Capital Gains Tax Treatment on Sale of Assets by an Australian Resident

Question: 1
Jasmine is a resident of Australia, who is now planning to move to UK, Jasmine is
planning to sell off the assets owned by her in Australia, as she is retiring and would
go back to UK. Case to case treatment of each asset being sold off is as under:
A. Jasmine has sold the home, that was purchased in 1981 for $ 40,000
for $650,000. The home has been her main residence since she
purchased.
Home is a capital asset and attracts Capital Gains Tax (CGT), as per Sect
100.25 of Income tax assessment Act, 1997, whereas, Sect 100.30 provides
an exemption for the capital gain made on sale of home, that has been the
major residence. In the given case, the home that has been sold, was the
major residence for Jasmine, which she has been using for staying since the
purchase of house, hence, this transaction shall not attract a CGT, as per
Income Tax Assessment Act, 1997 (SECT 100.30, Income Tax Assessment
Act. (1997),
http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/
s100.30.html).
Sect 100.25 of Income Tax Assessment Act, 1997 provides that the assets,
which otherwise gets classified as capital asset but were purchased prior to
1981, shall not be liable to Capital Gains Tax. It was implemented to give
one-time relief to individuals who owned the asset prior to the
implementation of Income tax law in Australia. Further, the house was
purchased in the year 1981, i.e. before 20 September 1985, and hence, it is
exempt, as per sect 100.25 of Income Tax Assessment Act, 1997 (SECT
100.25, Income Tax Assessment Act. (1997),
http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/
s100.30.html).
Thus, gain of $ 610,000, i.e. (650,000 – 40,000) on sale of home shall not be
taxable in the hands of Jasmine. Had there been a capital loss in the
transaction, same would also not have been allowed to be deducted from the
capital gains earned otherwise.
B. Sale of car purchased for $ 31,000 in the year 2011:
Sect 100.30 of the Income Tax Assessment Act, 1997 provides exemption for
four categories of assets, such as:
- Exempt assets, such as cars, etc
- Loss denying transactions, such as compensation for tenancy, injury, etc.

- Small business relief
- Anti-overlap provision, i.e. not taxing an income twice, in case it falls in
more than one category.
Since, car is an exempt asset, the loss of $ 21,000, i.e. $ (31,000-10,000)
shall not be allowed to be deducted from the overall capital gains of Jasmine.
Had there been a gain on this transaction, same would also not have been
taxable in the hands of Jasmine.
C. Sale of “Small cleaning business”, which Jasmine commenced
herself, for $ 125,000 which includes $ 65,000 for business
equipment and $ 60,000 for goodwill:
As per sub-division 152D of Income Tax Assessment Act, 1997, in case of
retirement, beyond the age of 55, Capital Gains arising out of sale of small
business is exempt to the extent of $ 500,000 in the lifetime of an individual.
The gain of $ 500,000 could be claimed as an exemption in one transaction
or combined together in multiple transactions.
In the given case, Jasmine is 65 years old and has a small cleaning business,
that she did setup by her own and can be categorized as small business. She
has received the following amount and has earned/incurred respective
gains/losses:
Sale of equipment - $ 65,000 – Loss - $ 10,000 ($75,000-65,000)
Goodwill - $ 60,000 – Gain – $60,000
Thus, Jasmine has earned a net gain of $ 50,000 from sale of small business
and in the absence of any information in relation to her past gains from sale
of small business, it can be safely assumed that there were no such gains in
the past. Hence, although the amount of gain of $ 50,000 falls under the
purview of capital gains tax, since the amount is within the lifetime threshold
of $ 500,000 set by sub-division 152D of Income Tax Assessment Act, 1997,
the tax liability on this transaction would be Nil (SECT 152D, Income Tax
Assessment Act. (1997),
http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/
s100.30.html).
D. Sale of furniture for $ 5,000, wherein, no single item offered for sale
costs more than $ 2,000:

As per the exemption list given in Sect 100.30 of Income Tax Assessment Act,
1997, the assets purchased for personal use and costing less than $ 10,000
shall not be liable to Capital Gains Tax under the Act.
And in the given case, Jasmine is selling the furniture purchased for personal
use, and the cost of none of the items individually exceed $ 2,000, hence
these items are covered in the exemption list and thus, the amount of gain or
loss that Jasmine has incurred on the transaction would not be taxable.
E. Sale of paintings for $ 35,000, all except one of these paintings were
purchased for less than $ 500 individually, whereas, only one
painting was purchased for $ 1,000 and that is being sold for $
5,000.
As per the exemption list given in Sect 100.30 of Income Tax Assessment Act,
1997, the collectables acquired for $ 500 or less shall not be chargeable to
Capital Gains Tax.
In the given case, Jasmine has purchased all the paintings except one, for
less than $ 500 each, i.e. capital gain/(loss) arising on these paintings shall
not be chargeable/deductible under Income Tax Assessment Act, 1997.
Whereas, one painting which was purchased for $1,000 and is sold for $
5,000 shall result in a taxable income of $ 4,000, i.e. $ (5,000-1,000).
Thus, considering the explanations and relevant statues explained above, the
amount chargeable to capital gain tax on transactions undertaken by Jasmine shall
be as under:
Transaction
(brief)
Amount of gain/(loss) Gain/(loss)
taxable/deductible
Sale of home 610,000 0
Sale of car 21,000 0
Sale of small
business
50,000 0
Furniture 5,000 0
Paintings 35,000 4,000