Taxation Law: CGT on Sale of Assets and Depreciation Deduction

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................5
References:...............................................................................................................................10

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Answer to question 1:
Requirement A: Sale of Main House
The basic feature of the CGT is that it is applied on the assets which is purchased on
or afterward 20th Sept 1985. Any assets or events that are taking after this date are taken into
the tax regime of capital gains (Evans 2019). While assets that are before this date are termed
as the pre-CGT asset and they are usually exempted from the capital gains tax regime
irrespective of gains or losses made. Assets bought on or after this date is considered as the
post-CGT asset.
The circumstance of Jasmine opens with the situation that she is an Australian dweller
and she is now selling all her assets that she had owned as she is permanently moving to UK.
Jasmine in her process of selling all the assets is found to be selling her home that she has
used as her main location of dwelling. The main dwelling was purchased in 1982 by Jasmine
and she paid a sum of $40,000 to acquire it. As in the current tax year she sells it for
$650,000. As understood from the transaction that Jasmine has yielded capital gains from
selling her main residence. But it must be noted that her main dwelling was purchased in
1982 and the asset will be termed as pre-CGT asset because the asset was bought by her
earlier to the application of CGT regime (Plummer 2016). The capital gains made thereon is
simply excluded or exempted from tax.
Requirement B: Sale of Car:
A capital gain happens when the proceeds on sale exceeds the cost of acquisition.
While a capital loss happens if the cost of purchase goes beyond the sale price. A CGT event
under “sec 104-10 (1), ITA Act 97” is only considered in the course of sale of CGT asset.
“Sec 108-5 (1)”, CGT asset usually involves any form of property excluding the land and
building (Coates 2015). Explained under “sec 108.20 (2)” a personal use asset (PUA’s)

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denotes assets such as television, furniture, motor vehicle etc. kept or used by taxpayer for
private purpose and enjoyment. When a capital loss happens from PUA’s it should be
disregarded under “sec.108-20(1)” by taxpayers.
Jasmine has sold a car for $10,000 that she had purchased in 2011 for $31,000. The
car is a personal use asset under “sec 108.20 (2)” because it is used by Jasmine for her
private purpose. A “CGT event A1” took place under “sec 104-10 (1)” when Jasmine sold
the car. As the car being a personal use asset has fetched loss for Jasmine, she must disregard
the loss under “sec.108-20(1)”.
Requirement C: Sale of cleaning business:
There are four types of concessions accessible to help the small business under “Div
152”. There are certain basic conditions that must be met to access the concessions;
a. The company should qualify as small business entity with total revenue of less than
$2 million and assets net value is not above $6 million (Lam and Whitney 2016).
b. The assets in business must be the active asset.
On meeting the above eligibility conditions the four concessions are;
1. Fifteen-year exemption: The total amount of capital gains derived from CGT asset is
exempted on sale if owned for a minimum of fifteen years.