HI6028 Taxation Theory, Practice & Law Assignment: T2 2019 Holmes

This assignment solution for HI6028 Taxation Theory, Practice & Law addresses two key questions. The first provides advice to City Sky Co on input tax credit entitlements under GST, considering the purchase of land, services of a lawyer and development costs. The second question calculates the capital gains tax (CGT) consequences of Emma's transactions in 2015, analyzing the sale of land, shares, a stamp collection, and a piano, referencing relevant taxation law and ATO rulings. The assignment demonstrates an understanding of the Australian income tax system, including CGT and GST, and applies taxation principles to real-life problems.

Running head: TAXATION THEORY, PRACTISE AND LAW
Taxation theory, practise and law
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Answer to Question 1: Advising The City Sky Co of the input tax credit entitlements. 2
Answer to Question 2:..................................................................................................3
1. Calculating the capital gain tax (CGT) consequences of Emma’s transactions in
2015:.............................................................................................................................3
2. Providing information regarding the legal issues and relevant taxation law:...........5
References and Bibliography:......................................................................................7

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Answer to Question 1: Advising The City Sky Co of the input tax credit
entitlements
The GST consequence is mainly considered to be an essential form of tax law
that has been imposed by the Australian Tax Organisation (ATO) on the business
activities of organisations. The Goods and Service Taxes are mainly calculated for
detecting the level of taxes that is mainly imposed on the total transactions that have
been conducted within Australia. The tax measures that have been imposed by the
ATO also allows the dealers to claim relevant GST credit for their transactions, which
might eventually help in reducing their tax consequence. The GST Act that have
been imposed by the ATO mainly helps in determining the appropriate level of
actions that is conducted on certain scenarios and transactions (Cassidy 2017).
Therefore, The City Sky Co for claiming the relevant tax credit can eventually
utilising the GST Act and determine the appropriate level of benefits from their
transactions. The analysis has mainly indicated that City Sky Co is a registered
organisation and is eligible for availing input tax credit whenever it is applicable.
However, there are certain credit conditions that needs to be satisfied by the
organisation, which are depicted as follows.
1. Appropriate tax invoice needs to be maintained from the supplier for
appropriately detect he level of GST that have been paid on the purchase of
relevant goods. Therefore, the invoice should have a clear depiction of both
prices and GST imposed on the goods.
2. The dealers that is used for purchasing the selling purposes neds to be
registered under the provision of GST Act for claiming the overall GST credits.
3. Therefore, the transactions that is maintained by the purchaser needs to have
a GST inclusive amount, as it helps in claiming the tax input credit for the
transaction under the GST law.
4. Moreover, the GST regulations also indicate that the time limit for claiming the
input tax credit is at the levels of 4 years.
5. In addition, the organisation needs to submit relevant tax input credit to the
Australian Tax Office for obtaining the required level tax credit for the
organisation.
The analysis has been conducted on the overall case study of City Sky Co,
where the management aims in developing residential properties which will be sold
to relevant customers. In addition, the analysis has mainly stated that 15 residential
properties will be developed and sold to relevant customers. In addition, the services
of the local lawyer are also taken into consideration by the business. Furthermore,
the business of City Sky Co is mainly registered under the regulations of GST Act,
which enables the organisation to claim relevant GST credits on purchases of both
goods and services (Cassidy and Cheng 2017).
Therefore, from the relevant analysis of the services that have been obtained
by City Sky Co for relevantly completing their operations is mainly considered to be
under the GST credit scheme. The development services of $33,000 have been
taken by City Sky Co from a local lawyer, which is mainly considered to be under the
reverse charge mechanism. Therefore, it is detected that under the reverse charge
mechanism the GST needs to be paid by the receiver of the services. Hence, if the
receiver uses such services for its business purposes then for the tax purposes
relevant claims can be made under the input tax credit. City Sky Co is a
development company, where the services of the lawyer can be claimed, as the

