Taxation Law Question Solutions

Taxation Law Question Solutions

Contents
Week 9 Capital Gains Tax Questions before workshop..................................................................3
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................3
Question 4........................................................................................................................................4
Questions during workshop.............................................................................................................4
Question 1........................................................................................................................................4
Question 2........................................................................................................................................4
Question 3........................................................................................................................................4
Questions after workshop................................................................................................................5
Question 1........................................................................................................................................5
Question 2........................................................................................................................................5
Workshop 8 Week 9 Capital Gains Tax..........................................................................................6
Question 3........................................................................................................................................6
References........................................................................................................................................9

Week 9 Capital Gains Tax Questions before workshop
Question 1.
Following are CGT assets, collectables or personal use assets:
a) An engagement ring that cost $5,000 – collectable: s 108-10(2) of ITAA97 includes jewellery
in the definition.
(b) A second-hand car purchased for $2,000 – if it is for personal use the car will be a personal
use asset: s 108-20(2). However, a capital gain or loss made from a car is exempt.
(c) shares in BHP – CGT asset.
(d) your home – CGT asset. However, your home may be exempt if it is your main residence:
Subdiv. 118-B.
(e) A painting hung in the foyer of your accounting firm – a CGT asset. It is not a collectable as
it is not used or kept mainly for your personal use or enjoyment.
(f) A holiday house at Byron Bay – CGT asset
Question 2
Following can form a part of cost base of rental property applied for the income producing uses:
a. Repairs to broken window - NO
b. Rates and land tax - NO
c. Interest expense on loan - NO
d. Legal fees on purchase - YES
e. Legal fees on mortgage(loan) NO
f. Stamp duty of purchase -YES
g. Stamp duty on mortgage (loan) NO
h. Purchase price - YES
i. Extensions to build extra room -YES
If deduction has been here claimed, or should have been claimed, according to cost base's
strict rules, it cannot be included in cost base. Repairs, prices and taxes, as well as interest
on loan, are all deductible under the S8-1 ITAA97 because rental property's intent is to generate
assessable income figure. Legal fees including stamp duties on purchase are all fixed expenses
that are included in cost base. Borrowing charges, like legal fees including stamp duty, aren't
included in cost base (Murphy, 2019).

Question 3
Subdivision
Subdivision on its own does
not trigger CGT as there is
no change in beneficial
ownership.
The cost of subdivision and
other fees will form part of
the cost base and be
assigned equally
to the blocks assuming they
are the same size and value
to give the cost base of
each block.
The sale of each block is
CGT event A1 and is dealt