Taxation Law Report - Income and Capital Gains Analysis

This report delves into the intricacies of taxation law, providing a comprehensive analysis of income tax calculations and capital gains tax implications. The report includes a detailed breakdown of a case study involving land sales, clarifying the application of pre-CGT assets and the resulting tax treatment. It provides insights into the Australian taxation system, specifically addressing the tax implications for individuals. The report also includes a breakdown of the taxable income, tax payable, and a reference list for further study. The report covers the specifics of the taxation of income and capital gains, which are the main areas covered in the assignment. The report also contains the breakdown of the tax payable by an individual, considering the relevant deductions and tax rates, and applies the taxation principles to a real-world scenario to determine the tax liability of an individual. The report offers a clear understanding of the taxation principles and their practical application.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Reference List:...........................................................................................................................4

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Answer to question 1:
In the Books of Mary
For the income year ended 2015-16
Particulars Amount ($)
Assessable Income
Gross Income 70000
Allowable Deductions 100
Total Taxable Income 69900
Tax On taxable Income 14264
Medicare Levy 1398
HELP Repayments 3495
Total Tax Payable 19157
Answer to question 2:
A capital gains or capital loss may occur from the disposal of the depreciating asset
only when an individual has made use of the asset for the private purpose or in other words
for non-taxable purpose. In contrast as defined by the Australian Taxation Office capital is
usually taxed under the capital gains tax regime and provided that the underlying asset results
in capital gains and has been held by an individual for a minimum of 12 months. The term
property is not defined with the objective of CGT event even though the property was held as
the trading stock.
The judgement stated in the case of ICI Australia Ltd v. Commissioner of Taxation
property has an ordinary legal meaning under section 104-230 and extends to the assets that
are acquired before the 20 September 1985. However, section 104-230 does not take into the
account the CGT asset which is not regarded as the property1. Therefore, the CGT assets only
comprises of the unit trust, debts owed to the company, land and building, shares in other
company, goodwill and any interest on the asset. As evident from the current case study it is
1 Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013

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found that Brian purchase the land of 20 hectares for an amount of $2 million in the area that
was suitable for subdivision. He initially aimed at getting the permission from the local
council to develop the land for the purpose of subdivision and reselling it for the purpose of
profit but eventually ended up leasing the property for grazing. Brian’s failure of obtaining
the permission of subdivision ultimately led to selling of property for a sum of $4 million.
The sale of land in the present context for brain and making capital gains will be disregarded.
As defined by the Australian taxation law, if an individual makes a capital gain on the
asset that is acquired by the person before 20 September 1985, that asset is classified as pre-
CGT and any kind of capital gain or loss that is made by the person from the disposal of the
asset will be disregarded and will no capital gains tax is required2. As evident from the
current situation the land was purchased before 20 September 1985 and the amount derived
from the sale of pre-CGT land will be disregarded from tax. In other words, the amount from
sale is specifically exempted from CGT and the amount derived from sale of land by Brian,
irrespective of the large amount of gain it will be regarded as tax free amount and does not
attracts any tax on such sale.
2 Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)

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Reference List:
Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013
Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)