Taxation Law Assignment: CGT and GST Analysis - HI6028

This assignment analyzes two taxation law problems. The first problem examines whether a property development company, Citysky Co, can claim Input Tax Credit (ITC) for legal services under GST regulations. The solution applies the relevant GST legislation, including the requirements for creditable acquisitions and GST registration, and calculates the ITC amount. The second problem delves into the Capital Gains Tax (CGT) consequences for Emma, considering various transactions, including the sale of land, shares, and personal assets. The solution calculates the cost base, cost proceeds, and CGT gain or loss for each transaction, applying the relevant provisions of the Income Tax Assessment Act 1997, including the 50% discount for assets held over a year. The assignment demonstrates the application of tax principles to real-life scenarios, covering issues of GST and CGT.

Running head: TAXATION LAW
TAXATION LAW
Name of the Student:
Name of the University:
Author Note:

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Answer 1:
Issue
The issue that arises here is that whether Citysky Co can claim ITC on the basis of the
presumption that the company has undergone registration under GST effect.
Rule:
ITC can be claimed only on specific goods or services on which GST is applied. This is a
statutory provision done under section 7.1 contained in the Goods and Services Tax 1999,
hereinafter referred to as GSTA. If anyone desires to claim ITC, GST is required to be imposed
on the goods or services concerned. But the imposition of GST depends on two conditions that
have to be covered when GST is imposed. Such conditions are importations and supplies that are
taxable.
For any transaction covered under GST effect, occurrence of two events is mandatorily
required. Such requirements provide that the concerned events must be either creditable
importation or creditable acquisition.
The importations or the suppliers are deemed to be considered as the taxable supplies or
importations provided one can establish that the company which was involved in such type of
transactions related to it is included under GST provisions or such company possesses the
eligibility to be incorporated in future as a company liable to GST.
Those companies or organizations that are registered or incorporated under the GST
system possess the right of claiming ITC from their acquisitions that are creditable and also from

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those importations that are predictable due to which the companies or the organizations have got
GST imposed for the concerned importations or acquisitions related to services and also goods.
The entities that are claiming ITC are required to undergo registration of GST in order to make
their claims valid and successful. The condition to be fulfilled in order to be registered as GST
imposed entity is that the entity must carry out activities that can be regarded as businesses.
Moreover, those entities must not be barred expressly from GST charging. Thus an entity can
claim ITC in case it can fulfill the condition of availing services or goods for causing a supply
that can be taxed and such that they shall never avail as an end consumer of those services or
goods. This has being construed in the judgment given in Uber B.V. v Commissioner of Taxation
[2017] FCA 110 2017 ATC 20-608.
The entities registered and incorporated in the scheme of GST have the eligibility to
claim ITC for every creditable importations as well as creditable acquisitions in respect of which
GST is being imposed on those entities. Creditable acquisition refers to any acquisition which
has been availed by the entity for making supplies that can be taxed or is not excluded by
statutory implications for getting taxed under section 11.5 contained in GSTA. ITC claim can
arise only in cases involving creditable acquisitions.
GST which can be imposed on any taxable supply can be calculated as 10 percent on the
valuation of the supply as enumerated in section 9.7 of GSTA. In order to calculate the taxable
amount, 10/ 11 of gross amount of valuation is considered.
Application:
In this case study, it is seen that a company called the City Sky Co is found to be engaged
in the business of property development as well as the property developing company. in recent

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time, the Company made a transaction for buying a land located in the southern part of Brisbane
over which the company has plan to construct total 15 apartments with an intention of selling
them. Any company that has been incorporated under the GST scheme or has the capability to
be registered and incorporated as a business as per the scheme of GST policy will be having the
right of claiming ITC from their acquisitions that are creditable and also from those importations
that are predictable due to which the companies or the organizations have got GST imposed for
the concerned importations or acquisitions related to services and also goods. The entities that
are claiming ITC are required to undergo registration of GST in order to make their claims valid
and successful. The condition to be fulfilled in order to get registered as a GST imposed entity is
that the entity must carry out activities that can be regarded as businesses. Moreover, those
entities must not be barred expressly from GST charging.
In the present case the creditable acquisition or creditable imposition that is attracted here
is the legal services that is availed by the company at a cost of 33000 $ from a local lawyer
named as Maurice Blackburn. A sole trading business was established by the lawyer and the
revenue turnover of such business amounts to 3000,000 $ every year. The matter to be analyzed
here is that whether for this particular transaction of 33000 $ the company can claim ITC.
The entities incorporated under the scheme of GST have the eligibility to claim ITC for
every creditable importations as well as creditable acquisitions in respect of which GST is being
imposed on those entities. Creditable acquisition refers to any acquisition which has been availed
by the entity for making supplies that can be taxed or is not excluded by statutory implications
for getting taxed under section 11.5 contained in GSTA. ITC claim can arise only in cases
involving creditable acquisitions.

