Capital Gains Tax on Vacant Land

Capital gains tax functions by the considering the taxable income during the tax year in which the asset is sold or else disposed to the taxpayer (Engelmann et al. 2017). If the individual taxpayer is the company, then in such a situation the company should pay 30% on the net amount of capital gains. If the person is the individual, the tax rate will be similar to that of the individual tax rate during the year.

Vacant Land:

The treatment of tax for the land and the profits from the sales of those land is in general reliant on whether it is treated as the capital asset or the matter of business or the business transactions. Capital gains tax is taken into the account as vacant land is the capital asset. Still, when the transactions of land are assumed as the element of the business activity, the sale proceeds of the land may be treated as the ordinary income and might be subjected to GST (Tanzi 2014). A capital gains tax liability will arise if a vacant land is acquired by the person. The vacant land sums up as the capital asset. But when an individual purchase the land to use it in the business or for making revenue then the person is dealing in the activity of land. The sale proceeds of the land are the ordinary income where the taxpayer will be compelled to register under the goods and service tax.

Selling the block of empty land at $320,000 amounts to capital gains tax. The cost base of the vacant land will be including the outlays that the taxpayer has reported throughout the time when the land was in possession of the taxpayer will be added with the purchase price. The capital gains from the empty land will be included for assessment purpose.

Antique Bed:

As per the “section 149-10 of the ITAA 1997” a pre-CGT asset that is owned by a person only when the person last purchased the asset before the 20 September 1985 (Mares and Queralt 2015). All the assets that is purchased since capital gains tax started on the September 1985 there will be the CGT unless it is specifically excluded. The example of the CGT is applied to the real estate, leases or goodwill, foreign currency, collectables as well as the personal usage assets that are further than the certain value.

When there is loss or destruction of the CGT asset there is a CGT event C1 under “SECT 104.20 of ITAA 1997” (Genovese, Scheve and Stasavage 2016). CGT event C1 happens if the CGT asset that a person owned is lost or destroyed. This event is generally applying to a portion of the CGT asset under the section 108-5 when the time of the event is;

1. When the person obtains the compensation for the loss or the destruction or;
2. If there is no compensation received following the discovery or destruction taking place.

A person makes the capital gains if the capital proceeds obtained from the loss or destruction of the assets is greater than the cost base of the assets. simultaneously, a person makes capital loss if the capital proceeds is lower than the reduced cost base of the assets (Ábrahám, Koehne and Pavoni 2016). The antique bed is the collectables that is beyond the certain value. A CGT event C1 happened when the compensation amounting to $11,000 for the loss of stolen antique bed was received.

Tax Implications of Antique Furniture Sales

Painting:

Capital gains or the capital loss for the pre-CGT asset must be ignored if the asset is purchased before 20 September 1985. “SECT 108.10 of ITAA 1997” states that at the time of working out the net capital gains or the net capital loss during the income year, capital loss from the collectables can be used to lower down the capital gains from the collectables (Kabatek, Van Soest and Stancanelli 2014). A CGT exemption is given to the leases, shares, improvements made to land that are bought or acquired before the 20 September 1985.

The painting here is the pre-CGT collectables that is purchased before the start of the capital gains tax. As a result, the taxpayer here will be exempted from the capital gains that is made because the asset is the Pre-CGT asset.

Shares:

The purpose of the “SECT 115.45 of the ITAA 1997” a CGT event happens when the shares are sold. A capital gain is not the discounted capital gains when the capital gains from the CGT event happens to the shares in the company or unit (Apps and Rees 2015). As per the “SECT 104.10 of the ITAA 1997” a CGT event A1 gives rise when the disposal of the asset results in the change in the ownership occurring to the taxpayer or to other entity. However, the change in ownership does not takes place when a person stops being the owner of the asset but remains the beneficial owner. A person can make the gains when the shares in the company are disposed or the interest in the trust that is purchased.

