HI6028 Taxation Assignment: Australian Tax System Analysis

This assignment solution analyzes Australian taxation, focusing on Goods and Services Tax (GST) and Capital Gains Tax (CGT). It begins with an introduction to the evolving nature of taxation regulations and the importance of deductions and exemptions. The solution then examines a case involving City Sky, an investment company, and its GST liabilities related to legal services and property development. It details the application of GST to the company's transactions and the input tax credit it can claim. The assignment also addresses the tax liabilities of an individual, Emma, considering various transactions involving land sales, share sales, and the sale of personal assets like a piano. The analysis covers the application of CGT to Emma's transactions, including the calculation of capital gains and the impact of different expenses. The document provides a comprehensive overview of the relevant tax implications and offers practical insights into navigating the Australian tax system, referencing key legislation and case law.

AUSTRALIAN TAXATION

Contents
Introduction...........................................................................................................................................2
Answer a................................................................................................................................................2
Answer b................................................................................................................................................3
Conclusion.............................................................................................................................................6

Introduction
With the changes in the business conventions, policies, and procedures, taxation authority is
modifying the rules and regulation compliance with span of time. It has been evaluated as
several taxation regulations, which will need to be complied when a taxpayer is determining
tax liabilities of organisation. The deductions and tax exemptions are some of the benefits as
the authority of the taxation to the taxpayer to avail them relief from the tax obligation. At the
very beginning, City Sky organisation often considers the calculations of GST tax credits.
Further, the report will consider computation of tax liabilities of Emma, which has both assets
and income.
GST was regulated into existence in Australian taxing system in 2000. The tax is implied on
whole production at each stage and it has been returned to the parties, which is included in
chain (Smith, 2015). VAT (value added tax) is payable at the rate of 10 percent on sale of
goods and services by exempting few things such as healthcare, food industry, by availing
concessional rate of 5.5 percent. Organisations in Australia has the turnover of nearly
$75000, which has to register for GST where the organisations do not produce $75000
turnover that can claim GST for the suppliers (Smith, 2015). GST is not implied on sales but
the seller can claim GST by considering several provisions export, wheel chair, food items,
bread, and healthcare products and there are few provisions for water, drainage, and sewage
(Smith, 2015).
Answer a.
City Sky organisation is liable for the tax liabilities as it is registered organisation under
(Goods and services tax) GST Act of Australia. City Sky co. is an investment company,
which deals in development of properties for GST (Smith, 2015). The company bought
available land in Brisbane South that has been planning to build 15 apartments so that it can
conduct trade in selling apartments. The company has to conduct legal services as being

handled from the local lawyer as Blackburn. The organisation has lawyer fees for $33000 in
order to avail legal services to the customers (Smith, 2015). Blackburn operates established
trading company with the revenue of 300000 dollars every year. In order to create the
projects of 15 flats, which is normal course of event as it can be in regarding the organisation
(James, 2018). City Sky company is liable to pay tax input fees as being paid by the company
to the registered lawyer. Blackburn has carried to counter the lawyer fees as their professional
income as generated by the lawyer in order to provide legal services to company. The
organisation has the right to opt to take full input tax credit on $33000 to the lawyer that will
cost to the company (James, 2018). According to the GST Act, the organisation has the
turnover of $75000 in regards to the case to company and avail them with services as revenue
of $150000 (James, 2018). It will remain a minimum threshold as required by organisation
and in case of NPO (Non-profit organisation) registered under GST Act of Australia. The
lawyer is responsible to delegate appropriate legal services to the company in any conditions
so that the company can claim input tax credit to the organisation. When a sole proprietor
handles legal fees as an sole trader and professional income under ITA (income tax act) from
the lawyer as the fees is paid as a part of input tax credit for development of vacant land as an
important ingredient of final product as City Sky co. deals in (Pellegrinoa, Perbolib, and
Squillerod, 2019).
Answer b.
Emma has to incur transaction as the income taxpayer of the nation, 2015, that is associated
with the capital gain under Income Tax Act. Situations of the transaction is listed either
relating or not relating to capital Gain to comply the rule under income tax act (James, 2018).
Sale of land “1000000 dollars”
Emma bought vacant land to invest and pay $250000 so that they can acquire land from the
seller (James, 2018). While purchasing the vacant land, Emma has to pay the sum of 5000