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input tax credit of GST that is been paid on the services availed from the advocate
(May 2016).
City Sky Co has purchased land, which is an immovable property, which
indicates that the land is neither considered under goods or services and therefore
not considered under the ambit of GST. The analysis has mainly stated that no GST
is applicable on the purchase of vacant land, where there is no provision of black
credit any goods or services received by a taxable person for the construction of an
immovable property. Therefore, the development company is not considered under
the GST credit, where the organisation is not eligible under the input tax credit.
Therefore, City Sky Co does not have input tax credit entitlements for its overall
purchases of the land (Hasan and Sinning 2018).
Therefore, after analysing the case study of City Sky Co, it could be
understood that the organisation is mainly eligible for GST tax credit on the services
that have been used by the company. Thus, the analysis mainly indicate that GST
credit cannot be earned from the vacant land that has been bought by the company
for redevelopment. Moreover, the whole construction cost is also not under the GST
credit conditions, as it falls under the provision of black credit. Thus, City Sky Co can
be considered to have no GST credit for the purchase and development of the
apartments. However, the services that was used by the organisation for $33,000
can be considered under the GST credit laws, as it follows the reverse charge
mechanism (Tang 2016).
Answer to Question 2:
1. Calculating the capital gain tax (CGT) consequences of Emma’s
transactions in 2015:
Capital Gains or loss for Emma during 2015
Particulars Value
Total gains obtained from the sale of land $ 677,500.00
Total gains obtained from the sale of shares $ -
Losses from the sale of Stamp collection $ -
Losses from the sale of Piano $ (50,000.00)
Total long-term capital gains $ 627,500.00
Tax on long term capital gain in 2015 20.00%
Tax amount on long term capital gain $ 125,500.00
The information provide in the above table directly helps in determining the
total tax amount of capital gain that needs to be paid by Emma during 2015. The
calculations have directly stated about all the relevant capital gains and losses that
have been conducted by Emma by conducting relevant transactions in 2015.
However, there are two transactions that cannot be included in the CGT calculations,
as it violates the ruling of the ATO to be considered under the CGT. The analysis
has mainly indicted that the total long term capital gain that have been obtained by
Emma is at the levels of $627,500 for 2015. On the other hand, the overall tax on
long term capital gain in 2015 was at 20%, which makes the total capital gain tax for
Emma at the levels of $125,500. The capital gains tax is mainly imposed on the
assets that have been heled more than 12 months by an individual in any
circumstance (Ato.gov.au 2019). Therefore, any assets that have been heled for a

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longer duration and is subject to the non-exemption clause in CGT is mainly taxed
under the capital gains tax.
Therefore, the calculations have mainly indicated about that gains from the
share sale and losses from the Stamp collection is mainly not considered under the
taxable amount of capital gains tax. This deduction of not excluding the gains and
losses is due to the violation of the CGT law that have been conducted by each
asset. The share has been purchased during 1982, which is before the CGT event
and is excluded from the CGT tax. Moreover, Stamp collection has been excluded, s
the asset was not held for more than 12 months, which is the most essential
threshold of the CGT law (Ato.gov.au 2019).
Land:
Capital Gains or loss on Land for Emma during 2015
Particulars Amount Amount
Land Value
Sale value of the land during 2015 $ 1,000,000.00
Expenses incurred
Legal fees incurred during 2005 $ 5,000.00
Expenses incurred for improvements $ 27,500.00
Selling expense of the property $ 25,000.00 $ 57,500.00
Purchase consideration
Purchase cost during 1991 $ 250,000.00
Stamp duty $ 5,000.00
Legal fees $ 10,000.00 $ 265,000.00
Total gains obtained from the sale of
land $ 677,500.00
The calculations in the above table mainly states about the overall gains that
have been obtained from the sale of the land. The total taxable GST is at the levels
of $677,500, which has been derived after deducting expenses of $57,500 and
purchase consideration of $265,000 from the selling price of $1,000,000. The land
has been purchased during 1991, where the purchase date is before 20th
September 1985, which indicates that the gains made from the sale is not exempted
from the CGT (Ato.gov.au 2019). Moreover, the overall improvements that have
been made by Emma on the property is mainly deductible under the CGT law, which
mainly help in reducing the level of taxable income on the sale of land. The total
purchase consideration comprising of the Legal fees, purchase cost and stamp duty
has mainly been used as deductions for minimising the total taxable income.
Shares:
Capital Gains or loss on Shares for Emma during 2015
Particulars Amount Amount
Shares
Price of the shares during 2015 $ 50,850.00
Brokerage fees
$
(1,017.00)
Price of the shares during 1982
$
(3,500.00)
Total gains obtained from the sale of
shares $ 46,333.00

