Assignment on Australian Taxation Law: CGT, Deductions, and Elections

This assignment solution delves into the intricacies of Australian taxation law, addressing key aspects such as capital gains tax (CGT) and deductible expenses. The first question examines an asset exempt from CGT, specifically highlighting the main residence exemption and its legislative reference. The second question analyzes various scenarios to determine the deductibility of expenses, including interest on loans, mobile phone charges, babysitter payments, goods stolen by an employee, and expenditures incurred for local government elections. The solution provides detailed explanations and references to relevant legislation and academic sources to support the analysis, offering a comprehensive understanding of Australian tax regulations.

Taxation law of
Australia

Table of Contents
QUESTION 1...................................................................................................................................1
D) Example of an asset exempt from capital gain tax, including its legislative reference..........1
QUESTION 2...................................................................................................................................1
A) Interest expenses incurred for taking loan..............................................................................1
B) Mobile phone charges of Julie when 60% incurred for work purpose...................................1
C) payment made to babysitter to look after the child.................................................................1
D) Goods stolen by employee......................................................................................................1
E) Expenditure incurred for contesting a local government elections.........................................2
REFERENCES................................................................................................................................3

QUESTION 1
D) Example of an asset exempt from capital gain tax, including its legislative reference.
Capital gain tax is levied on an individual or corporation at the time of selling of any
capital asset by them like real estates, securities, etc. Capital gain tax Act 1985 deals with the
livy of capital gain income and losses (CGT assets and exemptions, 2018). There are some assets
that are exempt from capital gain tax liability like main resident.
Main resident is exempt from the tax only if the individual or his family or any person
belonging to him is living in the house. Exemption can not be claimed for a vacant block of
property. Further, for the purpose of claiming the exemption, the person is has to be resident of
Australia.
QUESTION 2
A) Interest expenses incurred for taking loan
Interest expenses can not be claimed for those loan which have been taken for incurring
any deductible expenses
(King, 2019). Further, as payment of wages made by an organisation is deductible expense in the
Australian taxation law, Brett cannot claim exemption for the interest expense incurred for taking
loan for payment of wages.
B) Mobile phone charges of Julie when 60% incurred for work purpose
As per the clauses of income tax Act 1936, part of mobile expenses inured for work
purpose can be claimed for deduction by an individual while calculating the amount of tax to be
paid.
As Julie incurred 60% if the total mobile charges for work purpose, therefore, $300 (60%
of 500) can be claimed for the deduction.
C) payment made to babysitter to look after the child
The Australian taxation does not provide any deduction for the personal expenses
incurred by an individual. As payment made by Sally of $1200 to the babysitter is a personal
expenses, it can not be claimed for the purpose of claiming deduction.
D) Goods stolen by employee
As per the clause mentioned for business deduction in the tax, in Australian taxation law,
a business can claim deduction for all the operating expenses (Carter Breunig, 2019). Operating
expenses includes, general expenses of business, cost of employment, salaries, bad debts, etc.
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further, amount loss suffered by business due to misappropriation, fraud, theft, etc. made by the
employees or agents are also considered as the business operating expenses.
In this regard, goods stolen by Jerry of worth $20000 can be claimed for deduction by the
business during the year.
E) Expenditure incurred for contesting a local government elections
As per the Australian taxation law, expenses incurred for the election purpose can be
claimed for granting elections (Carter Breunig, 2019). If expenses has been incurred for
contesting purpose in a local government election, an expense upto the amount of $1000 can be
claimed for deduction.
In the present case, as the expenditure has been made for $5,000 for contesting a local
government election, an amount of $1000 can be claimed for the deduction. Although the rest
amount would be taxable in the hands of taxpayer.
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REFERENCES
Books and Journals
King, M., 2019. Policing the illicit trade of tobacco in Australia. Journal of Financial
Crime. 26(1). pp.146-161.
Carter, A. and Breunig, R., 2019. Do Earned Income Tax Credits for Older Workers Prolong
Labour Market Participation and Boost Earned Income? Evidence from Australia's
Mature Age Worker Tax Offset. Economic Record.
Online
CGT assets and exemptions. 2018. [Online] Available through :
<https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/>
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