For the purpose of the “SECT 104.10 of the ITAA 1997” a CGT event C1 happened when the shares of the common bank ltd, iron ore ltd and share build ltd (Apps, Van Long and Rees 2014). These shares yielded capital gains to the taxpayer whereas the capital loss from the shares of young kids were made. The capital loss can be offset from the capital gains yielded from the above stated shares.

Violin:

In “SECT 118.10 of the ITAA 1997” a capital gains or the capital loss that is made from the collectables is overlooked if the first element of the cost base or the expenses relating to the depreciating asset is lesser than the $500. Any capital gains that they make from the assets that is used personally is overlooked and not taken into the considerations if the first element of the assets costs base or the first element of its cost base of the depreciating asset is $10,000 or below (Burton 2017). “Subsection 108-20 (1), ITAA 1997” clarifies the taxpayer that makes the capital loss from the personal use assets should be disregarded.

The violin is the personal use assets because the taxpayer used the violin for its personal enjoyment and usage. The cost of the violin is $5500 which is below the prescribed limit given in “SECT 118.10 ITAA 1997” (Pinto and Evans 2018). The capital gains that is yielded upon the disposal of the violin should be ignored because the violin is the personal use asset and there cannot be any kind of capital gains tax in this regard.  

Tax Treatment of Share Sales

Issues:

The central issue in the question relates to the tax payable by the employers for the benefits that is paid to the employee as the alternative to the salaries and wages. This issue of fringe benefit is regarded as separate to the income tax and the tax is calculated on the chargeable value of the fringe benefits.

Laws:

“SECT 7 of the Fringe benefit tax assessment act 1986” clarifies the car fringe benefit. “SECT 7 (1)” defines that the car benefits where during any time in the day in regard to the employee’s employment the car is held by the person provided by the employee. The car benefits are applicable relating to the private usage by the employee or the associate of the employee (Motro 2016). Under “SECT 7 (1) (b)” car benefits happen when the specific conditions are fulfilled.

This includes either the car provider is the employer or the car is made available under the arrangement amid the provider or the another person. It is notable that the associate of the employer or the employer of the employee provides the car during the day in regard to the employment, a car benefit would eventually arise under “SECT 7 (1)”. “SECT 9 of the FBTAA 1986” explains that the taxable value of the car benefit is calculated by using the statutory formula (Rogers and Weller 2014). While the taxpayer can use the “SECT 10 of the FBTAA 1986” to determine the assessable value of the car fringe benefit under the cost basis method.

“SECT 20” provides the description of expanse payment benefits under “FBTAA 1986”. Under this section where the person makes the payment in discharge either in whole or in part as the obligation of the other person to pay the expenses to the third party in regard to the expenditure occurred by the recipient (Cremer and Roeder 2018). The expense payment benefit is also regarded as the benefit when another person is reimbursed in whole or the part in relation to the sum of expenses that is occurred by the recipient.

The reimbursement of the expenses under this section will be taken to constitute the provision of benefit by the employer to the employee. “SECT 23 of the FBTAA 1986” defines that the chargeable value in regard to the year of taxation of the expenditure payment fringe benefit given the amount of payment that is referred is reimbursed by the provider (Bagger et al. 2018).

Where during any specific time when the car is held by the person that being the employer, associate of the employer or the person to whom the arrangement of the car is available at the garage of the employee then it would give rise to car benefits.

As per the “SECT 16 of the FBTAA 1986” where the person or the loan provider makes the loan to the recipient (Ono and Uchida 2018). The making of such loan will be constituting the benefit that is given by the provider to the recipient and that the benefit will be taken to have been provided in relation to every tax year. The loan amount may be provided as the whole or part of which the recipient is obligatory required to refund the either any or the portion of the loan. For the purpose of the this act the person is under the obligation of paying the amount to another person.

Tax Consequences of Selling a Musical Instrument

As per the “SECT 18 of the FBTAA 1986” there results in the taxable fringe benefit of the loan (Benczúr et al. 2014). Subject to this provision under “SECT 18 (1) of the FBTAA 1986” the loan fringe benefit rendered in relation to the year of taxation it represents the amount through which the notional sum of interest in relation to the notional amount of interest that is accrued for the loan during the year of tax.