dollars as stamp duty. Emma has incurred legal fees for the services during purchase of land
property at $1000 (Edmonds, 2015). While purchasing the vacant land, Emma has to ensure
that it take loan as Emma has paid an interest of 32000 dollars with the loan amount. In 2015,
Emma had faced challenges and disputes, which occur with the neighbourhood of the vacant
land with the usage of vacant land. In order to resolve the issue, Emma has paid legal fees
$5000 by ending dispute between the neighbour and Emma (Smith et al., 2016). With the
span of ownership tenure, Emma has nearly spent $22000 as insurance, council rates and
water rates for the tenure when Emma holds property (Martin, 2019). Before illustrating the
property for the market sale, Emma spent $27500 in order to remove the dangerous pine trees
that remain on land. Emma spent $25000 for agent fees, advertisement, and the legal fees
when selling land. Emma has sold property in 2015 at 10000000 dollars (Evans, Minas, and
Lim, 2015). Capital Gain tax is applicable on transaction where property is purchased in 1991
and further, it is sold in 2015 (Smith et al., 2016). It results in the ownership of land for 24 as
CGT is applied to the sale of land and asset, which is capital in nature. According to the
capital tax taxation of Australia, According to this head (Capital Gain tax) of income tax of
Australia, property, and asset is being acquired after the year 1985 as held by the income
taxpaying for the 12 months as being considered as when CGT applied on capital asset on
asset and property (Smith et al., 2016). Emma has not used this vacant land for her residential
purpose then it becomes mandatory to apply on property and asset (Martin, 2019).
Emma has not applied as resident as CGT (capital gain tax) is applied on sale of property.
Other more reasons include implications of capital gain tax on the investments, as vacant land
has not attained any earnings for capital gain (Evans, Minas, and Lim, 2015). This can be
applied on transaction and property (Pellegrinoa, Perbolib, and Squillerod, 2019). While
examining the amount of CGT, when implied to sum up expenses for the time when she has
ownership of land. Furthermore, she has incurred expenses in order to remove dangerous pine

trees when selling the ownership of land. These expenses (either direct or indirect) will be
summed up while removing dangerous pine trees with its selling price inclusive of cost of
land. The interest expenses has incurred by Emma with buying land for 32000 dollars, legal
fees and stamp duty at $5000 when it is purchased will be added to the cost (Pellegrinoa,
Perbolib, and Squillerod, 2019). Council rates, water rates, and insurance will be included in
cost when expense is incurred for the settlement of dispute after the use of land of the
neighbours amounts to $5000. In addition, when selling the land, it will include agent fees,
legal fees, and advertisement fees, which will cost lastly to $25000. The first cost of property
is estimated as $250000 whereas when it includes all the expenses equating to 349000 and
the land is finally sold at $100000. During the settlement of dispute with the use of land by
neighbours, it is seen that resolving the dispute will cost $5000. Capital gain tax is applicable
on $651000 (Minas, Lim, and Evans, 2018).
Share sale of Rio Tinto amounting $50.85 each share at 1000 shares
Emma has incurred a sale of 100 shares of the Rio Tinto for $50.85 per share and it has
incurred 2 percent fees as their sale of share (Minas, Lim, and Evans, 2018). Emma has
bought share at rate of $3.5 for each share in year 1982. Share that is purchased and bought in
1982, as it will not be considered as capital asset with no capital gain as the gain and
profitability as earned after selling shares (Faccio, and Xu, 2015). Head of Australian income
taxation (under capital gain head) by stating where every asset, collectibles, any shares, and
property for investment bought earlier 1985 that is not considered as there is no capital gain
taxation on the capital Asset applying on the transaction (Faccio, and Xu, 2015).
Sale of stamp collection by Emma who has recently purchased from private collectors in
2015 for $60000 (Hasan, and Sinning, 2018). Emma has bought those stamps in 2015 and on
the other hand, she has incurred fees of $5000 as an auction to sell stamps at $50000 to sell

the stamp collection (Hoopes, Robinson, and Slemrod, 2018). There is not capital gain
applying on the transaction as when shares are sold out in next 12 months when buying them
according to the income tax, the payer holds assets for 12 months as compared to the capital
gain tax that is applicable to assets for the time when it is actually sold (Hoopes, Robinson,
and Slemrod, 2018).
Selling grand piano for $30000
Emma planned to sell her piano for $30000 in 2015 as Emma bought grand piano for $80000
in 2000. It is quite important to see and check the compliance of capital gain applying on the
transaction as asset is bought at 2000 and it is sold in year 2015 (Hasan, and Sinning, 2018).
The person held this asset for the 15 years as the piano is depreciable asset at the rate of 40
percent every year as it is recognised as percussion instrument. Emma has earned a profit of
$30000 from the transaction under the head of income taxation of Australia (Cassidy, and
Cheng, 2017).
Conclusion
After analysing the changes in regards to GST (Goods and Service Act) and CGT (Capital
Gain Tax), there are rules compliance related to business operations while determining
taxable liabilities. It is seen that when an individual wants to lower down tax implications and
burden that the person needs to undertake proper taxing implications by deducting and
exempting on taxable income. There are several benefits delegated by the tax authority to
assessor in order to reduce the burden of tax. In the very first case, City Sky Company is
entitled to consider and opt for input tax credit from lawyer as fees is paid to the lawyer to
provide legal services to the development of the vacant land. Further, the second question,
evaluates all the circumstances of the noted transaction as being listed and how it is related to
the capital gain under the income tax act that is given to help Emma in order to compute
taxable liabilities.

References
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