Taxation Theory, Practice, and Law: Capital Gains Tax Analysis Report

This report delves into Australian taxation practices, focusing on capital gains tax (CGT) and fringe benefits tax (FBT). It begins with a detailed analysis of CGT, examining the purchase and sale of various assets including land, an antique bed, a painting, shares, and a violin, providing calculations to determine the taxable capital gains for each. The report then explores the FBT implications of a company-provided car. The analysis includes relevant tax rulings, acts, and regulations from the Australian Taxation Office (ATO), offering a clear framework for understanding and calculating tax liabilities. The report also touches upon assessing the income of a couple residing in Australia. The report concludes with a summary of findings and references used.

TAXATION THEORY, PRACTICE &
LAW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Measuring the capital gain tax in the income tax...................................................................1
QUESTION 2...................................................................................................................................7
Measuring the liabilities if FBT in respects with relevant information..................................7
Analysing income of husband and wife.................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Taxation practices in analysing the assessable income and net tax will be payable by an
industry or an individual is necessary. Thus, net worth of any concern has to be taxed with
proper analysis and measurements. In the present report, there will be discussion based on capital
gain tax analysis as well as assessment income of couple resident in Australia. However, this
report will bring various measurement and determination of taxes on the basis of tax rulings, acts
and regulations enacted by Australian Taxation Office (ATO). A clear demonstration of all
calculations and analysis will bring information relevant with authentic framework of such
regulatory.
QUESTION 1
Measuring the capital gain tax in the income tax
Capital Gain Tax: The purchase and sale of any asset is basically reflecting differences in
amount. Thus, such variations will reflect positive or negative outcomes determines capital gain
of loss incurred on such property (Sowa and et.al., 2018). However, it will be measured and
analysed in income tax returns of an individual. It will directly add in assessable income of a
person which will significantly raises tax (Lawrence and Bennett, 2017). Moreover, in the below
listed analysis there have been various assets which were being bought and sold by an individual.
Thus, there will be measurement of capital gain tax to analyse the taxes which are needed to be
payable by them (White and Townsend, 2018). The analysis of CGT on various assets such as
Block of vacant land, Antique bed, Painting, shares and Violin is as follows.
Particulars Amount in($)
Vacant block of land
Purchase price of vacant block 100000
add: local council 20000
cost base unindexed 120000
Sale of land 320000
less: cost base unindexed 120000
440000
With provision of 1 sept. 1999 discount will be
applicable as per reducing the 50% cost of asset in
taxation 220000
Capital gain 220000
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Interpretation: In analyzing the profitability retained by individual in context with the
purchase and sale of various assets. Thus, Block of vacant land has been bought by him in 2001.
Similarly, it has been sold at the cost of $320000. To determine the effective capital gain tax
amount, there will be determination of various techniques and implication of such aspects will be
helpful in bringing the qualitative analysis. However, as per considering the three norms which
are being enacted in CGT analysis such as after 1985, 1999 and within 12 months. Therefore,
land was purchased in 2001 on which discounting technique were has to be implicated that states
50% of the Capital gain or loss will be charged. Moreover, there capital gain taxable here will
be$220000.
Antique Bed:
Particulars Amount in($)
Antique bed
Purchase price of antique bed 3500
Add: alteration cost 1500
Add: amount of household content 11000
cost base unindexed 16000
sale of bed 25000
less: cost base unindexed 16000
9000
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain 4500
Interpretation: As per analyzing the above listed determination of operation which
ascertains that there has been measurement of capital gain tax on Antique Bed which were
bought by an individual. The purchase costs of the bed in 1986 was $3500 on which a minor
alternation has been made amounted to $1500. Similarly, the insurance claim has been made by
owner with respect with the bed on which they have agreed on bringing $11000 as an insurance
claim. Moreover, here the cost base unindexed has been measured as $16000. The bed was sold
for $25000 which in total brings the total capital gain of $9000. As per considering the
discounting technique on which there have been charges levied on 50% of the total gains such as
$4500 will be taxable.