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The total calculations that have been conducted in the above table mainly
provides information regarding the overall benefits that have been conducted by
selling the shares. The calculations have indicated that a total amount of $46,333
has been obtained from the sale of the shares, which is not taxable under the CGT
law. The shares have been obtained during 1982, which is before the CGT event of
20th September 1985 (Ato.gov.au 2019). Thus, any benefits that have been obtained
from the sale of shares in 205 is not deductible under the CGT law. However, the
normal taxations will be applicable on the benefits that has been obtained by Emma
on the shares.
Stamp collection:
Capital Gains or loss on Stamp Collection for Emma during 2015
Particulars Amount Amount
Stamp Collection
Buying price of Stamp collection in 2015 $ 50,000.00
Auction fees totaled $ (5,000.00)
Selling price of Stamp collection in 2015 $ (60,000.00)
Losses from the sale of Stamp
collection $ (15,000.00)
The calculations have mainly stated that there is a loss of $15,000 from the
sale of the Stamp Collection. However, the Stamp collection was obtained during
January of 2015, whereas the CGT calculation is mainly for 2015. Hence, the loss
that have been incurred by Emma on the sale of Stamp collection is not considered
under the CGT tax bracket. The analysis has mainly stated that the losses incurred
from the transaction is not deductible from the CGT, as the assets is not held for
more than 12 months by Emma (Ato.gov.au 2019).
Piano:
Capital Gains or loss on Piano for Emma during 2015
Particulars Amount Amount
Piano
Price of Piano during 2015 $ 30,000.00
Price of Piano during 2000 $ (80,000.00)
Losses from the sale of Piano $ (50,000.00)
The calculations in the above table mainly state that the overall losses that
have been achieved after selling Piano for a loss of $50,000, which is deductible
under the CGT law. The CGT law for allowing the deductions for any loss incurred by
the individual is mainly calculated for the ongoing year and exceeded to other years
of the loss is not offset with the capital gains (Ato.gov.au 2019). Therefore, the
losses from the Piano sale is mainly deducted from the total gains obtained by
Emma during the year of 2015.
2. Providing information regarding the legal issues and relevant taxation law:
The CGT calculations of Emma have been prepared utilizing the laws and of
CGT, which has been highlighted by the Australian Tax Law. The analysis have
been conducted by detecting the minimum requirements of the CGT law, which is
essential for determining the appropriate level of taxable amount that can be

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conducted for the tax purposes. The threshold of 12 moth holding period for the CGT
has been used for determining whether the asset should be held under the taxable
section of CGT. Moreover, the time period of 20th September 1985 has also been
considered for selecting the assets that fall under the relevant threshold. The
information from the ATO websites with relevant examples from the ATO has been
used for determining whether the transactions conducted by Emma during 2015 falls
under the CGT consequences (Ato.gov.au 2019).

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References and Bibliography:
Ato.gov.au. 2019. Capital gains tax. [online] Available at:
https://www.ato.gov.au/General/Capital-gains-tax/ [Accessed 11 Sep. 2019].
Ato.gov.au. 2019. CGT assets and exemptions. [online] Available at:
https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/
[Accessed 11 Sep. 2019].
Ato.gov.au. 2019. Shares, units and similar investments. [online] Available at:
https://www.ato.gov.au/general/capital-gains-tax/shares,-units-and-similar-
investments/ [Accessed 11 Sep. 2019].
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