Individual Taxation Law Assignment - HA3042, Holmes Institute, T2 2019

This assignment solution addresses two key questions related to Australian taxation law. The first question focuses on providing recommendations regarding the Capital Gains Tax (CGT) consequences for an individual named Jasmine who is selling various assets, including a family home, car, business, furniture, and paintings. The analysis covers the calculation of capital gains or losses, relevant exemptions, and tax implications based on the Australian tax regulations. The second question examines a scenario involving a manufacturing company and the depreciation of a CNC machine, exploring the legal principles related to its purchase, installation, and potential issues. It discusses the application of relevant laws, including the Work Health and Safety Act, and the implications of costs associated with the machine's acquisition and modifications.

Running head: TAXATION LAW
Taxation Law
Name of the Student:
Name of the University:

Taxation Law
Table of Contents
Question 1).......................................................................................................................................3
Recommendation regarding the CGT consequence to Jasmine..................................................3
The Capital Gain relating to the family home.............................................................................3
Capital Gain or Loss from Car.....................................................................................................4
The Capital Gain regarding to the sale of the business...............................................................4
The Capital Gain relating to the sale of the furniture..................................................................5
The capital gain relating to the sales of the paintings..................................................................5
Question 2).......................................................................................................................................6
Issue, discussion and identification of the problem.....................................................................6
Law and application.....................................................................................................................7
Conclusion.......................................................................................................................................9
Reference:......................................................................................................................................10

Taxation Law
Question 1)
Recommendation regarding the CGT consequence to Jasmine
Capital Gain refers to any profit or gain that is incurred by selling any capital asset of the
organizations. The capital gain comes under the group of income, and thus tax is applicable for
the amount from the sale of assets in the year in which the transfer of the capital asset takes
place. It is known as capital gain tax, and it can be long-term or short-term capital gains. It
involves bonds, stocks and real states where revenues are due on the proceedings of sales. The
relevant case study is examined that implements similar principles for long-term gains. In this
case study, an Australian resident named Jasmine born in the UK, who wants to trade all of her
assets in Australia, as she was retiring from the job of the cleaner and decides to return to the
UK. Jasmine purchased a house in the year 1981 at the cost of 40,000 and the present value of
the house approx $650,000. It was her permanent resident when she purchased the home. The
opinion is given to her about the CGT consequences so that she will get a better value of her
assets. She also has to pay the CGT on the revenue if there are any gifted or ordinary assets, and
it is calculated from the time of purchase (Adam and Yusof 2019). Form 1040 and scheduled D
explains the capital gains and losses to understand the concept of long term and short term. If she
has gained any profits from the different objects then it is advised to pay the due.
The Capital Gain relating to the family home
Jasmine is a resident of Australia born in the UK, and she decides to go back to the UK
after retirement. She wants to sell all of her assets in Australia, as the home where she is residing
was purchased in the year 1981 at the cost of $40,000. As per the case study, the present value of
the house is $650,000. It was her permanent resident after occupying the home. It is the

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individual property as it is related to the family house, and has to deal with the capital gain tax
thus it is necessary to pay the tax. The top marginal rate of tax in Australia is 47% and includes
the tax of 2% with Medicare levy, as the family house has its tax implication. The variation in
the profit margin of the house is $61,000 (Correa et al., 2018). It is argued that the tax is avoided
for any rental property and the law discusses if any property held for at least one year, is
discounted by 50% and it is required to pay 33.3% for the superannuation funds. In the case of
Jasmine, paying the capital gain is exempted for her main residence. She has to pay at least 30%
of the tax for the CGT regarding the home.
Capital Gain or Loss from Car
As per the case study, Jasmine purchased a car at the cost of $31,000 in the year 2011,
and the present value of the car is $10,000 (Du 2019). There is a capital loss of $21,000, as the
selling price of the car is only $10,000. It needs to be reported to the tax return, for whatever the
capital gains or loss. In this situation, the value of the car decreases, and she is incurring a loss.
The amount that is received after selling the assets needs to be reported to the Form 1040, and
the capital gains or loss to the Scheduled D. As per the Australian report, the capital loss is made
on the deduction on the claim losses and the deduction is claimed through their tax return. In the
case of Capital gain, it needs to describe the specific asset to the Form 1040 and the tax return is
payable. In the situation of Jasmine, there is a capital loss, and it is necessary to understand the
estimation of loss related to $3000 per year. It is not possible to deduct the capital loss for the car
and it cannot be claimed (Dai and Sun 2018).
The Capital Gain regarding to the sale of the business
As per the case study, Jasmine wants to return to the UK after retiring from the job, so
she wants to sell her business and found a new buyer who wants to purchase her business for

