Taxation Report: Capital Gains, Losses and Tax Implications Analysis

This tax report analyzes various scenarios involving capital gains and losses, offering insights into the Income Tax Assessment Act 1997. The report begins by outlining the residential position for taxation, considering factors like incorporation, control, and central management, referencing the case of Ors V Commissioner of Taxation and Baywater Investments Ltd. It then delves into calculating taxable amounts, including the impact of bad debts and indexation on capital gains. Several questions are addressed, examining the tax implications of different asset types, such as land, shares, and jewelry, and determining whether the assets are CGT assets. The report also discusses the treatment of various assets like shares and licenses, calculating the taxable amount and providing detailed calculations for each scenario, showcasing the application of relevant tax regulations. Finally, the report concludes by analyzing the deductibility of expenses, such as interest on loans and media campaigns, in relation to the Income Tax Assessment Act.

Running head: TAX
Tax
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Part 1..........................................................................................................................................2
Part 2:.........................................................................................................................................3
Part 3:.........................................................................................................................................7
Reference....................................................................................................................................8

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Part 1
In accordance of the Income Tax Assessment Act 1997, in section 6(1) there are three
procedures applied to examine the company’s residential position for taxation. These are the
procedures for incorporation, control and central management, and the stakeholders are
controlled. If any one of the necessities are fulfilled by, the company then in Australia this
company is measured as a tax resident. Again, under the Corporation Act 2001 in Australia
when a company is incorporated, then this company mechanically turns into a tax resident of
Australia and thus none of the factors is counted. The company is required to continue a
business in Australia and the control and central management are exercised to announce that
the company has appeared as an occupant of Australia (Braithwaite 2017). The facts that are
required to decide the operational actions of the central administration of the country for
example as to search for the space for the chief decisions of the company regarding the
business is formed or the place where this decision is to be executed which are created by the
management. The whole matter is stated in the case of Ors V Commissioner of Taxation and
Baywater Investments Ltd., 2016.
In this current case, the endeavour of Elwood Blues that has its base in Singapore but the
primary business of goods transportation by ship from Sydney to Africa is continued in
Australia. In Singapore, the meetings of the directors are being detained while in Monaco the
annual general meeting is carried. Meanwhile the problems that rises from this situation is,
the business of the company is continued in Australia but the company’s control and central
management which is in Singapore (Burkhauser et al. 2015). The directors are the members
those who are considered as the sole stakeholders, while maximum shares are circulated in
the exterior of Australia. Here in this situation as the business of the company is continued in
Australia, thus, this company is legally responsible to recompense the taxes to the
government of Australia. Again, the conclusions that are created by the directors are being

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applied for the manoeuvres in Australia. The contracts on the place of the company are
signed in the country Sydney of Australia. In the case of the Ors V Commissioner of
Taxation and Baywater Investments Ltd. of 2016 as the case law is declared in the same
scenarios, the company is legally responsible to repay taxes to the Australian government as
to continue the business in Australia with all its operational actions (James et al. 2015).
Part 2:
In this present report, the assesse recovers the sales profit that is considered as taxable
after the decrease of the index cost of attainment. After the deduction of the bad debt that is
the loss from the amount of the whole sale is recognised as the net profit. The long-term
capital gain asset is the amount that is which is received for over three years as well as one
year for shares from the time of acquisitions. The capital gain taxation at the period of sale
after receiving the index amount of the procuring year as well as the index worth of the
marketing year. (Law et al. 2016) Index factor is the term that defines about the variation
between the marketing year index price and the procured year index amount. By multiplying
both the factors that is the index factor as well as the purchase, cost the amount which is
derived is known as the index price. The assesse will experience an incurred capital loss if the
amount that is obtained is lesser than the sales profit and is to be continued forward to
subtract from the capital gains revenues (Hargita 2016).
Question 1:
According to ITAA under section 8-2 no tax is chargeable as because the personal
operational possessions are not preserved as the CGT assets.
Question 2:

