Taxation Law: Capital Gains Tax and Fringe Benefit Tax Liability

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to Question 2:................................................................................................................5
Answer to question 2 B:...........................................................................................................10
References:...............................................................................................................................11

2TAXATION LAW
Answer to question 1:
Introduction:
As stated in “section 102-20, ITAA 1997” capital gains or loss only happens due to
the CGT event. Referring to “section 104-10 (1), ITAA 1997” CGT event A1 happens when
the when the asset is disposed (Stiglitz and Rosengard 2015). The commissioner of taxation
in “FC of T v Sara Lee Household” expressed its opinion by stating that CGT event is
necessary when a contract is entered into by the taxpayer. Capital gains tax cannot be
regarded as the separate system of taxation, instead it forms the part of the income tax
regimes of the taxpayer.
Answer to A: Sale of Vacant Land:
Vacant land that is purchased by the taxpayer for the private or investment propose is
treated as the capital asset and will attract capital gains tax upon the disposal of vacant land
(Becker, Reimer and Rust 2015). The evidences suggest from the present situation that an
agreement was reached by the taxpayer for disposal of vacant land. The cost base of land was
$100,000 with other expenses such as water, council rate etc. was incurred by the taxpayer
that amounted to $20,000.
The interpretative view of ATO makes it clear that vacant land is treated is similar to
any other capital asset for CGT purpose. According to the ATO the holders of vacant land
should maintain the record of date when the land was acquired and expenses incurred while
acquiring the land (Faccio and Xu 2015). The expenses include the council rates and
insurance on loan. Case facts obtained reveals that outlays on water, local council rates and
land taxes were incurred during the period of ownership. The ATO does not allows claiming
deductions for such expenses however they can be added up with the cost base of vacant land
to determine the CGT while disposing the land.

3TAXATION LAW
Answer to B: Antique Bed:
The explanation of collectables is given under “section 108-10(2) of the ITAA
1997”. As per “section 108-10(2), ITAA 1997” collectables refers to the artwork, jewellery,
antiques or coin that are kept by the taxpayer for their own use and satisfaction. There are
certain rules that is applicable on collectables (Tan, Braithwaite and Reinhart 2016). Capital
gains and losses made from collectables that costs less than $500 will be excluded. The case
study provides that the taxpayer held an antique bed but the antique bed was stole from the
house of taxpayer. In the insurance list the antique bed did not formed the part of the taxpayer
specified items which resulted the insurance company in paying the taxpayer a sum of
$11,000.
CGT event C1 takes place under “section 104-20(1), ITAA 1997” when the asset is
lost or destroyed that is owned to the taxpayer (Snape and De Souza 2016). Receipt of
compensation from such asset give rise to CGT event C1. Similarly the compensation
received by the taxpayer from the insurance company relating to the loss of antique bed gave
rise to CGT event C1.
Answer to C: Painting
Capital gains tax is usually applied on the assets that is acquired or on after 20
September 1985. It is worth mentioning that Pre-CGT and Post CGT is generally used to
refer the assets that is obtained or events that taking place before or after that date (Robin
2017). For an individual taxpayer it is necessary to work out the capital proceeds from the
CGT events. The primary step of ascertaining whether the transaction will attract CGT is to
ascertain the whether the CGT event has taken place.