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Question
1- Write a note on Taxation Law within 1500 words with references to APA.
Answer:
Issues:
Can Net income from the partnership made during the taxation year be granted under Sec 90 of Income Tax Assessment Act, 1936?
Rules:
To define partnership as per Sec 995-1 of Income Tax Assessment Act, 1997 on the basis of income tax, it includes receipts made from the business contract, service agreements, and from the income earned by both from the property. The term partnership could be better understood as the conducting of business together and to earn income from the business and statutory income jointly. Sec 90 of Income Tax Assessment Act, 1936 suggests to make net income tax reference under it. After deducting the permissible deductions from the assessable income which is calculated if the taxpayer is the resident helps to determine the net earnings of partnership.
The term ordinary income under Sec 6-5 of Income Tax Assessment Act, 1997 defines the income acquired from ordinary concepts. The statement of court in “Scott vs. CT (1935) ” case is that the income is based on the ordinary concepts and it characterizes that whether the profit has the feature of income or is in adherence with the ordinary concepts.
As per Sec 8-1, Income Tax Assessment Act, 1997, the taxpayer can claim any losses or outflows that he/she had suffered while operating business with the proper intention of engendering taxable income or earning for which taxes can be charged. On the contrary, under conferring to Sec (8-1(2)) of Income Tax Assessment Act, 1997it ceases the deduction of any losses or any sufferings of the company provided that the taxpayer has done it under negative intentions. The negative intentions could be made by showing the suffered loss for capital, personal or domestic expenses. For this the deduction is not applicable.
Under Section 25-10 , the deduction is permitted for the renovation purposes of the business venue and also for the depreciating asset from which the revenue could be earned. “ATO TR 97/23” states that anything which is under repair is considered to be a producing income as it is allowed in the deductible income mention under Sec 25-10. Any repair done to the business property or to the rental property is included under the deductible income. Some of the maintenance works are also treated as the deductible income under Sec 25-10. This may include the painting works of the building in the premises for maintenance purposes.
In contrary to the fact that if the replacement is done to the parts of the assets then it is allowed to be deductible repairs. In “Samuel Jones & Co (Devondale) Ltd vs. IRC ” case the dimensional changes which have been done during the replacement of the chimney of the factory resulted in indistinguishable portion of the asset in whole. ATO states that a business can claim immediate deduction if it buy assets for $ 20,000 or below that.
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Conforming to “Sec 995-1 of Income Tax Assessment Act, 1997 ”, Olivia and Daniel are business partners and are executing their business. In the year 2017, they have made receipts on the basis of their partnership business, which included cash receipts and payment from debtor’s amounts to ordinary concepts which is mentioned under “Sec 6-5 of Income Tax Assessment Act, 1977”. The receipts provided by the partnership business included the character income and are in adherence with the ordinary concepts as included in “Scott vs. CT (1935)” case.
Few expenses were claimed by Daniel and Olivia while performing their business and the same will be deducted under “Sec 8-1 of Income Tax Assessment Act, 1997”. The reason behind such deductions was that the expenses were mandatory while conducting their business. The expenses were mainly car expenses, electricity bill expenses, loan repayments, union fees, council rates, etc.
Daniel and Olivia also reported few claims regarding expenses which were required for private usage. But, these were non-deductible as they were considered to be for personal expenses. Hence, these expenses are acclaimed under “Sec (8-1(2))”and is non-deductible.
Olivia and Daniel also claimed their expenses which were made while repairing and painting their shops for maintenance purposes. These expenses are applicable as allowable deductions under “Sec 25-10”. Likewise, “Samuel Jones & Co. (Devondale) Ltd. vs. IRC”case here the change has been made to the motor of the refrigerator, which is again considered to be expenses under deductible repair in the aforesaid section. They purchased AC for $1200. Immediate deduction can be claimed under ATO as the price of AC is below $20,000. The net income of the partnership business is calculated below as per Sec 90 of Income Tax Assessment Act, 1936.
Conclusion:
The net income of the partnership is $2,373 as obtained by calculating followed by the deduction of the deductible expenses made within the business period as peer Sec 90 of Income Tax Assessment Act, 1997.
Answer to Question 2:
Issues:
As per Sec 20 of Fringe Benefits Tax Assessment Act, 1986 the employee is provided with the fringe benefits for the expenses made. Under Sec 25 of Fringe Benefits Tax Assessment Act, 1986 the employer provides all the expenses of housing facility to the employee.
