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Taxation Law

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This assignment is to be submitted by the due date in soft-copy only (Safe assign – Blackboard). 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 is appropriately acknowledged. Question 1 Charlie is an employee of Shiny Homes Pty Ltd (Shiny Homes). He is a real estate agent. Shiny Homes also operates a separate business ...

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This assignment is to be submitted by the due date in soft-copy only (Safe assign – Blackboard). 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 is appropriately acknowledged. Question 1 Charlie is an employee of Shiny Homes Pty Ltd (Shiny Homes). He is a real estate agent. Shiny Homes also operates a separate business on landscaping to ‘do up’ houses before it is put up for sale.From the period 1 July 2016 to 30 June 2017 the following events took place:• In 1 September 2016, Shiny Homes provided Charlie with a 4 wheel drive sedan value at $70,000. From 1 September 2016 to 31 March 217 the car travelled 80,000 km. He parked his car in his garage in the evenings. Before he goes away for his Christmas holidays, the car was sent to be serviced and he could not use his car for 2 days. He estimated that he uses 70% of the time was for business purpose and the other 30% of the time for private use. Charlie also maintained a log book for 12 weeks and the following information were recorded: a. 50,000 km were work relatedb. Petrol and oil per month - $2,000c. Repairs and maintenance per month - $3,500d. Registration per annum - $240e. Insurance per annum - $960Note: these expenses were incurred by Shine Homes. • In 1 February 2017, Charlie was involved in a minor car accident and he could not use the vehicle for 2 weeks (1st to 14th February 2017). This occurred before Charlie a week before Charlie’s wedding and Shine Homes decided to hire a car for that period at a cost of $1,000 to allow Charlie and his wife Deborah to go for their honeymoon trip to Gold Coast. Shine Homes paid for their honeymoon accommodation which is worth $3,000. • During working hours Charlie parked his car at Secure Parking (an unrelated entity) and Shine Homes paid $200 per week. RequiredAdvise both Charlie and Shine Homes about their fringe benefit consequences of these events. You are required to compute the taxable benefit where necessary.You need to cite the relevant case law and / or legislation. Question 2 1. Allan and Betty were living and working in Melbourne. They decided on a ‘tree change’, sold their Melbourne home and purchased a large country house on a 10 hectare block in central Victoria. Betty works part-time as an accountant and Allan as a locum doctor. Allan is popular with the elderly patients in the town and regularly is given home-made cakes and scones, along with his fee. On one occasion he treated a local wine maker’s dog for snake bite when the vet was unavailable and was given a dozen bottles of Lonarch Brae shiraz in appreciation. The wine had a retail value of $360. 2. Allan and Betty enjoy gardening. They plan to establish a few hectares of grape vines and begin growing vegetables. They attend a continuing education course on organic farming and find in their second year they have a surplus of produce. Betty started making marmalade and relish using her mother’s recipes. Initially she gave them to neighbours but they became so popular that she opened a stall at the Newtown Growers Market held on the second Sunday of every month. Allan sold some of the excess to a local supermarket and now regularly supplies three retailers with sweet potatoes and pumpkin. They don’t keep records as they never intended to make a profit but estimate that in a good month gross receipts could be $500 to $600. 3. Their neighbours have a citrus orchard and throughout the year vegetables are swapped for oranges and mandarins. This seems like such a good idea Allan and Betty decide to set up a ‘barter’ system in the area. To join the system a person must pay an up-front, one-off fee of $50 to Allan and Betty as a charge for the keeping of administrative records. Thereafter people register their goods or services to be bartered. For example, Suzie is a retired hairdresser and will provide hairdressing services at her home. No money changes hands. Suzie would receive a credit to her account of 15 to 20 ‘barts’ that she can exchange for goods or services of equal value from other registered participants in the scheme (fruit, vegetables, child minding, lawn mowing etc.).Required 1:(a) Advise Allan of any income tax consequences of para 1, above.(b) Citing relevant case law, explain how a hobby is to be distinguished from a business.(c) Advise Allan and Betty of any income tax implications in paras 2 and 3 above.(d) Advise the participants in the barter scheme of any income tax implications.

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Answer 1IssueHow the Fringe Benefit Tax will affect the transactions done or entered into by Shiny Homes and Charlie?LawsFBTAA 1986Luney & Hayley v FCTTaxation Ruling 2011/3Analysis of LawFBT is levied on the Employer for the extra benefits provided to the employee other than salary terms.Car Benefit: It is discussed under section 7. It is taxable when the car is provided by employer and is used by the employee for its personal use and not office use. Even if the car is parked at employee’s residence, it is treated as personal use only. In a case law of Hayley &Luney vs. FCT, the barrister incurred some expenses from home to his office. He claimed it to be business expense. However the court ruled out that such expenses were not making any assessable income and therefore cannot be treated as business expense. This expense will be treated under FBTAA 1986. Car’s taxable value is calculated by given methods1.    Statutory formula: Base cost * Statutory percentage * no. of days of car used for personal use / Total days in FBT year.Statutory percentage is 20%. Base cost is the purchase price plus any additional expense incurred on Car by the Employer not related to business use. 2.    Operating Cost: To use it there must be details available for oil expense and other expenses too. A logbook is required to be kept for at least 12 weeks. Taxable value = Personal use of the car in percentage * total operating costsIt includes repairs, maintenance, registration etc.

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