Sale of family home: Capital gains

Running head: TAXATION LAW
Taxation Law
Name of the Student
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TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................6
References:...............................................................................................................................10

TAXATION LAW2
Answer to question 1:
Sale of family home:
A gain is generally branded capital since it is not the subject of income inside the
ordinary earnings concepts. The regime of capital gains has begun on 20/9/1985 and it brings
the capital earnings in the tax base (Lam & Whitney, 2016). The income tax liability of the
taxpayer also includes the net capital gains. Any gains that is made before this date is termed
as “pre-CGT” and it does not attracts any capital gains tax.
There are some basic exemption which is available to the taxpayer from the capital
gains or capital loss transpiring from CGT event. Main residence exemption is available only
under “sec 118-110 (1) ITA Act 1997” when the taxpayer is treated as individual and the
house was the main place of dwelling during the ownership period (Phan, 2016).
Jasmine here lived in the dwelling that she has purchased for $40,000. As she is
relocating to UK permanently, the dwelling was eventually sold for $650,000. It must be
noted that dwelling is a pre-CGT asset because Jasmine has purchased it before 20th
September 1985. As a result the capital gains that she has made from the main dwelling will
exempted from CGT.
Sale of car:
“Section 108.5 ITA Act 1997” says that CGT asset usually encompasses any property
or lawful or equitable right (Armstrong, 2016). A CGT event is identified as occurrence for
particular assets that determines the net capital gains or loss from such event. A “CGT event
A1” under “sec 104-10 (1) ITA Act 1997” commonly applies to majority of the assets that
are disposed.

TAXATION LAW3
An important explanation regarding personal use asset given in “sec 108-20 ITA Act
1997” denotes that these assets are mainly kept by taxpayer for their own enjoyment (Mahar,
2016). The examples of this assets namely include the TV, vehicles, yacht, furniture etc. The
capital loss that happens from the sale of the personal use asset is on a frequent basis ignored
under “sec 108.20 (1) ITA Act 1997”.
In the present year Jasmine sold a car and received around $10,000. It must be noted
that Jasmine bought the car for $31,000 in 2011. The car here is a personal use asset within
“sec 108.20 ITA Act 1997”. Additionally, a “CGT Event A1” triggered when the car was
disposed by Jasmine. Eventually, she realised a capital loss when the car was sold.
Henceforth, under “sec 108.20 (1) ITA Act 1997” Jasmine should disregard the capital loss
from her personal use car.
Capital gains for Sale of business:
“Div 152” provides concessions to the small business so that they obtain relief from
capital gains tax (Friend, 2014). However to access the concessions, some basic conditions
needs to be satisfied:
a. The entity must meet the condition of small business entity where its net value of
asset must not go beyond $6 million or its gross turnover must not exceed $2 million
in a relevant year.
b. The small business asset must be an active asset
When the small business satisfies the conditions that is given above, they are provided
with the access of four small business concessions;
a. 15-year exemption: The total sum of capital gains is exempted from CGT when the
asset is owned for 15 years and the age of taxpayer is 55 years or more.