Taxation Law Question Answer 2023

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:.................................................................................................................5
References:...............................................................................................................................10

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Answer to question 1:
Response A: Sale of main house:
The most common aspect of the CGT is that it is applicable on the assets that a
taxpayer has bought on or following 20/9/1985. While an exemption has been provided to the
taxpayer under “sec 104-10 (5) (a)” that assets which is purchased preceding the date of
20/9/1985 does not attracts tax liability (Dixon and Nassios 2016). These are called as pre-
CGT assets and falls out of the purview of CGT. There was an instance where Jasmine is
found to be selling her main house in the present tax year. The house was purchased by her
for $40,000 in 1981 and when Jasmine sold it fetched $650,000. The transaction clearly
shows that a capital gains has been made by her when the house was sold. However, the
house is falling under the pre-CGT asset because it was acquired in 1981 which is earlier to
the implementation of CGT regimes. Denoting “sec 104-10 (5) (a)” the capital gains are
exempted for Jasmine and no tax liability arises.
Response B: Sale of Car:
With respect to the “sec 108-20 (2)” the taxpayers should denote that the personal use
asset amounts to boats, electrical items, furniture, vehicles that is held by them for private
purpose and enjoyment (Burkhauser, Hahn and Wilkins 2015). Despite the fact “sec 108-20
(1)” requires the taxpayer to simply disregard the capital loss suffered from the personal use
asset. The liability to impose tax arises when the “CGT event A1” under “sec 104-10, ITA
Act 1997” happens.
In continuance of Jasmine’s case facts, a car that she held from 2011 was sold in the
present year for $10,000. The car was actually purchased for $31,000. Citing “sec 108-20
(2)”, the car is a personal use asset and its sale has given rise to “CGT event A1” under “sec

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104-10, ITA Act 1997” (Grudnoff 2015). However, as car is classified as personal use asset
the capital loss which is suffered by Jasmine must be disregarded under “sec 108-20 (1)”.
Response C: Sale of cleaning business:
There are some basic conditions that must be fulfilled under “Div 152” for the small
business entities (SBE) as upon fulfilling the conditions the SBE are allowed to get four types
of CGT concession (Feld et al. 2016). The concession are;
a. The business must have net value of asset not higher than $6 million or the revenues
should not go beyond $2 million to be classified as SBE.
b. The business must be having the active asset.
The four concessions for small business relief are as follows;
1. 15-year exemption: Under this the overall amount of capital gains which is earned
upon the sale of CGT asset owned for a minimum of 15 years is simply exempted.
The taxpayer should also be a minimum of 55 years older to get this benefit.
2. 50% reduction: A reduction by 50% following the application of general 50%
discount is available under this regime for taxpayers that qualifies for it (Evans, Minas
and Lim 2015).
3. Retirement concession: The capital gains are allowed for exemption when the
proceeds obtained from the disposal is used in the retirement of the taxpayers.