Taxation Law: Capital Gains Tax and Fringe Benefits Taxation

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Introduction:...............................................................................................................................2
Answer to question 1:.................................................................................................................2
Answer A: Block of Vacant Land:.........................................................................................2
Answer B: Sale of Antique Bed:............................................................................................3
Answer C: Painting:...............................................................................................................3
Answer D: Shares:..................................................................................................................4
Answer E: Violin:..................................................................................................................4
Answer to Question 2:................................................................................................................7
Answer to question 2 A:.............................................................................................................7
Answer A:..............................................................................................................................7
Issues:.....................................................................................................................................7
Laws:......................................................................................................................................7
Applications:..........................................................................................................................9
Conclusion:..........................................................................................................................11
Answer to 2 B:.....................................................................................................................11
References:...............................................................................................................................12

2TAXATION LAW
Introduction:
The concept of capital gains tax is applied to the asset that are acquired or other event
taking place on or after the September 1985. Consequently, the terms of the pre-CGT and
post-CGT is commonly used to refer the assets that is purchased or events that take place
after the CGT event date (Seto 2015). The system of capital gains tax is applied on the system
on the disposal of the assets or from any other specified events.
Answer to question 1:
Answer A: Block of Vacant Land:
If an individual taxpayer has obtained the vacant land to use for the private purpose or
for the investment the land is generally regarded as the capital asset that will be subjected to
the capital gain tax when the land is sold by the taxpayer (Hoffman et al. 2014). As stated by
the Australian taxation office vacant land that is held by the taxpayer as the capital asset and
will be treated similar to any other asset for the purpose of capital gains. The taxpayer is
under the obligation of preserving the records of the date and costs for obtaining the land and
their ongoing expenses particularly the council rates and the interest on loan (Burns and
Ziliak 2017). The expenses however cannot be claimed as the income tax deductions but will
be included in the cost base of the land while computing the capital gains or capital loss when
the land is sold.
In the current case the taxpayer contracted to sell the vacant block of land for a sum of
$320,000. The taxpayer also reported outgoings on local council, water, sewerage rates and
land tax during the period of ownership of the land. The CGT event A1 happened under
“section 104-10 (1)” when the taxpayer sold the land (Stiglitz and Rosengard 2015). The
taxpayer under “section 102-5, ITAA 1997” will be required to include the net sum of capital
gains in their taxable income.

3TAXATION LAW
Answer B: Sale of Antique Bed:
Under subdivision 108-B collectable definition has been provided. Under section 108-
10 (2) a collectable is anything that is mainly used by the taxpayer and their associate for
their personal enjoyment and use (Becker, Reimer and Rust 2015). “Section 118-10 (1),
ITAA 1997” defines that collectables with the purchase value of $500 or less will be
exempted from the provision of CGT.
Present instances from the case derived suggest that the antique bed was stolen from
the premises of the taxpayer. It was later found that antique bed was not the part of the
taxpayer’s list of specified matters in the policy of insurance.
Additionally, under “section 104-25 (1)” when the asset is destroyed or damage a
CGT event C1 takes place (Auerbach and Hassett 2015). The receipt of compensation in the
current case for the stolen bed give rise to CGT event C1 since the compensation received
was for the lost asset.
Answer C: Painting:
Usually the functions of CGT operates prospectively and it is applicable if the CGT
event takes place for the assets that are purchased on after the 20-9-1985. For majority of the
CGT events, there are exceptions given the CGT asset is acquired before 20/09/2018
(Godber, Thornton and Stewart 2017). Therefore, an asset that is purchased before the CGT
event is introduced are usually held as the exempted CGT asset.
As evident in the current situation it is noticed that the painting was acquired by the
taxpayer on 2nd May 1985. The taxpayer sold the painting in the current tax year for
$125,000. As the asset was acquired before the introduction of CGT or before 20/09/1985
therefore, the asset will be considered as the pre-CGT asset that is exempted from the CGT
event.