Taxation Theory, Practice & Law

Taxation Theory, Practice
& Law

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Block of vacant land....................................................................................................................1
Antique bed.................................................................................................................................2
Painting.......................................................................................................................................3
Shares..........................................................................................................................................4
Violin...........................................................................................................................................5
TASK 2............................................................................................................................................7
Advice Rapid Heat Pty Ltd about FBT consequences................................................................7
Variation in the answer if Jasmine has used $50000 as share investment..................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Taxation theory is a group of different systems that are concerned with various tax blocks
in order to allot tax liabilities to an individual, company or a group of different companies
(Boadway, 2012). Tax policy is a choice of the government of a country to decide the amount
and percentages of tax and on whom it is going to be implemented. There are different laws for
different tax liabilities. As a tax consultant in Mayfield, New South Wales Australia, it is a
liability to calculate the taxable amount of the client who have bought and sold assets.
This project report is based on the tax calculation of two different case scenarios. In first
case scenario the client have bought and sold different assets and the tax consultant have to
calculate the tax liability of capital gain head. In second scenario an advice to a company is
provided by assisting them in tax. The main objective of this project reports is to understand the
concept of taxation law.
TASK 1
Mayfield, New South Wales is an Australian Community in which Australian taxation
law are applicable. As a tax consultant, calculation of taxable income is a liability. The client is
an investor and antique collector. In year 2017, the client have purchased and bought different
assets. The client belongs to Australia, hence all the Australian taxations laws like, income tax
law, GST law etc. are going to be followed while calculating taxation liability for client. It has
been identified that the client is not carrying a business so the laws will be followed on
individual basis and tax rates of an individual will be applicable on client. For this particular
scenario Capital Gain Tax and Insurance claim Tax is used. Total taxation income and tax
liability for the client is calculated as follows.
Block of vacant land
Case scenario: The client for this scenarios is an antique collector and investor, who has
signed a contract to sell a vacant land for $320000 which was acquired in January 2001 for the
value of $100000 and the client has paid $20000 for water and sewerage. Selling of land is a
capital gain activity so for this scenario capital gain taxation laws are going to be followed.
Related tax regulations: From the case scenarios it has been identified that the capital
gain taxation rates are going to be applied on the client. According to CGT, vacant land is type of
non moveable asset, which is treated as investment and it was acquired after 20 September 1985.
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According to Taxation department of Australia, vacant land which is a type of capital asset, it
related to the capital gain and the rules for this land are going to be same as other capital gain
assets (Capital gain tax, 2018). The extra expenses that are paid by the client are not going to be
deducted while calculating tax liability. Net capital gain for the client is calculated as follows:
Date Particulars Amount
Jan 2001 Purchase of block of vacant land 100000
Expenses of water, sewage and land taxes on land 20000
Total cost of land 120000
3 June 2017 Contract price of sale of block of vacant land 320000
3 June 2017 Deposit of contract price 20000
3 Jan 2018 Balance payment 300000
Capital gain 200000
Taxable capital gain 20000
Tax rate
19cents per dollars
exceeding 18201
Net tax payable amount 342
Capital gain is the rise in the value of such assets that are capital nature and this value is
higher than the purchased value of that asset. In this case to calculate accurate value of capital
gain, the cost of land is deducted from the value of sold capital asset, so the difference can be
discovered (Gerritsen, 2016). Total taxable amount which is calculated was $20000 not $200000
because the client has only receives $20000, which is a token amount and the rest $180000 are
going to be received in next year. According to the current taxation rate of Australia any income
which is less than 18201 is not taxable. The value of tax for client for current year is $342 which
was calculated by the tax consultant, it was calculated using tax rate 19% or 19 cents per dollar
that is exceeding 18201.
Antique bed
Case scenario: In this case the client is demanding for insurance claim for an antique bed
which was purchased in 1986 for $5000 with all expenses included. This particular capital assets
had been stolen from client's house, when it was stolen the value for the assets was $25000. The
client claimed for insurance on 13 November 2017, but the insurance department has cancelled
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