Taxation Law: Capital Gains and Depreciation

Running Head: TAXATION LAW
TAXATION LAW
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................7
Issues:.....................................................................................................................................7
Law:........................................................................................................................................7
Application:............................................................................................................................8
Conclusion:............................................................................................................................9
References:...............................................................................................................................11

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Answer to question 1:
A: The capital gain on family home:
The tax paid on the assets which are purchased or deemed to purchase on or following
20/9/1985 is commonly referred as capital gains tax (Smith 2014). As a consequence, Pre-
CGT and Post-CGT are the expressions usually applied on those assets which are purchased
or events taking place prior to or following the particular date.
A taxpayer is allowed a basic exemption for capital gain or for capital loss, provided
the CGT originates from such an event where the asset of CGT is a house. In “sec-118-110
(1), ITAA 1997” the house of the taxpayer must be treated as the basic dwelling place
throughout the ownership period (Freebairn 2016).
As apparent the circumstance of Jasmine demonstrates that she paid for a house for
$40,000 in the year 1981 and sold it off eventually for $650,000. The home of Jasmine falls
under the class of Pre-CGT asset as it was procured before CGT regime was applied.
Moreover, “sec-118-110 (1)” can be applied in Jasmine’s case as she was living in the house
ever since it was purchased (Jones 2018). Thus, the capital gains will be omitted from CGT
which was made afterwards the sale of house.
B: Capital gain or loss made from the car:
An event of CGT A1 takes place when the taxpayer is selling off the CGT asset under
“section 104-10 (1)”. As per the “section 108-20 (2)” an asset can be referred to as private
use asset which are generally used by the tax payer for personal use and enjoyment purposes
other than the collectables except for land and building (Pinto and Evans 2018). The
examples of private use assets normally includes,
 TV at home

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 A car or bicycle
 A yacht for personal usage
 Mobile phone for private usage
Few firm special rules which are applicable on private use assets. The capital gains from
personal use assets are to be omitted by the taxpayer if it was procured for $10,000 or less
under “sec 118-10 (3)” (Nassios et al. 2019). At the same time the capital loss occurred after
selling a private use asset is usually omitted as per “section 108-20 (1)”.
The instance reading of Jasmine shows that she has paid for a car for $31,000 in the year
2011 and was sold ultimately for $10k. A capital loss was suffered after disposing the car. On
the other hand, the car has been treated as a private use asset, therefore under “section 108-20
(1)” the capital loss is supposed to be disregarded by Jasmine as it has been incurred from
trading a private usage asset (Chow 2018).
C: The capital gain on sale of business:
There are concessions available for helping the small businesses under “division
152”. The primary conditions include-
a) The entity is supposed to be a small business entity with a total of yearly turnover of
less than $2 million for the current year or the previous year or the assets having a net
worth of $6 million or less (Ross, Walker and Walker 2017).
b) CGT asset is necessarily be an active asset.
Four types of concessions are mainly found for small business. These include the following-
1) 15-year exemption- The taxpayer can hold a CGT asset for a minimum period of 15
years.