeds 20000 dollar. The term which is used to for this benefit is called as the- reportable fringe benefits. The general rule is, showing such benefit in the consecutive year when it was reported. According to (Picciotto 2007), fringe benefits is a category of payments which the workers receive usually from businesses. It is also considered as the pay for administration, rather than the usual rates which are used for payment of workers. The fringe benefit can be received in various forms, such as administrations, property, money reciprocals or money. The money counterpart is another thing which also needs to be considered in the discussion of fringe benefits. These money counterparts like reserve funds securities are highly advantageous as they can be transformed in money faster.

The amount of tax payable here, is 40%* 1000000= 400000. However, in this case, some excess amount over the normal payable amount will be required. reasons are below-

Firstly, the amount of loan given here is less for the terms of interest. Thus, the excess amount falls under the category of taxable income. The consideration is applicable for the monthly income. This would be for the monthly income which is not reported and will be divided into various years.

There may be cases, when the payment needs to be done on per year basis. In these cases, it will be reported in the next financial year and the rate will be applicable accordingly. In case of monthly payment, the rate which is prevalent for the reporting year is applied. The yearly payment is cumulative in nature whereas the monthly payment is done just after gaining the profit.

Question 3

 The Australian occupants are considered as the subject for paying duty on picks up for transferring resources. In case the pick on is saddled as well as determined to another nation, they become subject to a twofold tax assessment also (ITAA 1997). However, when an Australian business provides shares to another organization located in foreign countries, the case is considered as a special case. In these situations, any case of change in capital, either increase or misfortune, which is an outcome of such share offerings, can be reduced in particular circumstances. However, the capital increases which are assessable are considered during calculation of the assessable payment. These are usually charged from the standard rate of salary at a rate which cannot be differentiated.

There are several cases when the Capital Increases tax is dispensed. One such case is- when an individual offers property in Australia and manages to make a profit from it. Such case is considered as offering of a capital resource. In these situations, difference between the amounts required for purchasing the property and monetary value of the deal, is determined and the tax is calculated on basis of that. Such expense commitments become especially important when one wants to influence their amount in the Government forms. The Australian regulations consider this as a wage component. In addition, it should be present in the wage assessment reports too. According to (Braithwaite 2007), an offer of selling peoperty will earn profit, is difficult to conceive. Thus, diminishing the current practice of quoting the pay on several assessments is not possible. However, there is a chance where the expense amount on CGT can be reduced (Honoré 1993)).

Here, the agreement between the parties will be used to allocate the amount for the purpose taxation. The case can be seen as an exceptional one where the loss will be on behalf of the party who bears the liabilities mentioned in the agreement. From the CGT perspective, both Jack and Jill need to calculate the difference between the property value and the selling amount. The difference can be either a loss or a profit. In case, they encountered a loss, the amount will be deducted from the next CGT. The amount will also have not any effect on their payable income tax.

Question 4

Relevance of the principle of IRC v Duke of Westminster [1936] AC 1 in Australia

The current case depicts that IRC sued the Duke, the respondent as he employed a gardener and made his payment from the post-assess wage. With the purpose of decreasing the charge, the Duke terminated paying the wage of the gardener and decided to pledge in which he consented to give a proportionate amount. In this way, the Duke managed to cut down the assessable wage according to the duty laws of that time. The Duke also managed to reduce the risks of surtax as well as the wage expenses.

In Court, the plaintiff lost in this case. According to the Judge, each party involved in the case, were qualified enough to organize the entire thing as the associated acts had not mentioned about what the prime part would be. In this case, the prime aim was to secure a result. Thus, the residents do not need to pay an extra amount.

 This case holds a special significant place as it supports the avoidance rule. In other words, the case supported the fact that an individual is able to find out own ways for avoiding a number of taxes. The result of the above mentioned cases, actually empowered people to save money on several taxes. In longer term, it is especially beneficial as the principle prevents taxation from being a burden to the individuals. After this case, the taxpayer actually got the freedom to choose between the taxes they have to pay and grab opportunities to reduce the total amount if there exists any. 

The avoidance principle is embraced by the jurisdiction of different nations. Among the nations, the Australia and the UK deserves special mention as these two countries excluded it.