Very generally, the car parking benefit might come into the existence during each of the day in which the provider of the car also gives the recipient with the space for parking that is exclusively for the use of the employee. Definitely, the car parking benefit will be arising in the fringe benefit year only under the below given conditions;

1. A car that is parked at the premises that is owned by the owner of the car or under the control of the provider generally not the employer.
2. Inside the radius of the one kilometre of the premises where the parking of the car is made at the commercial parking station that takes the fees for the full day parking.
3. The parking of the car is given to the employee when they are under the employment.
4. The employee uses the car given by the employer for traveling between the place of home and work for a minimum of once in a day.
5. The car is parked or leased at the primary place of the employment during the day.

Application:

The central issue of the case is here determining the fringe benefit tax for the Rapid Heat all through the FBT year. The benefit here in the current case provided to Jasmine holding employer employee relationship with the Rapid Heat Pty Ltd. Jasmine in regard to the employer employee relationship is provided with the fringe benefit during the year (Bernheim and Scheuer 2014). This includes the car that is solely provided to Jasmine in order to meet the work related travelling obligations.

The traveling or use of the car was not limited to the employment but it is also available for the private use. Using the car by Jasmine given by the Rapid Heat Pty resulted in the car benefit under “SECT 7 of the Fringe benefit tax assessment act 1986”. The car benefits are applicable for Rapid Heat for making the car available relating to the private usage of the employee (Seto 2017). Employing the “SECT 9 of the FBTAA 1986” the taxable value of the car benefit can be calculated by Rapid Heat by using the statutory formula.  

The events that were unfolded from the case study suggest that minor repairing expenses were occurred by Jasmine for the car. Referring to “SECT 20” the description of expense payment by Rapid Heat gave rise to the expense payment fringe benefit. The minor repairing expenses that has been reimbursed by the employer has given rise to the fringe benefit of expense payment for Rapid Heat (Boadway and Pestieau 2018). The expenses that was occurred was in the employee course of the employment which was eventually reimbursed therefore this give rise to the expense payment benefit.

There was the instance in the case where the employee Jasmine was out of the state and parked the car at the airport. The car was additionally parked for five additional days for the yearly repairs. In this aspect there was no car parking fringe benefit as the car was not parked at the premises that is owned by the owner of the car or under the control of the provider. The car was not within the radius of the one kilometre of the premises where the parking of the car is made (Ludwig and Krueger 2016). Therefore, there cannot be any car parking fringe benefit in this respect for Rapid Heat Pty Ltd.

Fringe Benefits Tax Considerations for a Company

The events that were occurred in the case study it is understood that the Rapid Heat gave Jasmine with the loan of $500,000. The interest of the loan was below the statutory rate of interest and as result of this there was the loan benefit of the Rapid Heat under the “SECT 16 of the FBTAA 1986”. The making of such loan by Rapid Heat will be constituting the benefit that is given by the provider to the recipient and that the benefit will be taken to have been provided in relation to every tax year (Boadway and Pestieau 2018). The taxable value of the loan benefit under the “SECT 18 of the FBTAA 1986” stating that the amount of difference that is presented in the notional interest rate from the actual rate of interest. The employer Rapid heat can consider opting for claiming income tax deductions for the benefit given to employee during the FBT year.

Preceding to the later events if it is found that the sum of $50,000 is used for purchasing the shares by Jasmine herself in its place lending the money to husband at interest free rate an eligible deduction on the interest on loan would be easily claimed by Jasmine under the general provision of “SECT 8.1, ITAA 1997”.

References:

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Apps, P. and Rees, R., 2015. Capital Income Taxation and Household Production.

Apps, P., Van Long, N. and Rees, R., 2014. Optimal piecewise linear income taxation. Journal of Public Economic Theory, 16(4), pp.523-545.

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Motro, S., 2016. The Income Tax Map: A Bird’s-eye View of Federal Income Taxation for Law Students.

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Tanzi, V., 2014. Inflation, indexation and interest income taxation. PSL Quarterly Review, 29(116).