Construction Of The Fundamental Principles -Myassignmenthelp.Com

Question: Discuss About The Construction Of The Fundamental Principles? Answer: Introducation The employers generally provide the fringe benefits to their employees apart from the salaries and wages. In accordance with the FBTAA 1986, this is can be notified that the relation between the employee and employer is necessary for receiving the benefits (Sikka, 2017). This relation between among two individual enables the utilization of provision under FBTAA 1986 for determining the tax obligations for both the individuals (employee and employers). As discussed in section 7 of the Fringe Benefit Tax Assessment Act 1986 if the benefit provided by a company is a car then this will be constituted as the car fringe benefit (Mellon, 2016). This act highlights this fact that providing a car to an employee or providing the car with lease management, this case will be resulting into the car fringe benefit tax for the employee. According to the elaboration of the fringe benefits, this is clear that if the employee uses the car for his personal usages instead of the private purposes then also this will be considered as the fringe benefit for the purpose of taxation. There are specifically two significant methods for determining the assessable value for car fringe benefits. These two methods include the statutory formulation methodology and operating cost methodology. In case of this statutory methodology the considered assessable amount within the fringe benefit is calculated by the value of the whole car. In addition to this, section 10A and 10 B of the FBTAA 1986 is considered as associated with the assessable value of the car fringe benefit in case of the operating cost method (Sharkey Murray, 2016). According to the operating cost method, this involves the administration of the car and also determines the assessable income of involved within the fringe benefits. One of the important fact involved within these methods are the method, which is identified for lowest assessable value for the fringe benefit, is considered for calculation of fringe benefit tax. For using the operating cost method, the employee will require the maintenance of the expenditure involved in case of the logbook or any related document. Case facts: The case study incurs this fact that he is the employee of Shiny Homes Pty Ltd., which provides him with a car. This car is allowed for personal as well private usages of Charlie. In observance with section, 7 of the Fringe Benefit Tax Assessment Act 1986 all the benefits provided to Charlie in the form of car will be included in car fringe benefit and will also be calculated for taxation (Robin, 2017). For determining the assessable value of the car fringe benefit of Charlie both the methods are applied namely the Statutory Method and Operating Cost Method. In case of the statutory method, the statutory rate of 20% is applied for determining the fringe benefits involved within Charlies case here. The statutory rate for of 20% is generally multiplied with the base value for the car in order to ascertain the assessable value of the fringe benefit. The degree of private utilization made by the employer is not taken in case of determining the assessable value related to the fringe benefit involved within the statutory Method. On the other hand, in case of the operating cost method, the total amount for the operating cost involved in administration of the car is segregated within separation for the personal along with the private usages of the car. This helps in determining the assessable value for the fringe benefit while calculating the taxation for the particular car. Therefore, the calculation showed below highlights the Statutory Method as well as Operating Cost Method; Operating Cost Method: In contrast with the section 11 (1) the deemed depreciation is highlighted by employing he Statutory rate of 25%. In contrast with the section 11 (2) the considered deemed interest is calculated by employing the Statutory rate of 5.65% for the year 2016/17. As discussed in the figures for statutory method the assessable amount of the fringe benefit related to the car is lower than the operating cost method introduced. So as a result, the assessable value for the car fringe benefit under this method should be taken for calculating the tax. In addition to this, Charlie used the car as Shine Homes has hired that for providing him facilities while Charlies wedding as well as honeymoon. Therefore, in consideration with 39A of the Fringe Benefit Tax Assessment Act 1986 the car parking fringe benefit is originated if the car is parked at the premises that is owned or leased by Shine Homes. In the present scenario, Charlie used a separate entity for parking the car this does not result into the fringe benefit for the car. The current situation highlights that Alan is a locum doctor while his wife is a part time accountant. They decide to change tree by selling off their house in Melbourne and purchasing a new home in