Taxation Law Assignment: Capital Gains Tax (CGT) Implications

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Taxation Law
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Contents
Question 1.............................................................................................................................................3
Collectables..........................................................................................................................................6
Personal use assets................................................................................................................................7
Depreciating assets...............................................................................................................................8
Question 2.............................................................................................................................................9
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Question 1:
Answer: CGT consequences of the below sales.
S
no.
Result Explanation
A Exempted
Reason: Jasmine purchased the home in 1981
and she uses this home for the main residence
purpose and as per the law this is exempted
(Australian taxation office, 2018).
According to the Australian tax system,
gain from the residence use as main
residence is exempted under the law
B Exempted
Reason: Capital gain arises from the car is
$21000 but this gain is exempted under the law.
Because the capital gain arises from own motor
vehicle which carries the load less than 1 tonnes
and not more than 9 passengers are exempted
under the law
As mentioned in the Law capital gain
arise from “Assesseer own car” is
exempted “the car” is described as
“motor vehicle” that is meant to carry
load for not more than one tonne & not
more than ninetravellers.
C Jasmine started her small business herself and
now wants to sale this business and buyer is also
available to take over the business. The business
is taken over at $ 125000 and the business
equipment who’s cost at $65000 are sale at
$75000. So, the capital gain is of $70000
The age of Jasmine is 65 years and she sold her
active business to the buyer (Australian taxation
office, 2018). So, she is applicable for the
exemption and need not to pay the capital tax.
There are three concessions allowed for
selling off the active asset:
1. In case assesseer business continuously
retained as a functioning asset for
fifteen years and the assesseeee age is
55 0r more than 55 and are retiring then
he /she is not liableto pay capital gain.
When the assessee sold that asset
2. Assessee can trim down the capital gain
on a functioning asset by fifty percent
3. This is mentioned in a provision that
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capital gain arises from the trade of
functioning asset are exempted equal to
a limit of $500000 throughout its life. If
the assessee’s age is less than equal to
55 years then exemption amount should
be paid in the form of fulfilling super
fund or in the saving account which is
opened for the after-retirement purpose.
D Jasmine is selling her furniture at $5000 which
cost $2000. As per the ATO asset which is used
for the personal purpose and costs less than
$10000 which comes under the category of
exempted goods from CGT
It was states in the law that the
depreciable goods which is used for the
personal purpose and costing of that
asset is $10000 or less is exempted
from the capital gain tax
E Jasmine have numerous paintings and she selling
them all for $35000 and all these paintings are
purchased in by the second hand shops or
markets. It is also mentioned all the individual
painting is costing is less or equal to $500. That
is why the gain arise from the sale of the
painting is exempted under the law
As per the law, if the depreciating asset
is a personal used asset and its costing
is less than $10000 then capital gain
arises from that asset is exempted under
the law (Australian taxation
office(ATO), 2018)
Capital gain tax
Capital gain tax may not be any different tax, it is only the segment of income tariff, that is realised
from the disposal of capital asset such as property, shares. When the selling price of the capital asset
is more than the purchasing price of the investment asset, so the tax thereon that gain is said to be
capital gain tax(Australian taxation office, 2018).
Assessee ought to report gains or losses derive from the capital asset in the income tariff return and
that pay tariff on the capital profits. Even thoughthis is denoted as capital gain tax (CGT). At the
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time when individualis having a capital gain, it should beincluded to the assessee’sassessable
income & may drasticallyboost the amount of tariffone need to pay. At the same time tax is not
keep back for capital profits, assessee want to calculatethe amount of tariff is obligedto pay
alsoaccordingly lay bythe ampleamount of funds so that it covers the relevant amount of tax
In case if individual come up with a loss occurred from selling of investment asset, then
assesseecannotpetit it in the favour ofassessee’s other income but assessee can use this deficitforthe
reductionin the capital gain.
All the assets which assessee haveprocuredfrom the time whentariff on capital profit started i.e.
on September, 20, 1985are bounded by CGT unless it isexclusively excluded by the Law.Other than
this there are many assets which are excluded from the capital gain tax as below:
 CGT also did not attach to all depreciable assets which arewastedparticularly for only taxable
purposes, like asany fixtures or fittings in a rental property or business equipment.
 Most of the individual’s own assets are exempt under the Act of CGT, these includes own car,
assessee’s home, and private use assets such as furniture.
When assessee went into the agreement or transfer is the main spot at which assesseecome up with
capital addition or misfortune. In this way, if assessee intends to go in an agreement to exchange a
speculation property September 2017 and settle this in November 2017, assessee need to make
reference to this addition or misfortune in assessee's government form for the appraisal year 2016-
2017
In the event that individualis a native of Australia, at that point, CGT levy applies to assessee's
benefits wherever in the entire world. For the occupant of Norfolk Island, CGT duty applies to those
benefits which are taken over from or after 23 October 2015. On the off chance that if inhabitant of
some other nation think of a capital increase or misfortune, in the event that on the off chance that a
CGT occasion happens to a benefit which has a place with Australia, at that point it is an
"assessable Australian property".
All benefits assessee havetaken overfrom when this duty is appropriate CGT begun on 1985
September20 are matter to the CGT untilit isexclusively let off.
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For instance, CGT applies to: property, shares units and alike investments,cryptocurrency, legally
binding rights, generosity, remote nation cash, and real capital improvements made to the land or
Pre-CGT assets,precious things and private use resources surpassing a particularvalue
Exemptions
Maybe a couple of the benefit's capital increases are absolved that implies the capital addition
acknowledged from those advantages is free from CGTExemptions contains capital additions or
misfortunes for:
• Assessee's private habitation for example property which is utilized for the claim reason
• Asset whose worth isdepreciating and istotallyused for assessable purposes, as asfixtures &fittings
in a rental propertyor business gear.