On basis of the decision made in the above stated case, a number of opinions emerged from Justice Murphy in Obrien v Komesaroff (1982). In the later case, the justice mentioned the practice of avoiding tax as an antisocial activity. It had a long term impact. The law which was established at that time played a vital role. Even, avoiding taxes in some places like Victoria is considered as a serious offence. The Tax legislation of (1995) of this place clearly mentions under section 44-Every agreement or undertaking a will be considered void and invalid if the is an attempt for tax avoidance regardless time of making the agreements, either before or after initiating the regulation. The same principle will be applied in every case, whether the agreement is made by verbally or by deed or in written form. Agreements made by individuals as well as the organizations will fall under this category. In addition the act will be applied in every case of duty occurrence and the risk to pay. 

This act improved the morality of the Australian people although there are some efforts for avoiding the liability (Braithwaite 2007). The benefit of this act is development a neutral fee structure where the citizens cannot avoid any of the duty with the help of blueprints or faux. The Australian model of assessment actually focuses of reaping such practices with the help of well known publications. The outcome of having such recreation plan is, the complexities of duty sanction increases. The need of having consistence prices for thew citizens is also recognized using the self-evaluation survey system. According to (Honoré 1993), the Tax assessment Act 1936 of IVA, which was displayed in the year of 1981 through the treasurer, for the purpose of winning over the restrictions put on variety 260, with the utilization of affecting ‘down prominent, fabricated or anticipated blueprints’. In this way, the phase 260 was tested and was not successful for having an effect on the evasion.

Component IVA was created with a lot of term. It provides a better situation of being conscious for the Commissioner of Taxation for rejecting a recreation-plan. It also makes the Commissioner able to the entire assessable wage of a subject or further questioning it. The above mentioned courses of action even if they are anticipated form are effective for prevention of practices such as breaking down of the salary and ensures that there will not be any obstruction to the blue print organizations. Moreover, the act is proved beneficial for the associated trades. The problems associated avoiding the taxation has been being looked from a different point of view and before taking any action the court decides whether there was any sort of unfairness or not (ATO 2017).

Question 5

 In case of period payments, one has to every amount any amount he/she got in the form of lost salary or wages under the provision of sickness or crash insurance policy, positive cash-flow protection, or staff compensation scheme. If there is an injury state and one seeks for a settlement, or there is court orders in favor, one can get reimbursed in the form of either a lump sum amount or periodic (structural) obligations. Even in some cases, an individual becomes able to receive the both. According to the regulations such amounts which are received as repayments are declared as tax-free, when particular conditions are fulfilled (). 

From the above discussion, it can be stated that one does not need to add such payments received under a crash or sickness insurance coverage, income protection, if the wage is replaced by such payments and the monthly premiums are deductible. The same is applicable if one is already helped or included to the tax returns. It means, in case of periodic payments, one should liable for paying the respective taxes as and when due.

 In case of lump sums, A 1997 Federal Court choice mentioned it clearly that the constituent payments which are received on the compensable reasons should be converted into a singular payment installment at the time of applying for the remuneration arrangements (ATO 2017).In other words, the remuneration is difficult to identify from these single payments. For finding out the actual amount of remuneration, from one single lump sum payment one can challenge at tribunal , court or to the judge to figure out anything unpaid. In some special cases, a solitary negotiation takes place and the amount is paid.

In case, there are two disconnected wounds, it is difficult to identify whether payment is made for each of the occasion after receiving a one settlement amount (as happened in Savage v DEEWR [2008] case). In this case, a certain part of the entire amount should be decided for each compensable occasion. According to the 50% rule in this case, half of the lump sum is charged as compensation for any case of misplaced capacity for earning as well as loss of income. It is usually received as the consent judgement, settlement of declaration, periodic bill redemption or a meantime charge. 

 Bibliography

1. a) Journals:

Tony Honoré “The Dependenceof Morality on Law” in Oxford Journal of Legal Studies vol. 13, no 1 (1993), p.5.

Picciotto, Sol. “Constructing compliance: Game playing, tax law, and the regulatory state.” Law & Policy 29.1 (2007): 11-30.

Braithwaite, Valerie. “Responsive regulation and taxation: Introduction.” Law & Policy 29.1 (2007): 3-10.

 

b)Legislation:

Income Tax Act 1997 cth

1. c) Case laws:

IRC v Duke of Westminster [1936] AC 1

O’Brien v Komesaroff – [1982] HCA 33

Savage v DEEWR [2008] FMCA 32 

 

1. d) Others:

ATO 2017, Working out your capital gain https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-capital-gain/ 

ATO 2017, https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Other-income/  Other income