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Painting:
Painting
Particulars Amount in($)
Purchase price of Painting 2000
Cost base unindexed 2000
Sale of painting 125000
Less: cost base unindexed 2000
123000
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain 61500
Interpretation: In consideration with the above listed analysis which insist capital gain
tax will be charged on painting there have been obtained by an individual for $2000. However,
the cost base unindexed will be same as there has been no additional cost incurred in purchase of
painting. On the other side, it was sold for $125000 on which unindexed cost base has been
reduces which determines that total capital gain of $123000. Thus, with reference to the CGT
provision of 1st September, 1999 that determines discount of 50% for CGT which brings the
outcomes as $61500.
Share:
Shares
Particulars
Details
(In $)
Amount
(In $)
Common bank shares purchased 1000*15 15000
Add: Stamp duty on cost of purchase 750
cost base unindexed 15750
Sale of shares 1000*47 47000
Add: Brokerage fees on sales 550
less: Cost base Unindexed 15750
31800
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain 15900
PHB share purchased 2500*12 30000
Add: Stamp duty on cost of purchase 500
cost base unindexed 30500
Sale of shares 2500*25 62500
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Add: Brokerage fees on sales 1000
less: Cost base Unindexed 30500
33000
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain 16500
Young Kids Learning Ltd purchased 1200*5 6000
Add: Stamp duty on cost of purchase 500
cost base unindexed 6500
Sale of shares 1200*0.5 600
Add: Brokerage fees on sales 100
less: Cost base Unindexed 6500
-5800
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain -2900
Share build ltd purchased 10000*1 10000
Add: Stamp duty on cost of purchase 1100
cost base unindexed 11100
Sale of shares 10000*2.5 25000
Add: Brokerage fees on sales 900
less: Cost base Unindexed 11100
14800
Sold within 12 months
Indexed Capital gain 7400
Interpretation: On the basis of above listed analysis on capital assets of a person which is
consisted of various shares has been bought and sold in a specific period. Common bank shares
were being purchased for 1000 at the rate of $15 were amounted to $15000. It also includes the
stamp duty which were paid at $750. Thus, the total unindexed cost case has been gathered as
$15750. Along with this, these shares had been sold by them at the rate of $47, each which were
amounted to $47000 including the brokerage cost of $550. However, as per considering the
discounting method, the total capital gain tax will be payable as $15900.
As per considering the 2500 PHB shares were purchased at the rate of $12 amounted to
$30000. Stamp duty had paid on it as $500. The total unindexed cost of these shares was $30500.
In addition, this asset has been sold on the rate of $25 each amounted to $62500 including
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brokerage fees of $1000. Moreover, there have been reduction of cost base unindexed amount of
$30500 which were reduced to have the total capital of asset as $33000. Considering discounting
approach in it which will ascertains that 50% of asset will be taxed in capital gain tax such as
$16500.
In relation with 1200 shares of Young Kids Learning Ltd which were being purchased for
$5 each amounted to $6000. Therefore, it includes the stamp duty of $500 which presents the
total cost based unindexed as $6500. On the other side, these shares were sold at the rate of $0.5
which can be demonstrated as a loss in this capital asset. These shares amounted to $600 along
with the brokerage fees of $100. However, the total capital loss has been analyzed as -$5800 on
which 50% will be taxable such as $2900.
By considering the capital asset bought by individual such as 10000 marketable securities
of Share Build Ltd at $1 of rate which is amounted to $10000 along with its stamp duty as a cost
on purchase amounted to $1100. Therefore, unindexed cost base of data base is $11100. Thus,
sales of these shares were at the rate of $2.5 each which has been amounted to $25000 including
brokerage fee of $900 on sales has been charged which brings the total capital gain of $14800.
