Outbound Investment Tax Issues In Australia â€Myassignmenthelp.Com

Question: Discuss About The Outbound Investment Tax Issues In Australia? Answer: Introducation As per the ATO (Australian Taxation Office, the FBT (Fringe benefit tax) is the tax that is paid by the employers on payment of few benefits that they offer to the employees. it includes the family of the employees and other associates. These benefits are paid as additional to or as part of the employees wages or salaries. For instance, the benefits received by the director of a trust or company will be subject to FBT. The treatment of FBT is different from the income tax and the FBT is computed on taxable value of fringe benefit that is provided (Dunne, Mason and Patto 2014). Person liable to pay for FBT Any person or employer who offers any fringe benefit to his employee or the associate of the employee with respect to his employment is required to pay for FBT. The employee for whom the employer is required paying the FBT may be the past, present or future employee or the director of the trust or company. Further, the person will be liable to pay FBT even if benefit is delivered to the associate of his employee or by any third party under the agreement with the person (Boccabella 2015). Loan benefit The situation of loan fringe benefit takes place while the employer provide the loan to any employee with zero interest rate or with minimal interest rate that is lower as compared to statutory interest rate. However, the term loan is quite large, for instance, when an employee owes an amount of debt to the employer but the employer does not enforce the payment while the debt become due, the amount remain unpaid will be treated as loan or where the loan is made to the employee that allows payment of interest that is less than six month frequent, the unpaid amount will be treated as separate loan at the end of every six month with zero interest rate (Somers and Eynaud 2015). Computation of Fringe benefit tax for Brian As per TR 93/6 taxation ruling, any person can avail the benefit of tax offsetting on on the interest payment of loan taken from various banks or financial institutions. Further, as per the ruling the taxpayer is not required to have profits from any other sources to make such payments. Therefore, if the bank facilitates Brian with the interest payment option at year closing, he will not be liable for payment of interest to bank. Further, if bank releases Brian from interest repayment, he will not be liable to pay tax. As per the case study of MC. Donald Vs FC of T, it was held that for the stated property Mr. Mc Donald was entitled to 25% of profit and Mrs. Mc. Donald was entitled to 75% of profit. However, in case of loss, the entire loss will be borne by Mr. Mc Donald. The main issue in the case was whether the operating loss shall be shared as per the agreement or it shall be shared in equal proportion. After the occurring of loss, the taxpayer claimed that the loss will entirely borne by Mr. Mc. Donald as per the agreement (Gordon 2016). However, the ATO contended that in the 1st place there were no partnership as per the general law and the relevant relation that was existed in the agreement was of the nature of co-ownership. The reason behind that was as per the law the tenants were joint and were in equity, the occurring of loss through letting out the properties shall be equally shared with respect to the consequence that the respondent will be allowed for only half of the loss (Edmonds an d Raghavan 2017). Finally, the private arrangement between the partners regarding sharing of profits or losses will not over-ride or change the respective entitlements under the income tax. Therefore, as per the principal establishment of Mc. Donald case Jack will be able to deduction for only half of the total loss that is ($ 10,000*50%) = $ 5,000. Thus, Jill and Jack are required to share loss amounted to $ 10,000 equally. Further, on selling instance, any arising capital loss or capital gain will be shared by Jill and Jack personally and the partnership level here will not be considered. Moreover, the capital gain, if any, will not be added to net income of partnership. However, that will be included to the income of each partner to the level of interest in the property. The case of IRC v Duke of Westminster (1936) based on the case of tax avoidance. As per the case, one gardener was employed by the dyke, who was paid from the post-tax income of Duke. However, for the purpose of tax chargeability, he stopped paying the gardener rather prepared another agreement for paying him the same amount. As per the taxation ruling, this enables Duke to claim deduction from his taxable income that reduced his income tax liability (Freedman 2016). However, this case state that each person is entitled to plan his tax as per his preference or requirement and no person can be enforced to pay higher amount of tax. The relevance of the case in Australia states that any person has the choice of transaction for through which the taxpayer achieves the benefit of the asset is the matter of him; he will be entitled to select that option of the transaction that will be subject to the tax or subject to less tax as compared to others (Evans 2015). As per the fact of the case Stanton v FCT (1955), the taxpayer was a grazier and he had some balance of timber with him. He entered into the agreement with saw miller who agreed for paying him lump sum on the basis of the timber amount that was standing in the land. However, amount was quarterly payable and independently became due irrespective of the fact that the timber was removed and cut or not. However, as per the courts verdict the taxpayer was not assessable on the payment as it was not the payment for royalty. However, if the case of Mc Cauley v FCT (1944) is taken into consideration, it was stated that the grazier was dealing with the timber for lump sum amount and it was just a matter to him irrespective of the fact that the purchaser came or cut it or not. However, the payment was with regard to the right for cutting g the timber and based on the time they wre engaged to do it (Wallace, Hart and Evans 2013). From the discussion of above two cases it is identified that the case of Mc Cauley v FCT (1944) will be applicable to Bill as the right for cutting the timber is the proprietary right as the lands owner. Further, the payment was not for timber rather it was for the right of cutting and removing the timber. The case of Stanton v FCT (1955) will not be applicable here as the word payment is expressed under this case as the amount of payment shall be calculated based on the value or quantity upon which rights are exercised. Therefore, taking into consideration the outcomes of the above cases, it is concluded that in 1st case the received amount of Bill will be taxable under income tax. However, in the 2nd case the received amount of Bill will be considered as royalty. Reference Boccabella, D., 2015. Reconciling the Overlap of Charging Provisions in Regard to Non-Cash Benefits from Employment, Personal Exertion and Business.J. Austl. Tax'n,17, p.85. Dunne, J., Mason, J. and Patto, J., 2014. 2013 cases show high ATO success rate.Taxation in Australia,48(8), p.429. Edmonds, M. and Raghavan, R., 2017. Outbound investment tax issues.Taxation in Australia,52(3), p.162. Evans, S., 2015. It's' Clean Hands' Again: The Dirtiness of Not Paying Tax Considered in the Supreme Court. Freedman, J., 2016. General Anti-Avoidance Rules (GAARs)A Key Element of Tax Systems in the Post-BEPS Tax World? The UK GAAR. Gordon, R., 2016. Increasing use of tax-transparent entities by private groups due to BEPS.Tax Specialist,19(4), p.136. Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO's proposed treatment of unpaid present entitlements: Part 1.Taxation in Australia,50(2), p.90. Wallace, M., Hart, G. and Evans, C., 2013. An evaluation of the contribution of Justice Hill to the provisions for the taxing of capital gains in Australia.Austl. Tax F.,28, p.123.