Taxation Theory, Practice and Law

Taxation theory,
Practice and Law

Contents
Question 1..............................................................................................................................................3
Question 2..............................................................................................................................................7
Question 3..............................................................................................................................................9
CONCLUSION........................................................................................................................................11
REFERENCES..............................................................................................................................................12

Question 1
When a taxpayer sells the asset at higher than the purchase amount then it take place
capital gain or loss. The variation between the buying cost and the selling price will be
term to be the capital gain (Dietschand Rixen, 2014). As per the question in the current
year, Helen sold out her assets. In case while selling out her assets, if the Helen come
up with capital gain then she will be liable to pay tax in the current financial year. This is
so because separate provision regarding capital gain tax is being maintained by the
Australian tax. Beside this, capital gain also leads towards shifting of tax burden to the
taxpayer. On the other hand, if by selling its asset, assessee possess capital loss then
such loss will be carried forward and will be managed or it can be said that such loss
will be set off with the capital gain in current year. Those assets which acquired after
20th September, 1985 will come under CGT tax. Beside this, rate for capital gain is also
not specified by the Australian income tax. But in case, if an assessee retain assets for
12 months or more, then its capital gain would be taxed by 23.5% (Vatn, 2015). Such
rate is being availed only if a discount aspect is being availed by assesse and if assets
are being retained for 12 months or more. Moreover, discount facility is not being
availed by those assesse who retained by assessee before 21st September, 1999.
Furthermore, indexation method is applied if the assesse make the purchase of an
asset before the aforementioned date. Beside this, assessee could make use of
indexation or discounted method for the purpose of calculation of capital gain income
only in case of assesse make purchase of asset before 21st September, 1999. Whereas
in case if assess hold assets for 12 or more than 12 months then neither the discounted
nor the indexation method could be applied. Thus, as per the question 1 all the assets

are being purchased before 21st September 1999, so in this case instead of discounted
methods, indexation method will be applied for calculating capital loss/gain and it is
being elaborated below:
Indexation method: By using this method, an assessee could easily calculate the
acquired assets value. In addition to this buying cost value in current market can also be
calculated. Thus by dividing quarter CPI in which asset is being purchased such factor
could be measured easily (Cooter and Ulen, 2016).
Therefore Helen each transaction is being examined below:
1. In first transaction Helen make purchased of an asses in February 1985 before
the applicability of Australian income tax authority. As the asset were purchased
before 20th September 1985, so it would be classified as Pre-CGT assets and
these are further classified under exempted assets. Thus, in such case no tax
will be charged on such assets by Australian income tax authority department.
2. In second transaction Helen made purchased of Historical sculpture before 21st
September 1999, but were sold for $6000 on 1 January, 2018. This in this case
only indexation method will be applied for measuring purchase price value not
the discounted method.
Particulars Amount $
Selling Price 6000
Purchased price 10120
Capital loss/gain (4120)
Working Note: