Taxation Law: Sale of Assets and Depreciation of Assets

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

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Answer to question 1:
Response A: Sale of main home:
The broader concept of the CGT comprises of making the comparison against the
capital proceeds and the cost base of the asset. The taxpayers are required to denote that
capital gains or loss must be ascertained by subtracting the correct cost base associated to the
asset or any other associated events that is rising from the proceeds following the sale of
assets (Allerdice 2014). As a common rule, the application of taxing capital gains is usually
made in those circumstances when the CGT event happens after the 20 sept. 1985. This
contributes to the fact there are terms such as pre and post CGT is very commonly used for
referring the assets that is purchased or events that are taking place before that date. The
taxpayer is required to understand that the system of CGT is completely dependent on the
capital gains or loss that are happening from selling of assets.
To ascertain the capital gains tax liability of Jasmine, it is eminent that she is
departing from Australia on a permanent basis but prior to her departure there were numerous
assets which she has decided to sell. Eminently, Jasmine sells her home for $3,00,000 that
she has been using from a long time. In the year 1981 Jasmine buys it for $40,000. As a
matter of fact, the asset must be treated as the pre-CGT asset and the capital gains which
Jasmine has realised from selling the main residence will be excluded from tax.
Response B: Sale of Car
The primary step associated to the determination of the CGT is to know whether there
has been any occurrence of CGT event. More specially a “CGT event A1” under “sec 104-10
(1), ITA Act 97” is applied on the capital gains or loss derived from at the time of event
(Middleton 2018). The explanation regarding the personal use asset (PUA’s) is made in “Sub
Div 108-C”. Considering, “sec.108.20 (2)”, personal use asset is recognized as non-

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collectable asset. These type of asset is used by taxpayer chiefly for own amusement. The list
of assets under this heads include the boats, furniture, electrical goods, vehicles and domestic
use assets. If a circumstances arises where a PUA’s is disposed on loss, no offset can be
claimed by the taxpayer in this regard from the capital gains. Under “sec 108.20 (1)” the loss
is clearly ignored.
During the year 2011 a car having a cost of $31,000 was sold by Jasmine. The car that
was held under the ownership of Jasmine is a PUA under “sec.108.20 (2)”. In addition to
this, a “CGT event A1” also happened when Jasmine sold the car. Jasmine has suffered a
capital loss when the car was disposed. As the event of loss has happened, Jasmine is not
permitted to offset the loss against any other capital gains and should ignore it under
“s108.20 (1), ITA Act 97”.
Response C: Sale of cleaning business:
Under the “Div 152” if any kind of capital gains irrespective of discount capital gains
meets the requirements for small business concession, then the concessions is applicable on
each of the capital gains (Minas, Lim and Evans 2018). Only CGT events taking place
following 21/9/1999 is eligible for CGT concession under “Div 152”. On satisfying the test
of active asset under “sec 152-35” four types of concession from CGT is available to small
business that has the net worth of the CGT asset not higher than $6 million under “sec
152.10”. The concession under “SubDiv 152” are