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$125,000. She started her small cleaning business and now she wants to hand over the business
to another person. The sale price of all the business equipment is worth $65,000 and the actual
cost price is around $75,000 and $60,000 (Hum et al., 2019).
The CGT is applicable when the profit or losses are incurred by the sale of the assets. The
tax charged for the profit incurred by selling the assets comes under capital gains tax. There are
also the implications of sales where intangible assets like goodwill are included. In the case of
Jasmine, the goodwill involves the $75,000 and $60,000. When the financial planning is
reassigned then it is profitable for both the buyer and seller. The goodwill cost shown here
relates to the capital gains and it is deductible to the seller (Li et al., 2019).
The Capital Gain relating to the sale of the furniture
As per the case study, Jasmine has decided to sell the furniture for $5,000. There is an
exception if the cost of the sale is less than $2,000. CGT exemptions are made if the selling of
the furniture is less, as mentioned in Form 1040 about the deductibility (Li and Zhou 2018).
In this case, the furniture is acquired less than $10,000 and it is disregarded for the CGT
purposes. In this situation, the proper functioning of the taxation laws and principles is required
as mentioned in the Australian law. According to this situation, the fact of capital gain is
relevant, and any of the capital losses on the furniture are not mentioned under the asset value
and it is disregarded (McLaren 2019). The use of the depreciating asset is used for non-taxable
purposes.
The capital gain relating to the sales of the paintings
Jasmine has many paintings that are being sold for $35,000 and all of its sold for not
more than $500. There is an exception to the rule, that she purchased one painting worth $1000

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and sold for $5000. There is a capital tax gain of 28% on the collectables and arts and it is the
maximum tax rate made on it. For instance, the collectable tax rate is made payable if the
Jasmine is in the range of 15% tax. The tax rate is capped to 28% when the income tax range is
higher than the resultant tax. In the year 2019, the capital gain tax is 15 and 20%, and it lies in
the value of the asset (Neshta et al., 2018). No capital gains are required for the holdings and
selling of the furniture and tax does not apply to the profit. The purchase price and sales price
makes no impact.
Question 2)
The initial time to calculate the decline in the value of the asset starts from the installation
time. At the time of the first installation than it is determined that there is the requirement to
argue about the law which is applicable in the work health and safety Act 2011. As per the
Australian Bureau of statistics states, the safety standards are designed for everyone. In this case
study, the rods were installed and it requires the legal laws and regulations that need to be
implemented.
Issue, discussion and identification of the problem
As per the case study, John has a accessories manufacturing company that produces
motor vehicle parts and their business is related to BMW parts. On 1st of November 2014, John
decides purchasing of the computer numeric parts (CNC) which was imported from Germany.
The cost of the equipment was $300,000. John decides to visit CNC factory to examine the CNC
machine. The main purpose for the visit was to place the order of the machine. The order was
placed only after analyzing that all the requirements are fulfilled or not. The cost of the trip was
concerned at $12,000. On January 2015, the machine was installed and, the main issue that is

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faced is relating to the carrying out the CNC machine that requires some extra charges. It also
requires to be installed only by the specialist (Rong 2018).
Law and application
The first aspect that is applicable here is the cost of the CNC machine, which costs
$300,000. According to the industrial laws, the customers are liable to take proper advantage of
the purchasing of the machines like, the John did. As per the case study, the decline time relating
to the purchase of the CNC machine started from the time when he decided to take a visit to the
CNC industry in Germany. The main reason to visit the industry is to purchase the same
machine. The next process involves guiding the installation of the rod at an extra cost of $5000.
The legal principles that can be determined here are that when the machines are brought then it is
seen that they are checked properly so that the purchaser gets the good product without any
damage and do not get cheated (Sadiq 2019).
The given case mentions the grant v. Australia Knitting mills where the Supreme Court
of the South Australia duty of care was alleged here. When the duty of care was determined then,
it is essential to see how the company is responding. In the relative situation, the same case is
applicable to the exporters if the CNC machine.
The accurate time for holding the CNC machine is from the purchasing of the machine,
in the given case the machine was purchased on 1st of November 2014 at the cost of $300,000.
After the installation, there was some fault in the machine, which was later discovered, and the
CNC machine needs some additional improvements. Therefore, the company decided to make
some changes and install the rod. The second stage is the installation of the rod where the

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additional guiding was discussed there. The total cost of the machine is added at $300,000,
$12000 and $25000. When the $300,000 is eliminated from the additional as it is the cost of the
machine, then $12000 and $25000 total of $37,000 is calculated. The guiding rod amounting to
$5000 is also added, and then it is increased to $42,000 (Vichare et al., 2018).
The legal principle applicable here is the saying that where there is a profit, there is a
loss. However, this saying should incur when the balanced loss is less than the expected loss.
Some of the legal principles from the given case involve how the machine equipment is
purchased and how the owners claim their rights that may arise in the purchase of the product.

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Conclusion
After reviewing the above statements, it can be concluded while making any purchase of
machines all legal principles need to be made applicable. It helps the customers to take
advantages and get a better quality product. When John purchased a CNC machine, he has an
option to choose the best one. CNC is the best machine to be installed in the factory. It is stated
that the CNC machines require the installation of rod for the best performance. There are many
legal principles while making purchasing decisions that can be made applicable. The best
decision taken by John is the installation of a rod in the machine, from which he can take money
return from the company or can get deductions in the cost price of the product.

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micro-line segments. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of
Engineering Manufacture, 233(9), pp.2007-2019.

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Li, Y. and Zhou, S., 2018. Sensorless balance method for the spindle system of computer
numerical control gear grinding machine. Measurement and Control, 51(9-10), pp.460-469.
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Neshta, A., Kryvoruchko, D., Hatala, M., Ivanov, V., Botko, F., Radchenko, S. and Mital, D.,
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