Taxation Law: Input Tax Credit and CGT Liability

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
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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:
Issues:
The primary matter that will be dealt in this questions is the input tax credit
availability that can be claimed by City Sky Co in regard to the acquisition made.
Laws:
The GST has been introduced as the part of the new tax system by the government.
Usually there are three forms of supplies (Richard 2014). This includes the taxable supplies,
GST-Free supplies and input tax supplies. GST is generally referred as the transaction based
tax. The elements of the transactions generally include the following;
a. Supplier: This includes those that provides the subject matter of supply
b. Recipient: This includes those that obtains the supply and pays the price in
consideration of the supply.
Notably in “sec 9-40” and “sec 13-15, GST Act 1997”, it is understood that the
liability for GST happens when any assessable supply or importation is made by the taxpayer
(Dootson and Suzor 2015). Fundamentally, GST must be viewed as the tax on consumption.
GST is imposed on the sale of goods and services made inside Australia and on goods that
are imported to Australia. GST is usually paid on the value of added to the assessable supply.
Under “sec 9-10, GST Act 1999”, it says that supply is regarded as any type of supply that
includes the goods and services (Jacob 2015). It also includes the provision of advice or
information, financial supply, surrender of real property, or surrender of any right. “Sec 9-5,
GST Act 1999” says that GST is levied on the assessable supply. A taxpayer may make the
assessable supply if;
a. There is any kind of supply

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b. For consideration
c. During the course of business or progress of the business activities
d. Supplies that are connected with the Australia
e. The taxable supply is made by the registered entity.
On the other hand “sec 11-5”, elucidates that creditable acquisition represents those
acquisition of items that are by taxpayer with the creditable intention (Wiese 2015). When a
company acquires any item that is for the business course of the company then those
acquisitions are viewed as having creditable purpose. A business makes creditable acquisition
provided that the item acquired is;
a. Purchased anything that is absolutely for business purpose
b. The supply of thing to business is regarded as the assessable supply
c. The business is under obligation of providing consideration for supply
d. The business is under obligation of registering for GST or it is registered for GST.
Under “sec 11-15 (1), GST Act 1999” a business is only permitted to get input tax
credit when it purchases anything for the creditable purpose up to the extent that they acquire
it in conducting the enterprise activities (Richards 2015). The ATO has elucidated that when
a taxpayer purchases land it is generally held as the capital asset which may attract capital
gains tax when it is sold. However, when a taxpayer purchases land for making business use
or for making profit, sales proceeds that is earned is held as ordinary earnings and the
business may be required to register for GST.
Additionally, there could few conditions where the GST is required to be paid by
purchaser. This type of situation is known as reverse charge. Things apart from the GST will
be held subject to GST when the Australian business purchases them and things are made
through the business which is carried on by the seller out of Australia (Krever 2015). Under