Taxation Theory, Practice & Law

TAXATION THEORY,
PRACTICE & LAW

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1: The Goods and Services Tax (GST)...............................................................1
Identification of material facts..................................................................................................1
Identification of Legal Question and relevant taxation law.................................................2
Application of Tax legislations relating to GST.....................................................................2
Detailed and Accurate Conclusions.......................................................................................3
QUESTION 2: Capital Gains Tax (CGT)...................................................................................4
Identification of material facts..................................................................................................4
Identification of Legal Question and relevant taxation law.................................................6
Application of Tax legislations relating to CGT....................................................................6
CONCLUSION...............................................................................................................................8
REFERENCES............................................................................................................................10

INTRODUCTION
In order to raise adequate amount of financial resources to meet various fiscal
expenditures, the government of an economy may charge a certain amount on the
goods and services produced, held and utilised to generate income by both individuals
and organisations. This charge is known as Taxation and is carried out in a manner
which is viable, equal and efficient from administrative perspective (Boadway and
Tremblay, 2016). This report aims to provide valuable insights in regards to taxation
structures relating to Goods and Service as well as Capital Gains. For this purpose, the
report is divided into two sections that attempt to address the GST and CGT
respectively which draw inferences and make relevant conclusions regarding their
treatment from taxation authority perspective.
QUESTION 1: The Goods and Services Tax (GST)
The Goods and Service Tax is a broad-based taxation structure prevalent in
most of the economies worldwide and is highly dependent upon the economic
environment prevalent in those countries. In Australia, the GST is a kind of value-added
tax which is applicable at the rate of 10% on sale of most of the goods and services and
is subjected to certain types of exemptions as well as concessions (Datt and Keating,
2018).
Identification of material facts
In the context of given case scenario, a property and investment company,
namely The City Sky Co., has purchased a block of vacant land that it intends to use for
business purposes. The company plans to use this piece of property for building 15
Apartments to sell subsequently in future. For this purpose, the firm utilised the services
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of a local lawyer for the provision of legal services relating to development. For this, the
company incurred an additional $33,000. Also, Maurice is a sole trader who has annual
revenue earnings of worth $300,000.
Identification of Legal Question and relevant taxation law
Here, the question arises regarding what sort of input tax credit entitlements is
the company City Sky Co. is eligible for claiming as per the ATO guidelines given in Part
7-1: GST and Input Tax Credits under Part 2-1: The Central Divisions of a New Tax
System (Goods and Services Tax) Act 1999.
Application of Tax legislations relating to GST
In order to advice the firm regarding its input tax credit entitlements, it is assumed
that The City Sky Co. is registered for GST purposes. Essentially, Section 17.5 of the A
New Tax System (Goods and Services) Act 1999, such entitlements can be expressed
as the amount of credit which is included in the price of business inputs (Deb, 2018).
Based on the situation of The City Sky Co. it can be said that since it is a registered
organisation, it will be eligible for the entailment of input tax credit entitlements wherever
necessary. Since the company is predominantly dealing in the acquisition of property
and their subsequent sell-off, City Sky's transaction relating to purchase of vacant land
shall be treated as a revenue asset rather than a capital one (Land as a Capital Asset,
2019). This is due to the fact that the company has bought the land with an intention to
develop, subdivide and sell in the near future. Thus, making it entitle to the inclusion of
GST in its price. Apart from this, it is also important to ensure that there is a genuine
effort demonstrated on the part of the enterprise to indicate that they intent to build a
property on the vacant land. This may include seeking finance for the development of
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