Taxation Law Assignment - Holmes Institute, HA3042, T2 2019

This assignment solution addresses a Taxation Law assignment, analyzing various tax implications for an individual named Jasmine. The first part of the assignment examines capital gains and losses associated with Jasmine's residence, car, cleaning business, furniture, and paintings. It explores relevant sections of the Income Tax Assessment Act 1997 (ITAA 1997) and Australian Tax Office (ATO) guidelines, including the application of capital gains tax (CGT) and the indexation method. The second part of the assignment focuses on the taxation of a CNC machine, identifying issues related to its cost, including travel, installation, and guiding rod expenses. It applies the rules outlined in Section 110.25 of the ITAA 1997 to determine the machine's initiating date and calculate its cost base. The analysis includes detailed calculations and a discussion of primary and secondary cost elements, providing a comprehensive overview of the taxation principles involved.

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

Running head: TAXATION LAW
Table of Contents
Answer to Question 1:..................................................................................................3
THE CAPITAL GAINS RELATED TO THE INCOME OF THE FAMILY...................3
CAPITAL GAINS ASSOCIATED WITH CAR:...........................................................4
CAPITAL LOSSES OR GAINS FROM BUSINESS SALES.....................................5
CAPITAL LOSSES OR GAINS ASSOCIATED WITH FURNITURE SALES...........6
CAPITAL LOSSES OR GAINS RELATED TO SALE OF PAINTINGS....................6
Answer to Question 2...................................................................................................8
ISSUE........................................................................................................................8
RULE.........................................................................................................................9
APPLICATION........................................................................................................10
CONCLUSION........................................................................................................11
References.................................................................................................................12

Running head: TAXATION LAW
Answer to Question 1:
As per the situation, Jasmine wants to sell the residence which she is owning since
1981 for $40000 on the present values of the asset which give the total of $650000.
Jasmine wants to return to the UK that’s why she wants to sell off her present
residence. In the course of buying and selling the property, one can face either
capital profit or loss.
THE CAPITAL GAINS RELATED TO THE INCOME OF THE FAMILY
The house had been a permanent abode for Jasmine after occupying the
same. It is an individual property and liable for paying tax as it has relation with the
family house (Altmann 2015). The Medicare levy is 2% tax and 47% is the maximum
marginal rate for a family home. There is an argument that a property that had been
held for a period of one year will have to pay 33.33% for the superannuation funds.
Furthermore, there will be a discount of 50% on the total taxes. In the given case,
there will be exemption of capital gain granted to Jasmine as the transfer is related
with her main house or residence.
CAPITAL GAINS ASSOCIATED WITH CAR:
As per the current situation, in 2011 Jasmine has bought the car, and wants to
sell her car on the present values of the car which is $10000. Due to depreciation on
the car value it has been depreciated to $10000, the original value of the car was
$31000. The capital gain or loss must be reported and in the given case, she is
incurring losses due to decline in the value of the car. In Form 1040, amount of sale
proceeds needs to be entered and the gains or loss from transfer must be included
in Schedule D. The tax return helps in availing the deductions on capital losses
through describing the same in Form 1040. In this case, Jasmine has incurred a
capital loss that cannot be claimed as deduction of the capital loss for car is not
possible (Braithwaite and Reinhart 2019).
CAPITAL LOSSES OR GAINS FROM BUSINESS SALES
As per the case, Jasmine wants to sell off her cleaning business to someone
who can handle the business for $125,000. In the current situation, all the
equipments have a cost price of about $75000 and $60000 while, the selling price of
the equipment is $65000(Bruce 2017). The applicability of CGT occurs at the time of
incurrence of the profits and losses on the transfer of assets. The profits on the
proceeds from sale are considered under the tax returns. The tax is also applicable
in case of the goodwill and other intangible assets. In this case, $75000 and $65000
is a part of the goodwill and included for taxes. Thus, the goodwill will be taken for
deduction purposes (Spiro 2018).
CAPITAL LOSSES OR GAINS ASSOCIATED WITH FURNITURE SALES
Jasmine has sold some of her furniture at $5000 which includes higher selling
cost. The selling furniture cost includes $2000. The Furniture which is Ford personal
use is not considered for calculating the capital loss or gain as per section 122.50
ITAA 1997. Jasmine has sold her furniture which will not be considered for
determining the capital loss or gain. Thus, it is not allowable for her to apply for the
sale of furniture for the determination of the capital gain. As per the Australian Tax
office, the furniture which is used for the personal purpose and all the depreciation
on the furniture is not included in the calculation of the capital loss or gain (Burnett et

Running head: TAXATION LAW
al., 2015). Therefore, it can be treated as one of the incomes since CGT is not
involved in the sale proceeding of the Furniture. However, if the furniture is used for
the business purpose then it is allowed to calculate the capital gain or loss. But if the
furniture is not used for the business then it is not considered to be the factor of
capital gain or loss. There have been other provisions for the furniture which are
used for the personal purpose by the government of Australia. Overall is clear that
the furniture used for the personal purpose is not considered to calculate the capital
loss and gain.
CAPITAL LOSSES OR GAINS RELATED TO SALE OF PAINTINGS
In the current situation, Jasmine has bought many paintings some of them are
second-hand where as there is one painting which she bought for the $1000 directly
from the artist. In this situation she sold her painting for $5000 in which the prices of
the painting were all under $500. As per the situation, jasmine can earn capital loss
or gain. Thus, in the current situation while calculating the capital loss or gain the
selling values of these painting should also be included (Milligan et al., 2015). In
order to calculate the capital loss or gain of an individual it is very important to
include the selling amount as per Section 104.225 ITAA 1997. As per the given
situation, jasmine has sold her painting for less than $500, but the painting which she
bought for $1000, has sold for $5000 which is quite profitable (Cannon and Kendig
2018). As a result, it led to the total sales proceeding of $35000 even though other
selling factors are not mentioned in the situation. Therefore, the total sales are
calculated on $35000 under which the total cost of the Painting is considered as
$5000. For calculating the capital loss or gain of Jasmine, the different amount of the
paintings and the sales are used.

