Understanding Input Tax Credit and Capital Gains Tax in Australia

STUDENT DETAILS:
TAXATATION LAW
Running head: TAXATION LAW 0

QUESTIONS 1
Answer 1:
The input tax credit is considered as GST credit. This is a credit that may claim for the amount
of GST involved in a price related to services and goods (input) one purchase for utilisation in
the business. It is essentially required to be registered for GST to claim the input tax credit. It is
credit, which one can claim for amount of GST included in a price related to input service and
service and one may buy for using in the business. Following conditions are required to be
fulfilled by the suppliers of the goods and services -
1. The ITC may be claimed only in case when it is registered for GST.
2. It is required to have debit note or tax invoice rendered by the supplier of the services
along with input services.
3. Not everything would have Goods and Service tax involved in a price, for instance if one
will purchase fresh vegetables for the utilisation in restaurant, then it will be sales free of
Goods and service tax.
4. In case of purchasing the item for the purpose of business as well as individual purpose,
then it is only allowed to claim the ITC for a part of business.
5. It is required to keep the tax invoice for purchases that cost above 82.50 $ (involving
Goods and Service tax credit)

QUESTIONS 2
6. It is not possible to claim the input tax credit on item that is purchased for making the
input tax sales. For instance, in a case when someone rents out residential sites, then it is
not possible to claim the credit on maintenance and repairs (Adam, Miller and Pope,
2017).
In a provided case study, City Sky Co will have eligibility to avail the input tax credit wherever
this is applicable. For the reason that City Sky Co is registered organisation. The corporation has
purchased portion of vacant land at south of Brisbane. At this portion of vacant land at south of
Brisbane, the company is making plan to build the apartments to sell. The portion of vacant land
covers in the category of immovable property. Therefore, the land does not cover under goods
and services. Therefore, the Goods and Service tax cannot be levied at land. The capital gain tax
is applicable at vacant land for the reason is that it is covered into capital asset. Hereafter, the
Good and Service tax may not be levied on vacant land. In this way, City Sky Co desires to
construct the apartments on vacant land, and then it will cover under the black credit’s provision.
Hence, the ITC is not entitled for it. In addition, City Sky Co has undertaken development
service worth thirty three thousand dollars from the local advocate. Advocates have certain
privileges of not to pay Goods and Service Tax on the outputs supply, when the tax on the
supplies has to be provided by the receiver in the Reverse charge Method. The services provided
by the lawyers are covered under the reverse charge method. The reverse charge mechanism is
considered as mechanism in which services and good’s recipient is liable to make the payment of
Goods and Service Tax. The supplier of the services and goods is not liable for paying Goods
and Services tax in the reverse charge system. According to the reverse charge system’s
provisions, the GST is required to be paid by the products and service's providers. In this way, in
a case when someone is recipient of the goods along with services under the reverse charge

QUESTIONS 3
mechanism, in that case it is essential for remitting only the purchase amount to the suppliers
(Babbel, Pronobis and Hundsdoerfer, 2018).
As per the provision of the GST, the recipient of goods and services is required to the deposit tax
in a direct manner with the relevant tax authority. The taxation collection is aimed at reducing
the taxation evasion majorly from the unorganised sectors. Additionally, in a case when the
person is a recipient as well as he or she is eligible to make payment of tax in the reverse charge
system, then it will be possible to claim the input tax credit for payment of tax. Moreover, it can
be claimed only if the goods and services would be helpful for business. The individuals, who
are needed to pay the tax as per reverse charge mechanism, have to forcibly register under GST.
In this way, it is required by the reverse charge mechanism that the registered recipients of the
services and goods should remit the tax to taxation authorities in a direct way if buying the
particular listed goods and services, or performing with unregistered dealer. Subsequently, the
company is Development organisation, in that case the services of lawyers are used for a purpose
of business only, hence this is eligible for ITC of GST paid on the services availed by the
advocate, Maurice Blackburn. Additionally, the revenues of the advocate is stated in the
question; however, it is not important for the company for claiming the input tax credit on the
development service. As per the above analysis, it can be concluded that City Sky Co can have
the ITC for the tax paid on services availed from advocates for development services (Chow and
Wang, 2017).