Analyzing Taxation: GST, Capital Gains, and Income Tax in Australia

This assignment solution analyzes taxation in the context of Australian tax law, focusing on Goods and Services Tax (GST) and Capital Gains Tax (CGT). The first part examines a City Sky Company, an investment firm developing properties, and its eligibility for GST input tax credits related to legal fees. The analysis considers the application of GST to property development and the conditions under which a company can claim input tax credits, including scenarios involving sole traders. The second part of the assignment delves into the capital gains tax implications for Emma, an Australian taxpayer, detailing various transactions involving the sale of land, shares, and personal assets such as a grand piano. The analysis covers how CGT applies to real estate, shareholdings, and collectibles, considering factors such as acquisition dates, holding periods, and associated costs to determine taxable capital gains. The conclusion emphasizes the importance of tax planning, deductions, and exemptions to minimize tax liabilities, reinforcing the benefits provided by taxation authorities to reduce the tax burden.

TAXATION

Contents
Introduction...........................................................................................................................................2
Answer-1...............................................................................................................................................2
Answer-2...............................................................................................................................................3
Conclusion.............................................................................................................................................5
References.............................................................................................................................................7

Introduction
With increasing commercial changes, it is seen that taxation authority have been amending
and changing the rules and regulations with the passage of time. It is analysed where
numerous taxation policies and regulations that will need to remain complied by taxpayer
when determining the tax liability of the company. Therefore, the exemptions and the
deductions are the benefits as being given by the authority of taxation to tax payer as a relief
from the tax burden. At initial level, City Sky Company takes into consideration where there
is a computation of GST tax credits. After this, there is a calculation of taxable liabilities of
Emma that has income and assets (Braithwaite, and Reinhart, 2019).
Answer-1
City Sky company is a registered firm that is recognised under GST (Goods and Services
Tax) under Goods and services Act of Australia. Type of organisation of City Sky Co. is the
investment in developing properties under GST of Australia. The organisation has purchased
vacant land in South of Brisbane which City sky Co has been planning to create 15
apartments story building to sell those apartments. While purchasing the vacant land, the city
Sky has handled a legal service from local lawyer named Blackburn. The company has paid
lawyer where the fees of Blackburn is estimated “$33000” to provide legal services to clients,
Blackburn runs established trading organisation with a revenue of$300000 each year. To
develop the projects of 15 apartments created to resell the flats, which is the normal course of
action as it is the nature of business. City Sky co. has been paying fees to the lawyer, which is
the cost of product, those city Sky co sales (Burkhauser, Hahn, and Wilkins, 2015). The
organisation is entitled to take away the tax input ad fees paid by the organisation to the
lawyer. Blackburn has counted the lawyer`s fees as professional income as being earned by
lawyer by providing the legal services to organisation. The company has the authority to take

full tax input on $33000 to lawyer, which is the part of cost to organisation. As per the GST
act, the company has the annual turnover of 75000 dollars regarding case of organisation and
availing the services with revenue 150000 dollars, which has remained a minimum threshold
as needed by the company and the organisation in case of Non-Profit organisation that are
registered under Australia Act of GST. The lawyer is entitled to give input tax credit to
company for the fees, which is collected to provide legal services to organisation in both the
conditions. Whether opting fees either as professional income under the income tax act or
handling legal fees in the sole trading business where the lawyer runs his sole trading, which
is again a registered under GST of Australia. The organisation is entitled to opt for tax input
from lawyer where the fees is paid to the lawyer to avail legal services for the development of
vacant land as a part of cost of the final product where The city Sky company deals in.
Every business imposes the charge of GST with product price. This tax has been applied on
registered sales for every type of real estate properties including vacant land, commercial
property, and residential building. GST credit is created when organisation can claim credits
on behalf of operations of business well known as input tax credit incurred expenditures on
capital assets according to Sec 9 for imposing (goods and service tax) GST. This is applicable
on supplies of services and goods engaged with transaction as being related to estate
business. An organisation can claim GGST credit as being owned by the business in respect
to transaction to the input tax supplies. Sales will include demand for interest income, house
property, and the dividend income. It is important to know that maintenance and repair
expenditure does not bear the implication of GST credits. Other most implied examples will
include input tax supplies, residential rents, charitable funds, precious supply of metals,
raising the funds, and food supplies into the schools.
Any company can claim income tax credit when it fulfils few conditions-

