(PDF) Fundamental principle of taxation

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Running Head: TAXATIONTaxationName of the Student:Name of the University:Authors Note:
TAXATION2Table of ContentsAnswer to part 1:.............................................................................................................................3Answer to part 2:.............................................................................................................................7Answer to part 3:.............................................................................................................................9References:....................................................................................................................................12
TAXATION3Answer to part 1:TheDivision 100 of the Income tax Assessment Act 1997provides a guide to the capitalor losses.The section 100-35 of the Income tax Assessment Act 1997provides that a capitalgain is made if the amount received from the CGT event is more than the cost associated withthat CGT event and if it is vice versa then it is capital loss. That means on selling a capital asset,real estate, shares or other such assets, a person, whether an individual or an organization withseparate legal identity, generally makes a gain or loss; these are termed as capital gain or capitalloss of such person. The difference between the cost of the asset that the person has incurred toacquire it and the amount that the person has received from the disposal of such asset is eithercapital gain or capital loss1. When the amount received from the disposal of a capital asset ismore than the cost incurred on acquiring such asset then the resultant will be capital gain.However, in case the cost incurred in acquiring the asset is more than the amount received ondisposal of such asset then the resultant will be capital loss.TheSection 6-5 of Income Tax Assessment Act, 1997, provides the meaning of theordinary income. It states that income according to ordinary concept should be treated asordinary income. On the other hand, thesection 6-10 of the Income Tax Assessment Act 1997states that income that is not an ordinary income is a statutory income2. The section 6-25(2) ofthe Income tax Assessment Act 1997 states that if an income is caught between ordinary andstatutory income then the specific provision shall apply. Therefore, in accordance with the1Barkoczy, Stephen. "Core Tax Legislation and Study Guide."OUP Catalogue(2017).2Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not knowing your deduction fromyour offset." (2016).
TAXATION4section 102-5 of the Income tax Assessment Act 1997it can be said that the capital gain shouldbe included in the assessable income as statutory income.TheSection 25-10 of ITAAprovides that one can deduct expenditures incurred on repairand maintenance on a depreciating asset only if such asset has sole been used to generate or toproduce assessable income. Thus, in case the sole purpose of the depreciating asset includesanything else apart from using it for generation and production of assessable income then thewhole expenditures incurred on repair and maintenance of the asset would not be allowed asdeduction for computation of assessable income of the taxpayer concern3. According to sub-section, 2 of this section (25-10 of ITAA) in case the property was party used for incomegeneration and party used for other purposes then proportionate amount of such expendituresshall be allowed as deduction for computation of such assessable income. No capital expenditureshall be allowed as deduction in computation of assessable income provided in subsection 3 ofsection 25-10 of ITAA.In determining the capital gain the concept of first element costs has to be worked out inrelation to a depreciating asset in accordance with the provision ofsection 40-180 of ITAA.According to the provision of this section the first element is,(a)The amount specified in an item; or(b)The amount that has been paid by the existing owner to hold the asset4.3Mintrom, Michael, and Joannah Luetjens. "Design Thinking in Policymaking Processes: Opportunities andChallenges."Australian Journal of Public Administration75, no. 3 (2016): 391-402.4Kellow, Aynsley, and Marian Simms. "Policy change and industry associability: The Australian miningsector."Australian Journal of Public Administration72, no. 1 (2013): 41-54.
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