Calculation of Capital Gain Tax and Input Tax Credit under Australian Income Tax Assessment Act

Executive Summary
The whole of the topic has been analyzed in accordance with the Australian income tax
assessment act, taxation ruling and Australian taxation office law. The court decision is
also considered in this report. This assignment includes the brief introduction of goods
and service tax and capital gain and fringe benefit taxation. The question contains two
parts. The first part requires the knowledge of goods and service tax and the second
part requires knowledge of capital gain tax. The task in this assignment has been solved
by applying law, rules, and regulation of the Australian income tax assessment act.
While describing GST, it also discussed the following points:
(a) Thresh hold limit of entity’s business for mandatory registration of goods and
service tax.
(b) Eligibility to claim Input tax credit of goods and service tax paid
(c) Taxability of capital gains taxes in relation to shares, land, collectible and
personal consumption.
The learning outcome of the report helps to determine the correct calculation of capital
gain taxes and claims of credit in respect of payment of goods and service tax in
relation to purchasing of goods and service tax.
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Contents
Introduction 3
Discussion 3
Solution – 1 3
GST Provision applied on respective case and conclusion: 5
Solution – 2: 6
Tax treatment of capital gain income and also various techniques for calculation of capital
gains: 8
Application of law to the case: 12
Conclusion 14
References 14
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Introduction
The report discusses in detail the calculation of capital gain tax. It also describes the
exemption which can be claimed in respect of the sale of a capital asset. It also
discussed that the entity which has gross receipts of more than $75000 during the
financial year.
Eligibility of input tax credit is also discussed. The credit in respect of payment of goods
and services can be claimed only where there is a transaction between two registered
persons. The person making payment of GST can claim credit as input. The input of
GST can be utilized to set off liability or claim as a refund.
It requires the calculation of capital gain in respect of following capital assets such as
land, shares, and collectibles as well as personal assets.
Discussion
Solution – 1
The task discussed organization which is namely the City Sky Co. The given company
is currently involved in the business of making an investment for construction of the
building and also developing several residential properties for sale. The company is
engaged in selling such apartments for the purpose of residential houses. Being a
corporation, City Sky co. is required to take various legal and advisory services. The
City Sky Co. had also taken such service from one of the lawyers whose name is
Maurice Blackburn. It is also given in the question that gross receipts of such lawyer are
$300,000. As already discussed, the mandatory registration of entity, the entity having
more than $75,000 is required to take registration under GST. Accordingly, it is
assumed that Maurice Blackburn is registered under GST provision.
The Issue of this Case:
Whether credit can be claimed by City Sky Co. in respect of GST paid to lawyer Maurice
Blackburn?
In this task, the discussion is based on new legislation of GST Act 1999:
Every person who has gained more than $75000 turnover during the current year is
required to take registration under GST. Further provided in law that cancellation of
such registered will not be done within 12 months from the date on which registration
has been obtained (ATO, QC 22412).
In accordance with ATO Law and Section 11-5 of the Australian income tax assessment
act 1999, where a person provides goods or services in exchange for cash or kind for
providing such services in relation to business then such supplies are called taxable
supplies.
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