Australian Tax Law: Classifying Assets - BHP Shares and Home Ownership

This report classifies shares in BHP and home ownership under Australian Tax Law, determining whether they are collectibles, personal use assets, or CGT assets. Shares in BHP are classified as 'other assets' due to their nature as a capital investment, making them subject to capital gains tax. Any gains or losses upon disposal should be declared for tax purposes. Conversely, a home typically falls under the 'personal use asset' category if it serves as the primary residence and meets the dwelling tests. The main residence exemption rule may apply, exempting the home from capital gains tax under certain conditions. However, if the acquisition cost exceeds $500, capital gains tax implications may arise upon disposal. Desklib provides a platform for students to access similar solved assignments and study resources.

AUSTRALIAN TAX LAW
CLASSIFICATION OF TAX ASSETS AS COLLECTABLE, PERSONAL OR CGT ASSETS.
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AUSTRALIAN TAX LAW
Both collectible and personal use assets are thus kept for luxurious personal use hence
attracts special treatment for capital gain tax on gain and losses since capital gain tax only
applies to those whose acquisition cost is more than $500 and for personal use assets is that
which is more than $10000 thus subjecting the holdings for capital gain tax but of course under
entirely different capital gain tax rules that is contrary to the standard capital gain tax rule
(Sawyer and Sadiq,2017.Pg.12.) Let it be known that capital loss recognition is only applicable
for the collectible asset but not personal use asset.
If an asset does not belong to either collectible or personal use asset it therefore
automatically fit in a class of assets so-called other assets or rather those who are subjected to
standard capital gain tax rules in case of gain or loss upon disposal. Ideally, most of this asset
referred to as average asset is deemed held for capital investment, business operation and healthy
growth. Its benefit is considered current and real upon conversion of actions to make it give you
the advantage you require (Evans and Krever, 2017.Pg.24.)
The two items in question, i.e., shares in BHP and your home belong to either one of
the three assets of course depending on the tests in each of asset category. Starting with the
shares in BHP I wish to state that Australian Tax Office and Australian Accounting Standards
and regulation on stocks classify share ownership as a capital investment, thus qualifying the
asset shares in BHP as other assets since it now does not fit in the collectible and personal use
asset
The fact that is a capital investment due to its gradual unique nature of the benefit, ease
of transferability and conversion among many other, makes is attracts capital gain or loss upon
disposal. These shares in BHP as a result of its nature class of other assets qualifies for capital
gain tax hence any gain on disposal should be declared for tax purpose similarly to any dividend

AUSTRALIAN TAX LAW
or interest earned by the shares in BHP. The capital gain made on disposal of these shares should
be included in the income, and if any capital loss occurs it should be carried forward for future
capital gain set off if any (Sialm,2009.Pg.1356.)
Your home asset falls under personal use asset mainly because it satisfies all the
requirements outlined in the personal use rule of private residence thus classifying this asset as a
private personal residence for capital gain tax. If this home has dwelled in it and that in it their
own lives there it automatically fails to be considered for capital gain tax in case of any disposal
of the same. Capital gain tax exemption is subjected on this home dwelling only upon
satisfaction of dwelling tests, hence if the test is not satisfied the capital gain tax on this asset is
not satisfied (Jacob,2018.Pg.21)
Main residence exemption rule for personal use asset ‘your home’ does not recognize
capital exemption on this property if the acquisition cost of the ownership is more than $500
upon disposal hence, in this case, it is expected that there is a capital loss or gain in this instance
hence a need to declare capital gain thou capital loss is not applicable.

AUSTRALIAN TAX LAW
References;
Evans, C. and Krever, R., 2017. Taxing Capital Gains: A Comparative Analysis and Lessons for
New Zealand.
Jacob, M., 2018. Tax regimes and capital gains realizations.European Accounting Review, 27(1),
pp.1-21.
Sawyer, A.J. and Sadiq, K., 2017. Reflections on New Zealand’s ‘Experience ‘with Capital
Gains Taxation.
Sialm, C., 2009. Tax changes and asset pricing. American Economic Review, 99(4), pp.1356-83.