Taxation Law: GST, Input Tax Credit, Capital Gains Tax, and CGT Asset

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
References:.................................................................................................................................8

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Answer to question 1:
Issues:
The present case scenario is engaged with the entitlements of GST and the claims
relating to input tax credit originating from the sale of creditable transaction.
Laws:
The tax treatment associated to the land and the proceeds that are originating from the
sale of land is commonly reliant on whether it is treated as the capital asset or it is subject to
business or commercial transaction. Vacant land is observed as capital asset and it is
commonly attracting capital gains tax (Deepshikha 2018). Nevertheless, when land is taken
as commercial transaction or the part of business activity, the sales that are earned will attract
GST.
Taxable supply under “sec 9-5 GST Act”, includes that a supply is made for
consideration and the supply is made at the time of conducting the business activities or for
the continuance of the commercial activity. The law court in “Waverley Council v
Commercial of Taxation (2009)” held that consideration should have connection with the
supply and the supply should be made for consideration (Anthony 2018). As noted from the
judgement of commissioner there must be payment in connection with the supply.
The input tax credit is allowed to be availed by the registered taxpayer only if the
applicable particulars that are prescribed in the invoice rules are stated in it. The GST which
is paid under the reverse charge rules is also allowed for claim as input tax credit. The term
reverse charge denotes the circumstances when the receiver of goods and services is required
to pay the GST rather than the supplier (Bar and Bench 2017). The reverse charge rules are
implemented on the service receiver when they buy anything wholly for business purpose

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that is carried on by them in Australia. The sale of item to the taxpayer is for the payment and
the taxpayer is registered for GST or they are required for obtaining GST registration. An
individual taxpayer is liable for GST within the rules of reverse charge if the thing that is
purchased is carried out in Australia and has connections with Australia.
Application:
The indications that is gained from the City Sky Co case facts it is understood that the
company has acquired a vacant land with the intention of building apartments and selling it in
the market. The vacant land that is acquired by City Sky Co is treated as the immovable
property and also it is a capital asset. No obligations relating to GST arises on the purchase of
vacant land, rather the vacant land is falling within the purview of black credit. This implies
that that any type of goods and service that a taxpayer has received relating to the
construction of the immovable property notwithstanding of ordinary business activities or
continuance of any commercial activity, no eligibility for claiming input tax credit happens
for City Sky Co.
In the later part of the case it is also noted that City Sky Co has obtained the
developmental service of $33,000 from Maurice Blackburn being a legal advisor company.
The services of advocacy that is taken by City Sky Co from Maurice Blackburn amounts to a
reverse charge mechanism where GST liability is falling on the City Sky Co. Additionally,
the services were in course of City Sky Co business activities and also connected to Australia.
With reference to “paragraph 9-5 of the GST Act” the taxable supply of legal services is for
the consideration (Anderson 2018). Stating the situation of “Waverley Council v Commercial
of Taxation (2009)” the payments made by City Sky Co for legal services is connected with
the supply. As a result, the company will be considered eligible for claiming input tax credit
relating to the legal services.