Thus, these are the shares which have been sold within 12 months of period it includes the stamp
duty paid by client on the purchase of these shares such as $1100. This together ascertains the
Cost base unindexed as $11100. Moreover, there have been sale of these securities at the rate of
$2.5 with additional brokerage fees of 900. In addition, there has been reduction of Unindexed
cost base which brings the total gains as $14800. The overall capital gain on this security was
$7400.
Violin
Particulars
Amount
(in $)
Violin Purchased 5500
cost base unindexed 5500
Sale of Violin 12000
less: Cost base unindexed 5500
6500
With provision of 1 sept. 1999 discount will be
applicable
Indexed Capital gain 3250
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Interpretation: On the basis of above listed table which insist that, Violin was being
purchased on cost of 5500 and sold for 12000. There has been a capital gain of 6500 which was
discounted at 50%. Thus, capital gain tax will be levied on $3250 of total gains.
Particulars
Amount
(in$)
Block Vacant land 220000
Antique bed 4500
Painting 61500
shares
Common bank shares 15900
PHB Iron Ore 16500
Young Kids Learning Ltd -2900
share build ltd 7400
Violin 3250
Total capital gains 326150
Less: Provision of previous year's capital loss 8500
Less: Attribute to the sale of sculpture 1500
Net capital gain 316150
Marginal tax rate 45% 142268
Tax payable on Regime 142268
Interpretation: The above listed table demonstrates overall capital gains and losses were
obtained by the owner in a period. Block of vacant land was at $220000, Antique bed as $4500,
Painting as $61500, Common Bank shares as $15900, PHB as $16500, Young Kids learning Ltd
as -$2900, share build ltd as $74000, Violin as $3250. Therefore, the total capital gains after
reducing the loss was $326150. In addition, there was a previous year balance which was
negative as -$8500 along with the attribute of amount based on sales of a sculpture amounted to
$1500. As per adjusting previous year arrears, net capital gain has been obtained by owner as
$316150. The marginal rate of tax at 45% was being charged on these assets which brings total
tax will be payable by owner is $142268.
QUESTION 2
Measuring the liabilities if FBT in respects with relevant information
Car:
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As per considering the consequences incurred that, Jasmin was awarded a car for travelling
by Rapid heat Pty Ltd. It will come under legislative influences of Fringe benefits tax
Assessment act, 1986 (Burkhauser, Hahn and Wilkins, 2018). Therefore, with the influences of
the section 7 of this act, which ascertains the time of purchasing the car, cost and total kilometres
it was travelled (Burns, 2018). Moreover, in analysing the FBT benefits will be awarded to
Jasmine which were analysed as per the travel made by car in period and rate is proposed in
norms of FBT act.
Particulars
Amount
(in $)
Car valued at 33000
Statutory FBT rate which
were being implied on car 26%
Period of car using 335-5
330
FBT will be payable as 7757.26
Interpretation: By considering the above listed analysis of FBT benefits of Jasmine on the
car has been determined. Car was valued at $33000. Thus, the car was being travelled only
10000 km which insist the rate of 26%. This rate has been levied on cost on the basis of tax
threshold presented by FBTA, such as vehicle which was travelled less than 15000 km will be
charged on 26%. Moreover, in a year the total days are 365 on which 10 days the car is not in use
as it Jasmin moves out of station. Along with this 5 days were deducted as the car is being
unused due to annual repairs etc. In analysing the FBT will be payable By Jasmine on the car is
$7757.26 which will be charged in her taxable income for the year.
Loan:
Fringe benefits which were being levied with respect of loan provided to Jasmine for
personal use. However, the loan of $500000 was taken by her on which 450000 was used for
purchasing the holiday home (Harding and Marten, 2018). Additionally, the $50000 was being
lent by her to her husband on which he had purchased some shares of Telstra. With respect to
FBTA act, that determines the amount of loan that will be used in purchasing securities which in
turn bring the dividend gain to a person will be deductible and exempted. However, these are
gains which are being allowed to a person in the income tax assessment act of Australia (Loan
Fringe Benefits Tax (FBT) Policy, 2018). It is because of interest on loan will be charged on
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amount which were being obtained by a person. Similarly, with this respect, it can be said that
Jasmine’s husband will use amount of loan in purchasing equity assets. In respect with the same,
the loan was awarded to her by her employer on which it is required that the employee must
provide a document of declaration which will bring the clear analysis on the loan is being
obtained for personal use (Fettes and Butler, 2017).
