Answer - 1 Capital gains tax a. in respect of family home

TAXATION LAW

Taxation
Answer – 1 Capital gains tax
a. Capital gain in respect of family home
The residents of Australia can claim tax exemption on capital gain earned from
the sale of the family home if only they have the ownership of that property
(Camp, 2019). In the given case, it can be seen that Jasmine is the owner of the
property and she has solely used the same for residential purposes only. Jasmine
has citizenship of United Kingdom and she moved to Australia long back. The
property was registered in her name and all her emails were received at this
particular address. Therefore, Jasmine qualifies all the requirements for availing
tax exemption on capital gain earned from the sale of her family home. The
residential property was purchased by Jasmine for $40,000 and the same was
sold at $650,000. This means that the residential property was sold at a capital
gain of $610,000 ($650,000-$40,000). The earnings from this residential property
cannot be taxed as Jasmine does not fall under the purview of CGT (capital gains
tax). Jasmine acquired and has been residing in this residential property since
1981, and as per the law, any property that is bought before 1985 will not fall
under the ambit of CGT.
CGT is levied in multiple countries. Even in Australia, the citizens have to pay
CGT on the capital gains earned by them from the disposal of an asset. Any asset
that has a worth of ten thousand dollars will fall under the ambit of CGT (Orem,
2019). Jasmine who is a resident of Australia is the owner of her property that
was purchased in 1981 has used this property solely for residential purposes.
Hence, all these details suggest that Jasmine is eligible to claim full CGT
exemption on the capital gain earned from the sale of her property used for
dwelling purposes (Manto, 2019).
b. The capital gain or loss made by the sale of the car
Assets like four-wheelers, motorbikes, residential property, machinery, etc that
are bought on or before September 20, 1985, is exempted from CGT. Jasmine
earned a capital loss amounting to $21,000 from the sale of her car. Jasmine will
not be liable to pay capital gains tax as there have not been any capital gains
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Taxation
earned from the sale of the car. Jasmine might have been liable to pay CGT if
there would have been any capital gains earned from the disposal of the car. It is
a known fact that capital loss can be absorbed by capital gains (Patnia, 2011).
This means that capital gains can only be used to set-off capital loss. Capital loss
earned from the disposal of long term capital assets can be set-off using long-
term capital gains. Capital loss earned from the disposal of short-term capital
assets can be set-off using both long-term capital gains and short-term capital
gains. This provision applies to all types of capital assets excluding shares.
c. The capital gain on the sale of the business
Capital gain earned from the sale of the business is partially exempted from
capital gains tax. A discount of 50 percent can be availed on the capital gain
earned from the sale of a business. Only organizations can claim this discount
and not individuals. Any individual who wishes to claim this discount shall be
over and above 55 years of age. Jasmine can claim this discount since she is 65
years old which is way higher than the required ceiling to qualify for the 50
percent exemption on capital gains that are earned from the sale of the business
(Brown, Ferguson & Sherry, 2010). As per all the calculation, it can be understood
that her business was started at least fifteen years ago as the same was
established soon after she shifted to Australia and when she shifted she was
almost nearing her retirement. The overall value of intangible and tangible assets
owned by Jasmine stands at $ 125,000. The capital gain earned by her amounts to
$50,000 and as she can claim 50% exemption on the same, therefore, her CGT is
$25,000.
d. The capital gain on selling the furniture
Assets used for personal purposes are called personal assets. Personal assets
that are worth $1,000 or anything lesser shall not be charged for CGT (Yardney,
2019). This means that the furniture owned by Jasmine shall be exempted from
the purview of capital gains tax. She can claim an exemption only on the value at
which the furniture is acquired. The furniture was purchased for $2,000 and the
same was sold at $5,000. This means that the furniture shall not fall under the
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