Australian Taxation Law Homework: CGT, Income Tax, and Residency

This document presents comprehensive solutions to an Australian Taxation Law assignment. It addresses specific questions concerning capital gains tax (CGT) implications on lease premiums, capital gains calculations with indexation and discounts, and the tax treatment of share sales. The assignment also delves into income tax considerations, including the taxability of a prized television, employee expenses, gifts from clients, personal injury compensation, and share purchases. Furthermore, the document analyzes the residency status of an individual for Australian income tax purposes, considering domicile, the 183-day rule, and the superannuation test. References to relevant Australian Taxation Office (ATO) guidelines and rulings are included to support the analysis. This assignment provides a complete overview of taxation liabilities for individuals and entities under Australian law.

TAXATION LAW OF
AUSTRALIA

Table of Contents
QUESTION 3...................................................................................................................................3
A..................................................................................................................................................3
B..................................................................................................................................................3
C..................................................................................................................................................4
D..................................................................................................................................................4
QUESTION 4...................................................................................................................................5
A. Taxable ascertainment for the Prized TV...............................................................................5
B. Employee expenses and taxable consequences......................................................................5
C. I-phone expenses by a client...................................................................................................6
D. Expenses awarded as personal injuries incurred by an individual.........................................6
E. Taxation liabilities for an individual regarding purchasing of shares....................................6
QUESTION 5...................................................................................................................................6
Income Tax citizen of Australia..................................................................................................6
REFERENCES................................................................................................................................8

QUESTION 3
A.
On the basis of cited case situation Andy invested in land and leased it to Brian for the
period of five years. In this regard, premium of $5000 also obtained by Andy. As per Australian
Taxation Office (ATO), in the case of lease with premium capital gain tax implies for the
difference addition amount received and expenditure incurred (CGT events involving leases,
2019). In other words, in such case, variations which take place between any premium received
and expenditure incurred for lease is considered as capital gain. Thus, in the current situation
pertaining to Andy there is no information regarding to expenses. Referring all such aspects, it
can be presented that CGT implications are allowed on the premium figure of $5000 in relation
to lease. Along with this, it has found that CGT discounts does not apply on such events. Hence,
CGT will be charged on the figure of lease premium $5000 respectively.
B.
Computation of capital gain for year 2018-2019
Indexation method:
Particulars Figure
Indexation value: 112.6 / 90.3
= 1.25
Current value of land (after indexation) 40000 * 1.25
= 49878.18
Capital gain 800000- 49878.18
= 750121.81

By doing assessment, it has found that John held property for more than 1 year so he is
obliged to pay tax foe the following figure:
As per 50% discount
750121 / 2
= 375060.9
C.
Capital Gain Tax of Australia clearly presents that if an asset is held or occupied by an
individual for at least 1 year then 50% discount is allowed to individual taxpayers (Capital gains
tax, 2019). Cited case situation entails that Jamie and Olivia bought house in 2006 and sold the
same in January 2018. During this period, Jamie and Olivia rented their house till January 2008
and after this period they occupied the same. On January 2018, this couple made a capital gain of
$300000 by selling house. By taking into account CGT, Australia, it can be depicted that 50%
discount is allowed on the figure of $300000. Further, case highlights that, with regards to tax
year 2018/2019 50% discount is allowed on such transaction. Accordingly, tax will be charged
on the capital gain figure of $150000.
Capital gain tax (50% discount) = $300000 * 50%
= $150000
D.
Purchase
Computation of capital gain tax for the year ended on 2019
Particulars Amount (in $) Amount (in $)
Sale of BHP shares (refer
section 104-10(1)
18720

Acquisition cost (refer
section 110-25(1)
5400
Capital gain (taxable figure) 13320
Less: CGT discount of 50% 6660
6660
Sales of Wesfarmers shares
refer section 104-10(1)
10500
Acquisition cost (refer
section 110-25(1)
26000
Loss from sales of shares (15500)
Net capital loss (8840)
The above depicted table shows that Chris incurred the loss of $10400 by selling shares.
In accordance with this, obligations pertaining to capital gain tax and discounting aspects are not
applied. Rules clearly state that losses can be offset in against to gains. However, one cannot
offset the figure of loss over normal income level (Capital losses on shares and units, 2019).
Thus, loss of $10400 may be carried forwarded and offset in the near future again capital gain.
QUESTION 4
A. Taxable ascertainment for the Prized TV
The television amounted to $2000 has been denoted as the other income as Australian
Taxation Office. However, in this case it has been treated as 50% of tax would be payable by that
individual on the prized asset. Such as $1000 will be taxable under the legal consequences of
ATO. On the other side, there is no requirement for disclosing the amount earned in ordinary
lottery. Thus, in such cases there will be requirement of making payment for capital gains
(Taxation Ruling, 2018). As per IT 167 ruling on which it can be said that prized item has been
used by an individual in business purpose than, it would be completely taxable.