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Thus, here it is seen that the company can claim ITC successfully for the said transaction.
The same can be calculated in the following manner,
Value of taxation= (10/11)* 33000 $= 30,000 $.
ITC value= 10 % * 30000 $= 3000 $.
Conclusion:
The amount of money that City Sky Co can claim as ITC is equal to 3000 $.
Answer 2:
Issue:
The issue here is discussing the CGT consequences of the transactions made by Emma.
Rules:
When any property owner disposes his property of capital nature by sale then such
transaction involved will be considered in the light of the A1 CGT event given under the
provision of section 104.10 of the Income Tax Assessment Act 1997 (Cth), hereinafter referred
to as ITAA 97.
This A1 CGT event occurs when there is absolute transfer of the title of the owner by the
act of the parties or by the operation of law. But this event will not take place in case the transfer
of the property occurs from the owner having legal title to the owner having beneficial title. The
property is said to be disposed when the ownership of such property is changed from one person
to other due to sale or due to any other transaction made by the concerned parties.

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The cost base (CB) of any property of capital nature can be calculated according to the
rule given under sub- section 1 of section 110.25 contained in ITAA 1997. Mainly five elements
are present in a CB. The first element that requires to be taken into account for computation of
CB is the expenditure made by an individual tax payer made for buying the capital asset. In case
where the capital asset is exchanged for another similar asset, then market valuation of the asset
exchanged will be the CB.
The second element to be considered for calculating CB is the expenditure or expenses
incurred by such taxpayer as an expense incidental to the capital asset acquisition.
The element that appears next while calculating CB is the cost of being the owner of the
capital asset incurred by the tax payer. This particular element is applied only when such asset
has been bought after 20th August 1991. This element further includes the interest required to be
borne by the individual taxpayer on the amount borrowed for availing the said asset. Moreover,
the repairing cost, maintenance cost and insurance amount incurred during the purchase of the
property also come within the third element. It even includes the tax imposed on the asset. Even
the interest that accrues to the amount borrowed for enhancing the asset also falls within the 3rd
element. But this cannot be considered for collectibles or personal using things.
The 4th element is the expenses incurred by the tax payer to protect the asset from damage
and deterioration whereas the 5th element expenses incurred for defending the ownership title of
the asset.
Cost proceeds (CP) is the money received by the tax payer by disposing of his capital
nature asset and CP is calculated under section 116.20 contained in ITAA 1997. All amount

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received by the tax payer for disposing the property comes under the CP. The market price of the
property will be considered as CP when any property is being exchanged for another.
In case the tax payer holds the property for more than 1 year then 50% discount is
allowed on the capital gain accrued fir disposing the property.
Application:
In this case, the outgoings and receipts incurred by means of several transactions are
discussed to discuss the CGT consequences for the transactions discussed below.
Sale of land block at a price of 1,000,000$
Buying price= 250000$ (E1)
Expenses incurred for Legal duties, stamp duty= 10000+5000= 15000$ (E2)
Water rates+ council rates+ insurance cost= 22000$ (E3)
Legal fees= 5000$ (E4)
Cost incurred for removing large pine trees= 27500$ (E5)
Legal fees+ advertising charges+ fees of agent= 25000$ (not considered)
Sale proceed= 1000000- 25000= 975000
Sale of 100 shares in Rio Toronto belonging to Emma at 50.85$/share:
Shares bought for (3.5 * 1000)$= 35000$
Sold for (50.85* 1000)= 50850 $.

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Selling of the stamp collection purchased by Emma from a collector in the month of
January:
Sale Proceeds= 50000- 5000= 45000$
Purchase price= 60000 $.
As buying cost is more than selling price, hence a loss of 15000 $ will be carried onward to the
next year.
Sale of grand piano:
Sale proceeds= 30000$
Purchase price= 80000$
As buying cost is more than selling price, hence a loss of 15000 $ will be carried onward to the
next year.
CGT consequences for Emma:
CGT Gain
Amount
($)
Amount ($) Amount ($) Amount
($)
Amount
($)
Amount
($)
Land block
Cost Proceeds 975,000
Element 1 25,0000
Element 2 15000 (5,000 +
10,000)
Element 3 22000
Element 4 5000
Element 5 27500
Cost Base 319,500

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CG 655500
Post discount
CGT gain
327750
Sale of Rio
Tinto Shares
Cost Proceed 49,833
Cost Base 3,500
CG 46333
Post discount
CGT gain
23167
Net Capital
Gain Tax
consequence
s
350917
Conclusion:
Thus the CGT gain accruing to Emma is 350917 $ out of the transactions made by her.

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References:
The Goods and Services Tax 1999
The Income Tax Assessment Act 1997 (Cth)
Uber B.V. v Commissioner of Taxation [2017] FCA 110 2017 ATC 20-608.