Supplies bought by sole trading company to transact with the help of business where such
supplies are not included in input credit. When purchase transaction is undertaken for
business use and claimed as personal use partly. When a real estate constructor constructs
portion with stocks claiming ITC (input tax credit). Later on, it is seen that ratio among the
user of resources faces claim of input tax credit. Further, the amount of ITC can be adjusted
originally tending the claims that differs from personal use, and business to business.
Inclusion to GST as the seller charge price as per the tax imposed on the product, property,
and services.
Answer-2
Emma undertakes several transactions as an income taxpayer of Australia in 2015, which is
related to Capital Gain under Income Tax. There are the consequences of transactions that is
listed relating to or not relating to capital Gain head under Income Tax Act.
Sale of block land “1000000”:
Emma purchased vacant land for the investment and paid 250000 dollars in order to acquire
land from seller. In order to purchase vacant land, Emma has paid sum of $5,000 as their
stamp duty. She has also incurred legal fees at the time of purchase of land with 10000
dollars. To purchase the vacant land, Emma has to take loan and Emma has paid $32000 of
the interest with the loan amount. In January 2015, Emma faced dispute that occurred with
neighbour of vacant land over usage of vacant land. To resolve this issue, Emma has paid
legal fees of 5000 dollars by ending up dispute between Emma and her neighbour. With her
ownership tenure, Emma has spent 22000 dollars as their water rates, insurance, and council
rates for whole tenure when Emma held property. Before keeping the property for market
sale, Emma has spent 27500 dollars to remove dangerous pine trees, which were on land.
During sale, Emma has spent 25000 dollars for advertisement, agent fees, and legal fees
during the sales of land. Emma has sold property in 2015 at the price of 1000000 dollars. The

CGT, which will be applicable on the transactions and the property as it was purchased in
1991 and sold in 2015. It has resulted into the ownership of land for twenty-four where CGT
applies to sale of land or asset that is capital in nature. As per capital Gain head of income
Tax in Australia, asset and property has been acquired after 1985 as being held by income
taxpayer for 12 months that is further considered as capital asset and CGT is applied on
property and asset. Emma as her resident has not used this property so that capital gain tax is
mandatorily applied on asset and this property. As Emma has not used as resident where
CGT, capital gain tax is applicable on sale of property. Another reason is regarding the
implications of CGT (capital gain tax) on property where vacant land has not been earning
any capital gain, which is applicable on property and its transaction. In order to examine the
amount of capital gain tax, which can be implied to the transactions where Emma will sum up
the expenses, which she did when has the ownership of land. Moreover, she has also incurred
expenses to remove dangerous pine trees before selling, which were present on land. These
expenses has been considered as a part of cost of land. The interest incurred by Emma while
buying land of 32000 dollars, stamp duty of 5000 dollars and the legal fees during purchases
will be added to the cost. All the council rates, insurance, and water rates will be included in
cost, even when the expenses incurred the settlement of dispute in 2005 with the use of land
of neighbours amounting to 5000 dollars. Further, advertisement fees, agent fees, and legal
fees during sale of land will be at last added to cost that is 25000 dollars. The first cost of
land is estimated at 250000 dollars with all expenses equal to 349000 dollars and the land is
sold at $100000. Therefore, capital gain is applicable on amount 651000 dollars.
Identification of CGT Assets
According to ATO (Australian taxation authority) to value every asset, unless the assesse
after acquiring it the enactment of CGT under income tax in 1985.

Real estate- Real estate is subject to CGT and it will be subject to exemptions and exclusions
Shareholding- section 108 related to capital gain, 1985 defines the assured exemption to cut
off the data.
Sale of shares of Rio Tinto nearly 1000 shares for $50.85 per share
Emma has sold 100 shares of Rio Tinto for $50.85 every share and it has paid 2 percent fees
for sale of the shares. Emma has initially bought the shares at the cost of 3.5 dollar per share
in 1982. Shares purchased by 1982 will not be considered as the capital Asset where no
Capital Gain apply to the profitability as being earned by selling the shares. The head of
Australian income tax capital gain head states that every asset such as property for the
investment, collectibles, and any shares bought before September 1985, which are not
considered as no capital Gain tax on capital Asset that is applicable on the transaction.
Stamp collection sale that Emma has purchased from the private collector January 2015 for 60000
dollars
Emma has purchased stamp collection from private collector in 2015, January. Emma has
recently purchased those stamps in 2015 where it was 50000 dollars where she has paid
auction fees of 5000 dollars to sell the stamp collection. Further, there will be no capital gain
applicable on the transaction as the shares were sold out in next 12 months of buying them
and as per the income tax; the taxpayer holds any asset for more than 12 months than the
capital gain tax is applicable on assets during the time when it is sold.
Selling the grand piano for 30000 dollars
Emma has sold piano in 2015 for 30000 dollars where Emma has bought Grand piano for
80000 dollars in 2000. It is important to note that capital tax gain is applied on transaction as
the asset is bought in 2000 and further sold in 2015 as the Emma holds the asset for the next
15 years. The piano is a depreciable asset with a depreciating rate of 40 percent each year as

it is a percussion instrument. Emma earned a profit of 30000 dollars from transaction under
capital gain heading of income tax of Australia.
Conclusion
From the above discussion, it is seen that there are several regulations and rules that can be
complied in order to determine the taxable liabilities. It is being examined that when a person
wants to lower down the tax implications and the burden, which he needs first to make proper
taxable planning by availing deduction and also the exemption on the taxable income.
Further, there are several benefits given by taxation authority to the assessor to reduce the tax
burdens. In first case, it can be seen that city Sky Company has been entitled to take input tax
credit from the lawyer as the fees has been paid to lawyer to avail legal services to the
developing vacant land, which remains a part of cost of final products where the company
deals in. Apart from this, the second case evaluates the situations of all the noted transactions
that are listed and they do not relate to capital gain under the income tax, which is given by
helping Emma to calculate taxable liabilities.

References
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