Central Victoria. Alan generates his income from the fees received by his patients while Betty earns income from her salaries. In compliance with the provision of section 6-5 of the ITAA 1997, income that are derived directly from the profession or business would be considered assessable. Similarly, the income of Alan and Betty would be considered for tax (Braverman et al., 2014). The situation from the case study provides that Alan is well known among his clients and Alan regularly from his patients receives foodstuffs and cakes that are regarded as the sign of gratitude. In addition to the foodstuff, Alan also charges fees from his clients for the treatment imparted. The receipt of fees from his clients would be subjected to income tax while the foodstuff and cakes cannot be considered assessable since these elements does not have any commercial value in the market. Once it was noticed that Alan received a dozen bottles of wine from one of his client as he saved his client dog from a snakebite. The wine bottles received by Alan carried market value of $360. Therefore, the receipt of wine by Alan from his client would be included into his taxable income because it contained commercial value and will be liable for income under the provision of section 6-5 of the ITAA 1997 (Hodgson Pearce, 2015). In accordance with the taxation ruling of TR 97/11, a determination is made whether the person is engaged in the activities of primary production or hobby. The ruling is helpful in providing an understanding of an individual indulgence in business or hobby (Black, 2017). To differentiate between hobby and business, the below listed differences provides a better understanding; Activities that comprises of the sale of goods commercial will be held as business. Hobby involves sale among friends and relatives. Business generally consists of repetition of activities. Hobby does not any such regularity or repetition of activities. Business activities generally comprises of purpose or intention while hobby does not have any such purpose or intention of executing business activities. The activities of business are generally big in magnitude. Hobby is generally small in extent and scale. The characteristics of an activity or the intent of an individual helps in ascertaining whether the person is carrying on a business or hobby. As held in the case of Ferguson v F C of Taxation (1979) amount derived from hobby is an income whereas yielding profit from those hobby is regarded as carrying on of a business (Kaplan Nadler, 2015). The case study introduces that Betty started making marmalade that became well known among her neighbours. This made her open a stall and put up her marmalade on sale during second Sunday of each month. Alan sold the additional or the leftover amount to the local supplier frequently. According to the decision of commissioner in Martin v. FC of T (1953), no form of sole actions would be capable of interpreting an exclusive indication and contained overlapping indicators (Miller Oats, 2016). In the current situation of Alan and Betty, the activities contained the purpose of profit and had regularity. As a result, the selling of marmalade is regarded as business activities and profit generated from such business would be considered for assessment of tax. As it has been defined by the ATO, any form of transactions that arises from the barter system shall be accompanying income tax consequences and GST. The transactions from the barter system will be treated equivalent to the transactions of cash and credit. It is noteworthy to denote that Subsection 25 (1) of the ITAA 1936 defines that earnings generated from the barter system would be accompanying tax consequences (Stiglitz, Rosengard, 2015). The federal court in the case of Federal Commissioner. Of T. v. Cooke Sherden 1980 stated that income that is earned from the barter system would be considered for assessment since they are considered equivalent to cash and credit dealings (Barkoczy, 2016). With reference to the above judgement, both Alan and Betty would be held liable for tax and GST under the GSTR 1999 for the earnings derived from barter system. The income from barter system is treated equivalent to the business dealings made in cash and credit. Reference List: Black, C. (2017). The Attribution of Profits to management Establishments: Testing the Interaction of Domestic Taxation Laws and Tax Treaties in Practice. Braverman, D., Marsden, S., Sadiq, K. (2015). Assessing Taxpayer Response to Legislative Changes: A Case Study of In-House Fringe Benefits Rules.J. Austl. Tax'n,17, 1. Du Preez, H. (2016).A construction of the fundamental principles of taxation(Doctoral dissertation, University of Pretoria). Hodgson, H., Pearce, P. (2015). TravelSmart or travel tax breaks: is the fringe benefits tax a barrier to active commuting in Australia? 1.eJournal of Tax Research,13(3), 819. Kabinga, M. (2015). Established principles of taxation.Tax justice poverty. Kaplan, R. 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