Taxation Law Answer 2022

TAXATION LAW

Answer 1.
Capital gain tax
A) Capital gain in relation to the family home.
Jasmine is a resident of Australia and is planning to sell her residential property because she
is retiring from her business. The property that she owned was for residential purpose as she
stayed in it. There are various conditions that have to be met if she wants to claim for
exemption (Paul, 2014). Jasmine’s residential property was sold for $650000 and the
purchase price for this property would be equal to $40000. If she was not able to avail full
exemption then she may avail a discount of 50%. The capital gain after availing discount
amounts to 50% of $(650000-40000) = $305000. Also, the alternative method is the
indexation of cost method. In this method, the costs increases and the capital gain decreases
as a result of this.
A provision of capital gain tax says that any property than has been acquired before 20th
September,1985 shall be exempted from paying the capital gain tax (Girard, 2014). So, there
is no capital loss/gain from the property that is sold by Jasmine.
B) Capital gain/loss made from car.
In this case, there will be a capital loss because the purchase consideration is more than the
selling consideration. Capital loss is $21000 because the purchase price is equal to $31000
and the sales price is $10000.
Car is also one of the assets that is fully exempted if it has been acquired before 20 th
September, 1985. The car was purchased by Jasmine in the year 2011 and so this provision
does not apply here. A capital loss can be booked only when there arises a capital gain from
any other asset. Since, there are no capital gains the capital loss will also be not taken into
consideration. Also, if there is a capital gain from asset which has been held for 36 months
then a capital loss can be booked if such loss arises from a long term asset only . The capital
loss arising from the sale of short term capital asset can be set off with long term as well as
short term capital gains (Pratt, 2009).