Rule:
To know the meaning of the term ‘fringe benefits’ explained underFringe Benefits Tax Assessment Act, 1986- a benefit which is enjoyed by the employee within his/her tenure of employment .Former or future employee is considered as well. It is also stated under Fringe Benefits Tax Assessment Act, 1986 that the employer is liable to pay taxes those are charged under fringe benefits. Fringe benefits are not to be considered under salary or wages; this has also been stated under Fringe Benefits Tax Assessment Act, 1986.
As per Section 20 of Fringe Benefits Tax Assessment Act, 1986, the expense payment on fringe benefits to be made by the employer to the third party in full or in part, if the obligation is raised by the employee. The value of taxation charged against the payment of expenses on fringe benefits is mentioned under Sec 23 of Fringe Benefits Tax Assessment Act, 1986. The tax which is charged against the expenses of the fringe benefits must be of the year for which the benefit has been provided. Hence, the employer has to pay the tax on fringe benefits expenses on the taxable year.
The residential benefit is stated under Section 25 of Fringe Benefits Tax Assessment Act, 1986 which mentions the sustenance of housing benefits for the whole year or any half of the year under which the taxation is provided, and this benefit is to be provided by the provider(here the employer), to the recipient (here the employee) in account of the year of taxation.
Section 27 of Fringe Benefits Tax Assessment Act, 1986 gives the right to determine the market value of housing rights. The value which is charged on the rental market for enjoying the benefits of accommodation and for which the payment is disregarded by the employee is mentioned under aforesaid section.
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Application:
The first part of the case study shows that John works as a senior executive in a printing company. The employer pays the private school fees of his child as is included in his salary package. The employer has to pay $15,000 as his child’s school fees. The payment of his child’s school fees has resulted in the expense payment on fringe benefits by the employer of John as per Section 20 of Fringe Benefits Assessment Act, 1986. This means that the whole payment to the third party, who acted here as the final recipient, is made by the employer of John.
To lay down Section 27 (1) of Fringe Benefits Assessment Act, 1986 , the expense payment on fringe benefits is taxable for the related year only. John’s employer is liable to pay all the fringe benefit expenses which have been during the year of taxation.
Wherein the second part of the case study, John is provided with the residential facility in Sydney by his employer, as followed all throughout the year of Fringe Benefits Taxation. The MV rent of the apartment in Sydney is $800 per week. In adherence, John has to pay only $100 per week for his rent. The provision of the yearly taxation on the expense payment on housing facility i.e. on fringe benefits is provided under Section 25 of Fringe Benefits Taxation Assessment Act, 1986. Under the aforesaid section, the employer is liable to meet the expenses on the accommodation facility. The taxation policy of accommodation facility is to be made on the market value as stated under Section 27 (1) of Fringe Benefits Taxation Act, 1986. Provisions are there to reduce the value of taxation on accommodation facility (i.e. fringe benefits) by escalating down any rental expenses made throughout the year of Fringe Benefits Taxation by John.
Conclusion:
Here, John has been provided with the accommodation facility in the nature of fringe benefit by his employer. Under Section 23 of the Fringe Benefits Taxation Assessment Act, 1986 the employer of John is liable to pay the value under taxation. The employee’s contribution must be deducted from the accommodation contribution made by his employee throughout the FBT year, as per Section 27 (1) of the Fringe Benefits Taxation Assessment Act, 1986.
Reference:
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CCH Iknow | Australian Tax & Accounting (2019) Iknow.cch.com.au
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CCH Iknow | Australian Tax & Accounting (2019) Iknow.cch.com.au
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CCH Iknow | Australian Tax & Accounting (2019) Iknow.cch.com.au
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Definition of FRINGE BENEFIT (2019) Merriam-webster.com
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Federal Register Of Legislation - Australian Government (2019) Legislation.gov.au
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FRINGE BENEFITS TAX ASSESSMENT ACT 1986 - SECT 65Areduction Of Taxable Value--Education of Children of Overseas Employees (2019) Www5.austlii.edu.au
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FRINGE BENEFITS TAX ASSESSMENT ACT 1986 - SECT 65Areduction Of Taxable Value--Education of Children of Overseas Employees (2019) Www5.austlii.edu.au
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INCOME TAX ASSESSMENT ACT 1936 (2019) Austlii.edu.au
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INCOME TAX ASSESSMENT ACT 1997 - SECT 6.5Income According To Ordinary Concepts (Ordinary Income) (2019) Austlii.edu.au
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INCOME TAX ASSESSMENT ACT 1997 - SECT 995.1Definitions (2019) www.austlii.edu.au
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INCOME TAX ASSESSMENT ACT 1997 - SECT 995.1Definitions (2019) Www5.austlii.edu.au
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