Assignment On Income Tax Liability

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................6
References:...............................................................................................................................11

TAXATION LAW2
Answer to question 1:
Sale of home:
The income tax liability of an individual usually takes into account the net capital
gains. On 20 sept 1985 the CGT began and carries the capital receipts in the tax base. Only
those assets that are purchased after this date is included into the tax base while the assets that
are purchased before this is not included in the tax base (Spence 2016). The purchased before
20/9/1985 is called as Pre-CGT asset and commonly it is exempted from tax.
Jasmine is selling the home in which she lived. She purchased the home in 1981 by
paying $40,000. But she is selling tit for $650,000. So it can be said that Jasmine’s home is a
pre-CGT asset because Jasmine has purchased in 1981 which is before the commencement of
CGT rule in 20/9/1985. The capital gains is exempted from the main home as the asset is a
pre-CGT asset and no tax is payable in this situation by Jasmine.
Sale of car:
Well-defined as one of the asset, under “sec 108.20 (2)”, personal use asset that is
kept or used for private purpose includes the TV at home, private use mobile phone, private
use vehicle or a bicycle (Steyn et al. 2018). When there is a capital loss suffered from sale of
personal asset it is omitted in “s.108.20 (1)”. Jasmine here acquired a car at a cost of $31,000
in 2011. Accordingly, within “s.108.20 (2)”, car is a personal use asset.

TAXATION LAW3
The calculation here portrays that Jasmine within “sec.108.20 (1)” should disregard
the loss from car no matter whatever the price she has paid for acquiring it since capital loss
from personal asset is omitted in this provision.
Sale of cleaning business:
Four types of CGT concession might be considered available for the small business
when there is a disposal of the business assets (Stewart 2017). The concessions are;
 The 15-year exemption for those assets that are held under ownership for 15 years
 The 50 per cent reduction following the access of the 50% discount given the taxpayer
is considered eligible (Lignier and Evans 2014).
 The retirement concession as it helps the taxpayer in ignoring the capital gains till
$500,000 if the profits are utilized in connection with the retirement of taxpayer.
 The rollover relief deferring the capital gains on the active asset if the acquisition of
replacement asset is made.
The above given four concession is only allowed when the business has the turnover
of not more than $2 million or alternatively the assets in the business does not exceeds the net
value of $6 million (Freedman 2013). The taxpayer must note that the concession relating to
the small business entity is only available when the assets in the business is an active assets.