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In this report a land was assimilated on 21/3/1984 for an amount of $20,000 and was vended
for about $200,000 on June 2018. The loss that is also known as the bad debt in the current
scenario comprised of two instalments of amount $20000 which is to be subtracted from the
whole profit of the taxable amount as given in the chart (Duong and Evans 2016).
Part 2
Question 2 Particulars Amount ($) Taxable Amount ($)
Sales Proceeds 200000
Less Bad Debt 40000
Net Sales Proceeds 160000
Acquisition Cost 20000
Less: Index Cost Of
Acquisition 59630.60686
Taxable amount 100369.3931
Question 3:
If the holding span in case of share exceeds one year, then in that case the share is considered
as the CGT assets of the income tax act which comes under section 186-5. In this case for a
total cost amount of $80000 the share was purchased in the year 1994 in December and was
sold in February of 2017 for an amount of $175000.

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Question 3 particulars Amount ($) Taxable Amount ($)
Sales proceeds 175000
Acquisition Cost 80000
Index Cost Of
Acquisition 142810.9855
Taxable Amount 32189.01454
Question 4:
In the year 1989 on 31st December, an asset was purchased for an amount of $5000 and again
it was sold on 1 may 2018 with the same amount of $5000. This possession is considered as
the long-term capital asset.
Question 4 Particulars Amount ($) Amount
Sales Proceeds 15000
Less: Index Cost Of
Acquisition 10235.50725
Cost of acquisition 5000
Taxable amount 4764.492754
Question 5:

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In this case a jewellery was purchased with an amount of $20000 on 29/9/09 and again it was
sold for $5000 on July in the year 2017. The asset is considered as the long-term CGT assets.
The liability of the tax is given below:
Question 5 Particulars Amount Amount
Sale Provide 5000
Less: Index Cost Of
Acquisition 22665.31027
Acquisition cost 20000
Taxable Amount -17665.31027
Question 6:
Shares of the XYZ Ltd. was purchased on 31/10/1998 for long-term investment with an
amount of $41500 and again it was sold on 1/10/17 for an amount of $45000. The liabilities
of the taxes are given below:
Question 6 Particulars Amount Amount
Sales Proceeds 45000
Less: Index Cost Of
Acquisition 68615.78171
Cost OF acquisition 41500

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Taxable Amount -23615.78171
Question 7:
According to the regulations of the Income Tax Assessment Act, 1997 the handover
of license is considered as a transfer of the assets of CGT. In this circumstance, the assessee
allocations his right to ingress from the Protective clothing (Chalk et al. 2018). Yet, even if
this is considered as the asset of the CGT, the indexation is not acceptable, thus; the renew is
not to be subtracted and the liability of the tax is given below.
Question 7 Particulars Amount Amount
Sales Proceeds 50000
Less: Cost of
Acquisition 25000
Taxable Amount 25000
Part 3:
In this circumstance, together with the volumes of media campaign and the interest charges is
to be subtracted from the income considering the income tax assessment act 1997 under
section 8-1. Further, the charge of the campaign is not in relation with the business or serving
the assesse to produce income (Burnett 2015). Moreover, the expenditure has significant
reason for the survival of the business, as because, without the help of the promotion

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campaign, the business should have died today (Burnett 2015). Thus, the charge must be a
marginal share of the expenditure which is to be deducted.
Particulars Amount ($) Amount ($)
Interest on loan 250000
Media Campaign 175000
425000

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Reference
Braithwaite, V., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax
record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
Burnett, C., 2015. Intra-Group Debt at the Crossroads: Stand-Alone versus Worldwide
Approach.
Chalk, M.N.A., Keen, M.M. and Perry, M.V.J., 2018. The Tax Cuts and Jobs Act: An
Appraisal. International Monetary Fund.
Duong, L. and Evans, J., 2016. Gender differences in compensation and earnings
management: Evidence from Australian CFOs. Pacific-Basin Finance Journal, 40, pp.17-35.
Hargita, C.S., 2016. Disrupting the Hegemonic Temporality of Superannuation. Australian
Feminist Law Journal, 42(2), pp.223-240.
James, S., Sawyer, A. and Wallschutzky, I., 2015. Tax simplification: A review of initiatives
in Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1).
Law, C.K., Kõlves, K. and De Leo, D., 2016. Influences of population‐level factors on
suicides in older adults: a national ecological study from Australia. International journal of
geriatric psychiatry, 31(4), pp.384-391.