B. Employee expenses and taxable consequences
In relation with this case, here employer had given $500 to his employee for the office
purpose traveling while there was a term which was associated with this action was that, he can
keep whatever remained in $500. However, in relation with such grant there will be no taxable
liability made on the such $500. It is completely exempted.
C. I-phone expenses by a client
iPhone amounted to $1000 has been treated as grant from client. Thus, this is not an
ordinary gift, it will be counted in the luxurious gift than 50% of the amount will be taxable
under the Income Tax Assessment Act, 1990. Moreover, in this case the person has to make
payment of $500 as taxable gains through gifts.
D. Expenses awarded as personal injuries incurred by an individual
Accidents and various issues which have been incurred uncertainly. However, helping
one with monetary support must be treated as grants. Therefore, in this case there are injuries
incurred due to car accident and to cure up with such damages there has been grant of $10000
was awarded to that individual. Therefore, there will be no requirement of making any taxable
payment to such amount. It is received by the one to cope up with personal injuries which would
be adequate and effective as per mitigating the challenges. There are guidelines which were
being awarded by The Commonwealth Grants Rules and Guidelines (CGRGs) which has
established the overarching grant policy framework. Moreover, in this case, the victim need not
to make payment of any tax on such grants which has been used in the personal treatment and
relevant medical expenses.
E. Taxation liabilities for an individual regarding purchasing of shares
Purchasing and selling the marketable securities requires one to make payment of taxes.
Thus, these are the sources through which one could become able to retain gains in upcoming
period. However, it can be treated under Capital Gain Tax (CGT) as real estate assets, shares and
various assets which would be purchased and sold on which 50% of amount will be taxable
(Capital gains tax. 2019). Thus, as per the fluctuation incurred in the share value and over the
time the person receives profit than he has to make payment for the earned amount in income
tax.

QUESTION 5
Income Tax citizen of Australia
Nisu arrived in Australia at 30th December and went back to Nepal on 30th June. He
stayed in the country for about 6 months. Below explored are the factors which needs to be taken
into account in determination if Nisu would be considered as the resident of Australia for income
tax purposes for the 2018/19 income year: Domicile Test: This test requires Nisu to be a permanent resident of Australia. As per
this, it is important for the person to be a permanent resident, under which he needs to be
born in Australia and should be a part of the country's database of its citizens (McBarnet,
2019). Nisu was from Nepal and he stayed in Australia for only 6 months (or 182 days).
He was not the citizen was Australia as well. He moved to the country in order to study
and earn a living. 183 day test: This test requires Nisu to be present in the country for at-least half the
income year (whether with breaks or continuously). This ensures that now the citizen is
able to be called as a part of the country and he is able to be a part of the Australian
income tax purposes. Nisu stayed in the country for 182 days and the it is important for
him as per the law to stay in the country for about 183 days in order to ensure that he is a
part of Australia for income tax purposes.
 Superannuation Test: This test is designed in order to ensure that the government of
commonwealth employees are working at the post of Australian overseas are being
treated as the residents of Australia. Nisu was working as a part-time and not as full time
job. Along with it, the job was not at an official company but at a book-store which
explains that it is not possible for Nisu to be a resident of Australia for income tax
purpose under the superannuation test.
As per the above factors it can be clearly seen that Nisu is not capable to a be an
Australian resident for income tax purposes. He failed at the factor of Domicile Test because he
is not a resident of Australia by any means (Brown, 2018). The next factor was the 183 day test
under which he needed to stay in the country for at least one more day, under which he stayed
there for 182 days. It makes him not eligible for the tax purposes and the last factor of

superannuation test required him to work as a professional candidate in the country. He was
working at a book-store which does not says that it was a professional job. Nisu failed all of
these criteria. It was important for Nisu to at-least complete 183 days in the Australian country,
in order to ensure that now he can be part of the Australian income tax purposes.
REFERENCES
Books and Journals
McBarnet, D., 2019. When compliance is not the solution but the problem: From changes in law
to changes in attitude. Centre for Tax System Integrity (CTSI), Research School of Social
Sciences, The Australian National University.
Brown, C., 2018. Submission to the Inspector-General of Taxation, Review into the Australian
Taxation Office’s use of Garnishee Notices.
Online
Capital gains tax. 2019. [Online]. Available through: < https://www.ato.gov.au/General/Capital-
gains-tax/>
Capital gains tax. 2019. [Online]. Available through :< https://www.ato.gov.au/General/Capital-
gains-tax/>.
Capital losses on shares and units, 2019 [Online]. Available through: <
https://www.ato.gov.au/general/capital-gains-tax/shares,-units-and-similar-investments/
capital-losses-on-shares-and-units/>.
CGT events involving leases, 2019. [Online]. Available through: <
https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/Sale-
of-property-and-other-CGT-events/CGT-events-involving-leases/>.
Taxation Ruling. 2018. [Online]. Available through :<
https://www.ato.gov.au/law/view/document?DocID=ITR/IT167/NAT/ATO/00001&PiT=9
9991231235958>.