Taxation, Theory and Practice

TAXATION, THEORY AND
PRACTICE

Contents
Question 1................................................................................................................................................3
1).............................................................................................................................................................3
2).............................................................................................................................................................4
3).............................................................................................................................................................4
4).............................................................................................................................................................5
Question 2................................................................................................................................................6
1).............................................................................................................................................................6
2).............................................................................................................................................................6
Question 3................................................................................................................................................7
Conclusion...............................................................................................................................................7
References...............................................................................................................................................8

Question 1
Capital profit or deficit turns up when a taxpayer vends capital assets which was
acquired by him in the prior year. Helen modulates all the assets during present
financial year. The capital gain or loss transacted by her will be taxed in this year and
Australian tax jurisdiction has separate regulations regarding capital gain tax. Such
capital gain finally shifts the burden of tax to the taxpayer. On the other hand, if capital
loss is eventuate, then such losses is carry farther for forthcoming years or set off with
current year capital gain. According to the Australian tax, if any of the asset procured
after 20th September, then this comes under the capital gain tax administration .This is
appropriately said that the Australian income tax does not elaborate any of the rates for
capital gain. But considerably it gives a statement that if any assets hold on the tax
payer for 12 months or higher, then the influential capital gain tax would be 23.5%. That
rate is exercisable only in the case of discount benefit by the taxpayer and asset holds
on for at least 12 months or more. This 50% discount benefits is not vigilant to the
taxpayer who retained an asset before 21st September. Hence, any of the assets
purchased before the predetermined date, and then discount method does not applied,
only indexation method must be levied. However, an taxpayer could use discount or
indexation method for calculating capital profit income if the asset is purchased after 21st
September.
Now come to the question 1, where all the assets were acquired before 21st September,
Hence, there is discount method will not apply. In that case, indexation method is
suitable for calculating capital profit or loss. It is discussed briefly as under:
Indexation method: It is that rule by which the price of the purchased assets is
discovered by using indexation method. By using this method, value of purchasing cost
in today’s market is established.
Helen each transaction is discussed as under:
1).
There is a law or rule that if any asset purchased before 20th September, 1985, shall not
be specified as the capital gain tax purpose. Accordingly same scenario takes place
here, where asset was purchased in February, which was before the applicability of the
Income tax law in Australia. Hence, those assets which were buying before 20th
September, classified as an excluded asset. Therefore, no tax will be paid on such
asset.