Running head: TAXATION LAW
Answer to Question 2
ISSUE
In the present case, the issues which have been detected as per the ITAA 1997, are
as follows-
1. If the cost which are associated to the computer devices includes all the other
relevant costs and expenses related to the Machines.
2. If the cost of the machine includes the amount related to travelling.
3. If the installation cost of the machinery is included in the total cost of the
machinery.
4. If the cost of guiding rod included in the machine cost. (rod which is used for
operating the machine)
These issues which have been mentioned are all identified as per the Australian tax
office provisions along with the ITAA 1997. It is very important to determine the CNC
value of the machine since it helps to find out whether the machine is responsible for
the reduction in the asset value (Cook et al., 2016). From the data provided, it can be
understood that after the guiding rod are purchased the machines were ready for the
production process. It is considered as the initiation time of the CNC machine.

Running head: TAXATION LAW
RULE
The machine’s which were bought on the 1st of November 2014, which was
installed in the company of the purchaser was installed on 15th January 2015. The
machines finally started operating from 1st February 2015 when the rod was
purchased. All these issues led to the conflict and problem in the course of
calculating the initiating timing of the machines since it includes the carious different
timing in the process (Krever and Sadiq 2019). To resolve the issues the Section
110.25 ITAA 1997 need to be considered for the initiating data of the machines at
which it started to operate and that is 1 February 2015. Before that, the machines
were not operating due to the absence of the guiding rod. Therefore, 1 February is
considered as the initiating date of the business.
The problems which have been identified in the course need the proper attention if
not then it can affect the overall outcome of the business as per the cost base
(Marshall 2018).
Cost of CNC Machine Calculation
Discounting Method Amount $
Indexation factor 1.548762737
Deposit * Indexation factor 464628.821
Trip Cost 18585.15284
Installation Cost 38719.06841
Guiding Rod Cost 7743.813683
Cost Base 529676.86

Running head: TAXATION LAW
APPLICATION
There are two cases where the above rules can be applied and they are discussed
below:
MACHINE COST ALONG WITH OTHER ACCOMPANYING COST (PRIMARY
ELEMENT)
When the machines were purchased on 1 November 2014, their cost was
$300000. In the current situation, the issues which have been emerged is whether
the related costs are required to be considered or not. It relevant cost of the machine
should be considered if all the cost is related to the machine. In this situation, all the
travel cost is included in the relevant cost since all the expenses which have been
incurred are solely for the machine. Thus, for this situation, it can be included in the
relevant cost since it was only for the machine (Deeter-Schmelz 2015). The buyer
visited Germany to personally check the condition of the machine before purchasing
the machines. In the course, there are many expenses which include the cost like
installation which the company has to bear. According to Section 110.25 ITAA 1997,
the total expenses of the CNC machine includes the cost of installation of the
machines. Thus, we can understand that in the current situation the expenses
related to the installation along with the travelling are related to the CNC machine
thus they should be treated as the primary element of the CNC machine. It can be
concluded that ITAA 1997 is applicable in the given case of the CNC machine
(Dimmock et al., 2018).
MACHINE COST AND OTHER ACCOMPANYING COST (SECONDARY
ELEMENT)
In the course of determining the second element which has an important role
along with the net machine Expenditure, the issues which are mentioned above are
required to be evaluated and resolved. After proper identification of their problems
and issues, it is clear that the expenses are the second most vital element of the
CNC machines because of the purchase of the guiding rod. Even though installation
is an important factor but the operation of the machinery is another important factor
(Eagers et al., 2018). To run the machinery without any difficulty the requirement of
the guiding rod is necessary. Therefore, all the expenses related to the guiding rod
are included in the second element of the CNC machine.
CONCLUSION
As per the whole study, we can conclude that the CNC machines were
purchased on 1st November 2014 form Germany. There were many issues in the
course, which were identified and resolved as the Australian tax office and ITAA
1997. These issues were related to the machines along with the various elements in
it. The issues were all related to the ITAA 1997 and were resolved with the Income
Tax Assessment Act 1997. All the issues and their solutions have been determined.
Overall, we can say that the purchase of the CNC machine has led to many
problems however were resolved with the help of the Income-tax Assessment Act,
1997.

Running head: TAXATION LAW
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communities: Tenants, committees of management and strata managers. Housing in
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Braithwaite, V. and Reinhart, M., 2019. The Taxpayers' Charter: Does the Australian
Tax Office comply and who benefits?. Centre for Tax System Integrity (CTSI),
Research School of Social Sciences, The Australian National University.
Bruce, M., 2017. Multinational Anti-Avoidance Law (MAAL) and Pt IVA—a critical
analysis of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill
2015 (Cth) and Treasury Laws Amendment (Combating Multinational Tax
Avoidance) Bill 2017 (Cth) and comparison with general anti-avoidance provisions.
Australian Tax Law Bulletin, July, pp.2018-70.
Burnett, C., Taylor, C.J. and Wong, J., 2015. Qualification of Taxable Entities and
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Dimmock, S.G., Gerken, W.C., Ivković, Z. and Weisbenner, S.J., 2018. Capital gains
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