• Assessee's very own (vehicle as an "engine vehicle" that built to convey a heap of not more than
one ton and less than nine explorers)
• Any resource which is purchasedon before 20 September 1985.
• Items utilized for claim reason which are taken over for not more than $10,000
• Precious things might be any sort of sketches, the stamps, remote monetary standards or and so
forth gained forupto $500 or less,
• Assets that are utilized absolutely to deliver pay which is absolved or some different kinds of non-
assessable non-excluded income.
• Losses or rewards from betting, a game or a challenge with prizes
• Repayment or installment of anyassessee's costs under the accompanying
• A installment got onby give up of a protection strategy where assessee are the first advantageous
proprietor of the arrangement.
• The handover of a super enthusiasm for one little super finance (a going along reserve that has less
than five individuals) to another on the breakdown of a connection between companions or previous
life partners
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• A CGT occasion striking the distributive current benefits resource of a consenting super subsidize
• Some consumption under an annuity instrument, or general protection strategy
• Shares in mutualexpansion support
• Profits or misfortunes got from clearance of speculations by certain investment substances
• A money related plan where additions and misfortunes are determined under the tax collection of
monetary game plans (TOFA) rules.
• Gift that is given in kind or in real money.
Collectables
Collectables or valuable things that incorporate the subsequent things utilized or kept fundamentally
for the claim use or joy of assessee or assessee's partners:
• Drawings, photos, works of art, sculptures,or; reproductions of these things; or property of a
comparableexplanation or use
• Gems or gems
• Antiques things
• Medallionsor coins
• Scripts or books, uncommon folios
• First day spreads or Postage stamps.
A collectable may likewise be:
• A interest in anyitems as recorded previously
• An alternative or ideal to get to some degree those things.
• A advance that produce from any of those things
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There are a few exceptions in the valuable thing additionally which an Assessee canneglect of any
capital increase or misfortune that assessee gets from a valuable thing if any of the accompanying
applies:
• The collectableacquired by an assesseeis $500 or less is at the very latest 16 December 1995
In the event that assesseesale of discreteprecious thing thanassessee would generally closeout of as
a set, assessee are absolved from paying levy just if assesseetakes the set for the estimation of $500
or less and that would be on or after the date 16 December 1995(Braithwaite, 2017).
Misfortunes got from the closeout of collectables must be utilized to diminish the measure of capital
increases acquired from some other collectables. On the off chance that assessee isn't having any
capital addition from another collectable in the that year, than assessee can convey forward that
capital misfortune with the goal that it very well may be use in an up and coming year. There's no
time imperative on up to what time an assessee can convey forwardthis capital misfortune on
theprecious things.
Private use resources
Private use resources are those CGT resources, which are other than collectables, and are utilized or
put for the most part for possess utilization or satisfaction of assessee or assessee's partners. Any
close to home use resource assesseethat is obtained for not in excess of ten thousand dollars is
disregarded for CGT purposes.
Individual use resources include:
• boats
• electrical products
• furniture and fioxtures
• household things.
An individual use resource is too an choice, or a right, to gain an individual use resource a loan
comes from CGT occasion interfacing a CGT resource kept to a great extent for assessee'sown use
and joy doing somewhat other than ahead of time or constructingassessee'staxable salary or carrying
on a business.
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Assessee's very own home and claim vehicle or bike is alsodenoted as close to home use resources.
If the assessee’s consumption of personal use assets discretely than that could frequently be
disposed of as a set, assessee can get the exemption only when assesseepurchased the set for equal
to or not more than $10,000 (Braithwaite, 2017).
Depreciating assets
Depreciating assets do not come in the category of those assets on which the CGT applicable if the
assessee use these assets only for taxable purposes (like as or items in a rental investment, business
equipment).
Profits or losses earn on these depreciating assets are preserved as assessable income or appealed as
reductions, until or unless the assets were share of a depreciation assets pool. So, if assessee do not
usesthe depreciating asset for taxable purpose lets say used for own personal purpose, then CGT
apply(Braithwaite, 2017).
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Question 2
If assets or investments are downfrom other country, then it is assessee’s responsibility to announce
all relevant outputs as if they belong to the country. This may comprise: interest income earned
bank deposits which comes from overseas or bonds dividends from shares units, from anyrental
intellectual property income, real estate pensions, lump sums and annuities or from managed funds
income streams, from super funds some pensions foreign government (Braithwaite, 2017).
The cost of the CNC machine forthe purpose of calculating the capital allowance
Particulars Amount in $
Purchase of CNC machine imported from
Germany.
300000
Add: Installation cost 25000
Add: Installation of Guiding rod 5000
Total cost of CNC machine 330000
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References
 Australian taxation office, 2018. Amounts not included as income. [online] Available at:
https://www.ato.gov.au/Individuals/Income-and-deductions/Income-assessee-must-declare/
Amounts-not-included-as-income/ [Accessed 27August 2018].
 Australian taxation office, 2018. Capital gains tax. [online] Available at:
https://www.ato.gov.au/General/Capital-gains-tax/ [Accessed 27 August 2018].
 Braithwaite, V., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
 Foley, J.T. and Nicklanovich, S., Charles Schwab and Co Inc, 2017. System and method for
forecasting tax effects of financial transactions. U.S. Patent 9,773,276.
 Onji, K. and Gordon, R.H., 2017. Taxes, corporate takeovers, and step transactions.
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