Considering the operational requirement on which it can be said that, securities obtained by
her husband will be deductible in the analysis as there will not be any taxable charges on such
amount. Along with this, she is paying 4.25% of amount as interest on such loan, which are the
payments already made by her in respect with the loan cannot be charged in income tax
assessment. Thus, in this respect, there will be not any other taxable payment made by her on the
loan.
Electric heaters:
Particulars
Amount
(in $)
Electric heaters manufactured by
Rapid heat 1300
Manufacture cost 700
Sold for 2600
Cots base unindexed 2000
Sale 2600
Less: Cost base unindexed 2000
Total gains 600
FBT rate 47% 282
Interpretation: On the basis of above table where, Jasmine had purchased Electric heaters
from Rapid Heat amounted to $1300 along with the manufacturing cost of $700. Therefore, the
total cost of that heater was $2000 that sold by Jasmine at price of $2600. Thus, $600 has been
gained by her. In consideration with the current charges and tax rates imposed by ATO on FBT
is 47% on goods. Thus, Jasmine has to pay tax on this heater as $282.
Analysing income of husband and wife
Particulars Amount
8

(In $)
FBT tax rate will be 4.25%-3.5%
estimates 0.75
50000*0.75%*212/365 217.81
Interpretation: In relation with the proposed case on which it can be said that, the
amount $50000 will be used by Jasmine for purchasing shares. Thus, as per considering the
norms where she need to make any taxable payment in the income tax payments made by her.
Thus, with this respect, there will be estimated that the rate of 3.5% will be charged in against
interest rate of loan of 4.25%. Moreover, rate has been analysed as 0.75. Thus, the overall FBT
will be payable by her in this respect is $217.81.
CONCLUSION
On the basis of above report, it can be said that, implication of various law, acts, norms
and regulation will be beneficial in soothing the taxation system in a country. This report is
consisted, with CGT application on various assets that were being obtained by an owner and had
been sold in the relevant period. Along with this, there were adjustments on loans taken by
Jasmine from her employer on which FBT taxes were analysed. Further, the analysis of all taxes
were on the basis of making proper operational determination.
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REFERENCES
Books and Journals
Burkhauser, R. V., Hahn, M. H. and Wilkins, R., 2018. Transitioning from an Historical to a
Contemporary Use of Tax Record Data for Measuring Top Incomes in
Australia.Economic Papers: A journal of applied economics and policy. 37(2). pp.113-
145.
Burns, A., 2018. Options in succession planning for a family business. Taxation in
Australia. 52(10). p.543.
Fettes, W. and Butler, D., 2017. Superanuation: Understanding ECPI in view of super
reforms. Taxation in Australia. 51(11). p.626.
Harding, M. and Marten, M., 2018. Statutory tax rates on dividends, interest and capital gains.
Lawrence, S. and Bennett, M., 2017. Image rights in Australia: Fair game or foul ball? Taxation
in Australia. 51(9). p.487.
Sowa, P. M. and et.al., 2018. Private health insurance incentives in Australia: in search of cost-
effective adjustments. Applied health economics and health policy. 16(1). pp.31-41.
White, J. and Townsend, A., 2018. Deductibility of employee travel expenses: The ATO's
guidance. Taxation in Australia. 52(11). p.608.
Online
Loan Fringe Benefits Tax (FBT) Policy. 2018. [Online]. Available through: <
http://www.finserv.uwa.edu.au/tax/fbt/policy/loan>.
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