Custom Writing Help For You!

Special Discounts Offers! 20-30% Off!

Posted: May 3rd, 2023

HI6028 Taxation, Theory, Practice &LawT2 2016 ASSIGNMENT

HI6028 Taxation, Theory, Practice &
Law
T2 2016 ASSIGNMENT 2
Due date: Week 10
Maximum marks: 20 (20%)
Instructions:
This assignment is to be submitted by the due date in both soft-copy (Safeassign – Bb) and hard copy.
The assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook.
It is the responsibility of the student submitting the work to ensure that the work is in fact his/her own work. Ensure that when incorporating the works of others into your submission that it appropriately acknowledged.
Case study 1: Capital Gains Tax
Fred is a resident who signed a contract to sell his holiday home in the Blue Mountains in August last year. The sale was settled in February this year when Fred received $800,000 from the purchaser. Fred incurred legal fees of $1100 (Inclusive of GST) and real estate agent’s commission of $9,900 (Inclusive of GST) in relation to the sale. Fred purchased the holiday home in March 1987 for $100,000 and paid $2,000in stamp duty on the transfer and $1000 in legal fees. In January 1990, Fred engaged a builder to build a garage on the property for $20,000,
Calculate Fred’s net capital gain for the current year. Assume he also has a net capital loss from last year of $10,000 arising from the sale of shares.
Would your answer be different if the loss arose from the sale of an antique vase?
(10 marks, max. 1000 words).
Case study 2: Fringe Benefits Tax
Periwinkle Pty Ltd (Periwinkle) is a bathtub manufacturer which sells bathtubs directly to the public. On 1 May 2015, Periwinkle provided one of its employees, Emma, with a car as Emma does a lot of travelling for work purposes. However, Emma’s usage of the car is not restricted to work only. Periwinkle purchased the car on that date for $33,000 (including GST).
For the period 1 May 2015 to 31 March 2016, Emma travelled 10,000 kilometres in the car and incurred expenses of $550 (including GST) on minor repairs that have been reimbursed by Periwinkle. The car was not used for 10 days when Emma was interstate and the car was parked at the airport and for another five days when the car was scheduled for annual repairs.
On 1 September 2015, Periwinkle provided Emma with a loan of $500,000 at an interest rate of 4.45%. Emma used $450,000 of the loan to purchase a holiday home and lent the remaining $50,000 to her husband (interest free) to purchase shares in Telstra. Interest on a loan to purchase private assets is not deductible while interest on a loan to purchase income-producing assets is deductible.
During the year, Emma purchased a bathtub manufactured by Periwinkle for $1,300. The bathtub only cost Periwinkle $700 to manufacture and is sold to the general public for $2,600.
(a) Advise Periwinkle of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2016. You may assume that Periwinkle would be entitled to input tax credits in relation to any GSTinclusive acquisitions.
(b) How would your answer to (a) differ if Emma used the $50,000 to purchase the shares herself, instead of lending it to her husband?
(10 marks, max. 1000 words).

________________________
Case Study 1: Capital Gains Tax

To calculate Fred’s net capital gain for the current year, we need to consider the following:

The capital proceeds from the sale of the holiday home: $800,000
The cost base of the holiday home:
The purchase price in March 1987: $100,000
Stamp duty on the transfer: $2,000
Legal fees: $1,000
Cost of building a garage in January 1990: $20,000
Subtotal: $123,000
The incidental costs of the sale:
Legal fees: $1,100
Real estate agent’s commission: $9,900
Subtotal: $11,000
The net capital loss from last year: -$10,000
Therefore, Fred’s capital gain for the current year is:

Capital proceeds ($800,000) – Cost base ($123,000) – Incidental costs ($11,000) = $666,000

However, as Fred also has a net capital loss from last year of $10,000, we can offset this against the current year’s capital gain to calculate the net capital gain for the current year:

Net capital gain = Capital gain ($666,000) – Net capital loss from last year ($10,000) = $656,000

If the loss arose from the sale of an antique vase, the answer would be different. This is because capital losses can only be offset against capital gains of the same type. Capital losses from the sale of collectables, such as antique vases, can only be offset against capital gains from the sale of other collectables.

Case Study 2: Fringe Benefits Tax

(a) The FBT consequences for Periwinkle Pty Ltd are as follows:

Car fringe benefit:
As the car was made available for Emma’s private use, it is considered a fringe benefit. There are two methods to calculate the taxable value of the car fringe benefit:

Operating cost method: Under this method, the taxable value is calculated as a percentage of the car’s cost price (including GST) multiplied by the percentage of private use. The statutory percentage for cars with a cost price above the luxury car threshold ($57,581 for the 2015/16 FBT year) is 20%. Emma’s private use is 10,010 km (10,000 km for work purposes + 10 km for private use) out of the total distance travelled of 10,015 km (10,010 km + 5 km for annual repairs). Therefore, the taxable value of the car fringe benefit is:
Cost price of car ($33,000) x 20% x 10,010 km/10,015 km = $6,606

Statutory formula method: Under this method, the taxable value is calculated as a percentage of the car’s cost price (including GST) multiplied by a statutory percentage based on the number of days the car was made available to the employee for private use. The statutory percentage for cars with a cost price above the luxury car threshold is 20%. Emma was provided with the car for 335 days (1 May 2015 to 31 March 2016), and as she did not use the car for 15 days (10 days when she was interstate and 5 days for annual repairs), the number of days the car was available for private use is 320. Therefore, the taxable value of the car fringe benefit is:
Cost price of car ($33,000) x 20% x 320/365 = $5,452

As the operating cost method results in a higher taxable value, this method should be used

Tags: , ,

Order for this Paper or similar Answer/Assignment Writing Service

Place your order by filling a guided instructions form in 3 easy steps.

Why choose our Study Bay Services?

Like every student, Focusing on achieving the best grades is our main goal

Top Essay Writers

We have carefully cultivated a team of exceptional academic writers, each with specialized expertise in particular subject areas and a proven track record of research writing excellence. Our writers undergo rigorous screening and evaluation to ensure they hold relevant advanced degrees and demonstrate mastery of English grammar, citation style, and research methodology. Recent projects completed by our writers include research papers on topics such as sustainable energy policy, cognitive behavioral therapy, and molecular genetics.

Student-Based Prices

We prioritize attracting highly skilled writers through competitive pay and strive to offer the most cost-effective services for students. References from recent years include surveys of customer satisfaction with online writing services conducted by the American Customer Satisfaction Index between 2018 to 2022, demonstrating our commitment to balancing affordable costs with high standards of work through positive reviews and retention of expert writers.

100% Plagiarism-Free

We guarantee 100% original and plagiarism-free final work through a thorough scanning of every draft copy using advanced plagiarism detection software before release, ensuring authentic and high-quality content for our valued customers. To note, we also do not generate assignment content with AI tool, thus you a guaranteed 0% similarity index for your final research paper.

How it works

When you decide to place an order with Study Pro Essay, here is what happens:

Complete the Order Form

You will complete our order form, filling in all of the fields and giving us as much detail as possible.

Assignment of Writer

We analyze your order and match it with a writer who has the unique qualifications to complete it, and he begins from scratch.

Order in Production and Delivered

You and,the support and your writer communicate directly during the process, and, once you receive the final draft, you either approve it or ask for revisions.

Giving us Feedback (and other options)

We want to know how your experience went. You can read other clients’ testimonials too. And among many options, you can choose a favorite writer.