Taxation Theory, Practice and Law: Capital Gain, Personal Exertion Income and Gift Taxation Law

Taxation theory, Practice
and Law
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Contents
Contents......................................................................................................................................2
INTRODUCTION.........................................................................................................................3
Question 1...............................................................................................................................3
Question 2...............................................................................................................................6
Question 3...............................................................................................................................7
CONCLUSION............................................................................................................................9
REFERENCES..........................................................................................................................10
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INTRODUCTION
Any income generated by an individual from the business or sales of capital goods is liable to
pay income tax to the taxation authority in the assessment year. This report is made upon the
taxation, theory and practice related provisions. It consists of three questions which are
related to capital gain tax, income from personal exertion, and income tax. In the first question
there are several transactions done by Helen, which shows capital gain or loss. While the
second question mention about income from personal exertion of Barbara. Third question
emphasis upon the treatment of assessable income of Mr Patrick.
Question 1
Calculation of net capital loss or gain of Helen for the assessment year
Capital gain tax is levied on the capital assets which are sold during the current assessment
year. Thus, capital gain will exist only if selling price is higher than the buying cost ( Goldin,
2015). Here in the given case, if Helen sold out its purchased asset in current year itself and
receive capital gain then Helen have to pay tax on the profit received by selling out its assets.
Similarly in case if Helen suffer from capital loss by selling out assets then such loss will be
moved forward and will be set off with future capital gain which Helen will receive. So
according to question it can be seen that Helen its assets in current year itself and which has
resulted in the form of capital gain to Helen (Woellner, et. al., 2014). Thus, in this case Helen
will be entitled to pay upon capital gain which she received from selling out assets in current
year itself. The main reason behind this is that separate provision in respect of capital gain is
being maintained as per ATA (Australian tax authority). Moreover, capital gain also leads in
shifting of tax burden upon assessee or a tax payer. According to Australian income tax
authority department after 20th September 1985 those assets which are acquired will be
considered under capital gain tax regime. Furthermore, specific rate is not being specified by
Australian income tax authority department upon capital gain (Brabazon, 2019). But side by
side in case if a tax payer retain assets for more than 12 months or for 12 months the
assessee will be lived to pay tax up to 23.5%. In addition to this if discount is being availed by
tax payer then also a tax payer will be liable to pay up to 23.5% tax. Whereas for those
assessee who retain assets before 21st September 1999 are not liable to for such type of 50%
discount facility upon taxable income. If an assessee purchase asset before aforementioned
date then in that case instead of discounted method indexation method is being applied. For
the purpose of calculating the capital gain/loss also both the discounted and indexation
method is being used and this take place only if an assessee will make purchase of an asset
before 21st September 1999. Similarly if an assessee hold out assets for a very long time
period (12 or more than 12 months) the none of the discounted and indexation will be applied
(Auerbach and Hassett, 2015). But here in this question an asset are being made purchased
before 21st September 1999, so in order to calculate capital gain/loss indexation method will
be used not the discounted method. Therefore elaboration of indexation method is being done
below:
Indexation method: Acquired assets value could be easily calculated by an assessee using
indexation method. Beside this, purchase cost value can also be easily examined with the
help of this method. In addition to this, only indexation method can be used if a CGT event
happened to an asset acquired by an assessee before 21st September 1999 and discount
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