CLWM4100 Taxation Law: CGT Events, Capital Gains, and Harrison Carter

This report provides a comprehensive analysis of Australian taxation law, focusing on Capital Gains Tax (CGT) events as outlined in the Income Tax Assessment Act 1997 (ITAA 1997). Part 1 meticulously details the timing of various CGT events, referencing relevant sections of the ITAA 1997. Part 2 delves into the calculation of capital gains and losses, specifically advising on the net capital gains (losses) to be included in Harrison Carter’s tax return for the years ending 2018 and 2019, incorporating all available methods for calculation, including the CGT discount method and the indexation method. The report then provides a comparative analysis of the outcomes of these methods. The assignment brief also included a video presentation component, though it is not included in the provided document.

Running Head: AUSTRALIAN TAXATION LAW
Australian Taxation Law
Name of the Student:
Name of the University:
Author Note:

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AUSTRALIAN TAXATION LAW
Table of Contents
Part 1....................................................................................................................................2
Part 2....................................................................................................................................4
Reference list.......................................................................................................................7

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Part 1
CGT events under Income Tax Assessment Act 1997
Sections of the ITAA 1997 CGT event Time of Event
Sub 104-A Disposal of CGT asset When contract of
disposal is entered into or, if
none or when the entity stops
being the asset's owner
Sub 104-B Hire Purchase When the CGT asset
transferred (Bentley, D.,
2019).
Sub 104-C End of the CGT assets When compensation
is first received or when the
loss is discovered or
destruction occurred.
When the contract
asset is ended.
Sub 104-D Bringing into the existence of
CGT asset
When the contract is
made into or the when the
right is created.
Sub 104-E Trust When the trust is

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created or When the asset is
transferred or When the trust
is converted or When the
trustee makes the payment or
at the time of the disposal or
When the reduction happens
or When the entity makes an
agreement (Mangioni 2019).
Sub 104-F Leases When the entity enters
into the lease contract or
when the lessor grants the
lease or When the lease term
is varied or waived or When
the lease term is varied or
waived.
Sub 104-G Shares When the company
pays a non-assessable amount
or When declaration was
made.
Sub 104-H Special capital receipts When the deposit is
forfeited or When the act,
transaction or event occurred.
Sub 104-I Australian residency end When the individual

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or company stops being an
Australian resident.
Sub 104-J CGT related to the roll-overs When the company
stops being a member of a
wholly owned group after a
rollover
Sub 104-K Other CGT event When payment is
made.
Sub 104-L Consolidated group After entity becomes
subsidiary member
Part 2
Australia introduced capital gain tax in 1985 which is applied on the asset disposal.
Australian Tax Office or ATO regulates the capital gain tax. It is applicable on the capital loss or
gain which is calculated on difference between the cost of the asset and the amount received at
the disposal of the asset (Black 2018). Capital gain tax is the part of the income tax and it is not
considered as a separate tax. Capital gain loss can be offset against any capital gain and can be
carry forward for indefinite year. However capital gain loss cannot be offset against any other
normal income. CGT is payable in the year when the sell or disposal of the capital asset occurs.
There are three method to calculate the capital gain tax which are as follows:
 CGT discount method – It is applicable to the assets which is hold for more than 12
month. In this method capital gain is calculated by deducting the cost price from the
selling price then reducing the net amount by 50 %. This method is applicable to the

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individuals only while non-residents can also apply this after removing the discount
process.
 Indexation method – It is applicable when the asset is hold for more than 12 month while
the asset is acquired before 21 September 1999. This method increases the cost of the
asset by applying the index method. Under this method capital gain tax is calculated by
deducting the index cost price from the sale price. This method is applicable to the
company while individual can also apply for this if they satisfies certain condition (Dixon
and Nassios 2016).
 Other method – It is applicable when the asset is hold for less than 12 month. It is the
simplest method than other two method as it is calculated by subtracting the cost from the
sale price.
Harrison capital gain tax is calculated by using two different method which are stated below.
From the below calculation it can be seen that the net gain by using discounted method is
$168,528 and the indexation method is $ 24190. So the most profitable method will be
indexation method as it will save tax by showing less income.
DISCOUNTED METHOD
ITEMS AMOUNT AMOUNT
sale of land 1,300,000$
less: cost of purchase 800,000$ 500,000$
sale of shares 120,000$
less: cost of purchase 40,000$ 80,000$
less: capital loss of 2018/19 adjusted 65,000$
Total capital gain 515,000$
less: discount @ 50 % 257,500$
257,500$
less: capital gain tax 88,972$
Net capital gain after tax 168,528$
Computation of capital gain tax
for the year 2018/19

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INDEXATION METHOD
ITEMS AMOUNT AMOUNT
sale of land 1,300,000$
less: index cost of Acquisition 1,320,984$
(purchase price * sales CPI/Purchase CPI)
capital loss from sale of land (20,984)$
sale of shares 120,000$
less: index cost of acquisition 69,152$
capital gain from sale of shares 50,848$
net capital gain 29,864$
less: capital gain tax 5,674.24$
Net capital gain after tax 24,190.17$
Computation of capital gain tax
for the year 2018/19

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Reference list
Bentley, D., 2019. Does A Capital Gains Tax Work? The Australian Experience Eleven Years
On. Journal of Malaysian and Comparative Law, 23, pp.13-36.
Black, C., 2018. Taxation of Intellectual Property Under Domestic Law and Tax Treaties:
Australia. Taxation of Intellectual Property under Domestic Law, EU Law and Tax Treaties",
IBFD: Amsterdam.
Dixon, J. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in Australia.
Centre of Policy Studies (CoPS), Victoria University.
Mangioni, V., 2019. Value capture taxation: alternate sources of revenue for Sub-Central
government in Australia. Journal of Financial Management of Property and Construction.