Taxation Report: Analysis of Capital Gains for Amber's Transactions

This report examines the taxation implications of Amber's financial transactions, specifically focusing on the sale of her chocolate shop and an apartment inherited from her uncle. It analyzes the relevant Australian tax laws, including the Income Tax Assessment Act 1997 and capital gains tax (CGT) regulations. The report details how the CGT applies to the sale of assets, considering factors such as long-term capital gains and potential exemptions. It also addresses the impact of the sale of Amber's business and the apartment on her tax liabilities. The analysis includes relevant cases and legal principles to provide a comprehensive understanding of the tax consequences. The conclusion summarizes the tax implications, emphasizing the importance of adhering to the tax regulations. The report is based on the assumption of absence of CII (Cost inflation index) and provides a practical application of taxation principles within the context of the case study.

Taxation

Table of Contents
ISSUES............................................................................................................................................1
LAW................................................................................................................................................1
APPLICATION...............................................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

ISSUES
Tax is considered as mandatory financial charges which is being levied by government
on various types of profits earn by the companies. The imposition of essential levies on
individual or any entities through government done to increase to earning as well as attain
economy of scale. According to the mentioned case study, it has been seen that Amber owned a
boutique chocolate shop in Sydney which was purchased for $ 240,000 in August 2010. It
consists of both equipment and stock worth of $110000 and rest balance being goodwill.
Because of their expanding family member, amber along with her husband purchased a four-
bedroom home in external areas of Sydney in June 2018 (Meade, 2013). The purchase was partly
funded through the sale of business but also through the sale of one-bedroom inner city
apartment. As she inherited it from her uncle in October 2013 for $ 180,000. Till the death he
lived there and during the death the value of house estimated at $ 390,000. Knowing all the facts,
Amber decided to signed a contract for the sale of apartment in May 2018 for $ 550,000 and its
settlement took place in July, 2018. These transactions which are done in the case is made on an
assumption in the absence of CII (Cost inflation index). There are various consequences which
are associated with transaction those are related with the capital gains as well as sale of property
(Becker Reimer and Rust, 2015).
LAW
The legal law that can be followed under the case of Amber is “Income from Capital
gain” under the corporation act 2001. In order to determine the present tax exemption, it is
essential to analyse the applicable law which is related with sale of any kind of assets. According
to the CGT assets and exemptions all the assets that are acquired by the Amber are considered
under the head of long term capital gain. In common, capital gain is considered as increase in the
value of a capital assets net amount of other associated transaction costs. Gains and losses on
any assets held by individual for at least 12 months are taken into account as long-term and
mentioned under the slab of 50% exclusion (Wallace, 2015). Henceforth, the top long term
capital gains are 23.25% (Capital gains tax, 2017). As per the corporation income tax is
combined with the individual income tax so that company tax paid is imputed to shareholders.
As mentioned in the case of Amber, there he was not been taken into account all these point
while calculating the valued price of the apartment. Because, the purchase was made after 1992,
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this means that there is certain deduction that can be impose on the purchase of apartment before
settlement date. The actual taxation norms in Australia follows neither the actual income nor
overall consumption of tax model. These are tax in case of realised nor as accumulated. Amber
who reports a usually profitable gain during the time of his uncle death. From the sale of a
business or building will be appear to be take into account common regulation those are
prescribed under the corporation act.
APPLICATION
The Australian taxation system is the federal agency who is responsible for the
administration of taxes such as capital gains, fringe benefits from the tax and goods and services
taxes. Use of capital can be done in purchase any kind of land, building and any other property
from the capital profit earn within the period of time. In case of any sale or purchase and
otherwise dispose of an asset they are known as capital gain activities. In case of Amber, the
trade was partly funded by the sale of business while some part of them are also from sale of
bedroom inner-city apartment. The apartment in which amber lived in is inherited from her uncle
in October 2013. Without knowing all the necessary norms and guidelines of the income tax
rules, Amber cannot be able to avail tax exemption because purchase was made after 1985 arises
in long-term capital gains as per the section of Income tax act such all the assessable income
(Besley and Persson, 2013). There is certain exemption those are mentioned below:
Exception consists under the capital gains or losses such as:
 In case of main residence there is not any provision of exceptions.
 For the personal use of building and apartments acquired for less than $ 10000.
All the depreciation assets used individual for taxable objective and trading of stock of
the company. According to the income tax, capital gains is essential application of CGT activity
of K6 regarding pre-CGT shares and pre-CGT trust interest under section 104-230 of income tax
assessment act 1997 (INCOME TAX ASSESSMENT ACT, 1997). According to the section 230
(2) of income tax act the market value of property company or any other assets purchased as on
or after 20 September, 1985 are categorise under the capital gain act.
Relevant cases:
Louise owns certain shares which has been listed over the ASX for 3 years. The house is
head body of a demerge group. As essential part of a demerger, she retains latest interest in a
demerged unit. After that the demerged firm list their own right and since, the head was
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mentioned only for 3 years, demerged must remain for 2 years before any new exception from
CGT cannot be liable for Louise.
CONCLUSION
From the above case analysis, it has been concluded that all the consequence those are
associated with the Amber during the valuation of the apartment can be evaluated according to
the income tax assessment act 1997. According to the section 104-230 per CGT share or interest
certain exemption as well as benefits can be provided to them. Like a company used to referred
to in subsection (2)- some of the value were listed for specific quotation in the mentioned list of
stock exchange or international country at the time of calculating any individual value. On the
basis of actual deduction that are calculated under the capital gain guidelines are taken into
account so that valuable amount of incomes can be generated during the time. on the basis of
overall analysis, it has been seen that amber is totally comes under the categories of tax
deduction because the purchase was made in the year 1985. Overall analysis is based on essential
solution to amber to deal with all the taxation consequences those are arises while the purchase
of the apartment.
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REFERENCES
Books and journals:
Becker, J., Reimer, E. and Rust, A., 2015. Klaus Vogel on Double Taxation Conventions. Kluwer
Law International.
Besley, T. and Persson, T., 2013. Taxation and development. In Handbook of public
economics (Vol. 5, pp. 51-110). Elsevier.
Meade, J. E., 2013. The Structure and Reform of Direct Taxation (Routledge Revivals).
Routledge.
Wallace, S. L., 2015. Taxation in Egypt from Augustus to Diocletian. Princeton University Press.
Online
INCOME TAX ASSESSMENT ACT. 1997. [Online]. Available through:
<https://iknow.cch.com.au/document/atagUio695879sl24365551/section-104-230-pre-
cgt-shares-or-trust-interest-cgt-event-k6>.
Capital gains tax. 2017.[Online]. Available through: <https://www.ato.gov.au/General/Capital-
gains-tax/>.
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