Taxation Theory, Practice and Law: Capital Gains Taxation Provisions and Fringe Benefits Tax

TAXATION THEORY, PRACTICE AND
LAW

Table of Contents
Question 1..................................................................................................................................2
Capital gain taxation provisions.............................................................................................2
Statement presenting net capital gain or net capital loss for the year ended on 30th June of
current tax year.......................................................................................................................6
Question 2..................................................................................................................................7
(a)...........................................................................................................................................7
(b)...........................................................................................................................................9
References................................................................................................................................11

QUESTION 1
Capital gains taxation provisions
The general and specific provision relating to the evaluation of capital gain tax liability is
provided in Section 100 to 149 of ITAA97. According to section 102-5 (1) of ITAA97 capital
gains are computable as statutory revenue and is treated as part of assessable income. Further,
section 104-10 CGT event applies when the asset is procured subsequent to 19/9/85 and
should have been transferred to another person. On the other hand, if the asset is not vented
although ownership will transform even than the provision of CGT will be used. Moreover,
the capital gain is determined if capital proceeds are more than the cost of assets. At the same
time, the capital loss is assessed if it is less than the cost of the asset.
Further, any type of property or legal right which is not a property will be regarded as an
asset for CGT purpose as per section 108.5 (1). In addition to this, rights regarding individual
service and the right to bring an action for personal service grievances are not considered to
be an asset for CGT purpose (Faccio and Xu, 2015).
Applicability
CGT functions through treating net capital gains like a taxable income in the tax year under
which an asset is vended or predisposed of. Further, it is to be considered that if an asset is
held for a minimum period of 1 year than any gain on it will be firstly discounted on 50% for
entity taxpayers, for superannuation funds by 33%. Moreover, capital losses could be
compensating against capital gains. Net capital losses in a tax year could not be compensated
against normal income but might be conceded further indefinitely.
Note: 1 Block of Land
Capital Gain on Sale of Block of Land
Selling price of asset $320000
Cost of asset (Working Note 1) $120000
Capital gain $200000
Cost of asset
Purchase Cost $100000

Cost incurred in local council $20000
Total $120000
As per above specified provisions even though the total amount of sales consideration has not
been received but the ownership has transferred in current year, thus the capital gain will be
taxed in present year only.
Note: 2 Antique Bed
Capital Gain on Sale of Antique Bed
Selling price of asset $0.00
Cost of antique bed $5000
Compensation Received $11000
Capital Gain $6000
Cost of acquisition of Antique Bed
Purchase cost $3500
Alteration Cost $1500
Total Cost $5000
Taxation provision relating to a scenario in which an asset is lost or destroyed has been
specified in section 24 of ITAA 97. The provision asserts that in case an asset is lost or
destroyed than same will be deemed to be the disposal of an asset (Jacob and Jacob, 2013).
However, the fact that compensation relating to same has been received or not will not
change the core of the provision that asset is required to be deemed to be treated as
disposable. Moreover, the compensation which has been received will be reduced from the
capital loss if any occurred.
Note: 3 Painting
Capital Gain on Sale of Painting
Selling price of painting $125000