CLWM4100 Taxation Law: Analysis of Income Tax,Disposal & Deductions

This case study examines various aspects of Australian taxation law, including the determination of tax residency for a shipping company and the capital gains tax (CGT) implications for Elwood Blue in several scenarios. It analyzes the taxability of gains or losses from the disposal of personal assets like a car, shares, and antiques, considering indexation for inflation. The study also addresses the deductibility of interest expenses on loans and the eligibility of media campaign costs as tax deductions. Ultimately, the analysis provides guidance on what income Elwood needs to declare and what deductions he can claim under Australian tax law, while also noting the ability to carry forward capital losses to offset future gains. Desklib provides solved assignments for students.

TAXATION LAW
AUSTRALIAN POSITION ON INCOME TAX, TAX ON DISPOSAL AND DEDUCTIONS.
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TAXATION LAW
Part 1;
This shipping company qualifies to be an Australian tax resident company in the aspect
that a company like this may not be incorporated in Australia but does its business operations,
central management and whose powerful decision making is made by Australian individuals who
reside and work as individual tax resident Maisto (2009.Pg 12.)
Going with the above latter condition, I wish to say that the shipping company owned by
Elwood Blue and other three directors qualify to be an Australian Tax resident by the fact that
most operations are done in Sydney Australia, and of course, the most crucial part is that of the
signing of work contracts. Likewise, the fact the overall control and management is conducted
and led by Elwood who is an Australia Individual for tax purpose makes this shipping company
to be an Australian one for tax needs Miller and Oats (2016.Pg 31.)
Part 2;
Scenario 1;
Capital Gain/Loss=25000 – 27500 = (2500), however, it should be noted that Elwood car is used
for personal Corias (2012.Pg 10) purpose hence termed as personal asset hence going with ATO
regulation any disposal gain or loss of a private asset are deemed exempted from capital gain tax
hence Elwood not expected to neither declare any gain if any or claim tax set off for the loss of
(2500) he incurred since his car is used for private use hence not qualifying for cgt.
Scenario 2;
Indexation for time value of the purchase cost=113/37.9=2.981, hence cost
value=20000*2.981=59630
The =Agreed sales price on disposal=20000*10=200000
=Paid sales residual=20000*8=160000

TAXATION LAW
=Gain on disposal will be =200000 – 59630=140370, this is what Elwood is to declare as CGT
income and of course claim bankruptcy loss deduction payment of 40000 since he was not paid.
Scenario 3;
Indexation of shares=110.5/62.8=1.759
=cost of shares=1.759*80000=140764
=sales residual=175000, hence Capital Gain=175000-140764=29236 hence this gain on sale of
shares has to be declared by Elwood in his income for tax purposes Evans, Minas and Lim
(2015.Pg .736.)
Scenario 4;
Indexation=113/55.2=2.05=cost value=5000*2.05=10250
Capital Gain=15000-10250=4750, Elwood should declare this gain on income as a gain resulting
from the disposal of his antique.
Scenario 5;
Indexation=110.7/93.8=1.18=20000*1.18=23600
=Capital loss=5000-23600=18600 he has to forward this loss to the next period whereby it will
be used to set off any capital gain that will be earned thus reducing the burden.
Scenario 6;
Indexation of shares=111.4/67.5=1.650*41500=68475
=Capital loss=68475-45000=23475 Elwood has to forward this loss to the next period whereby it
will be used to set off any capital gain that will be earned thus reducing the burden,
Bailey(2018.Pg 433.)
Scenario 7;
5years quota renew fee=5*5000=25000
Cost price=25000, therefore the two cost of the quota=25000+25000=50000

TAXATION LAW
Sales proceeds=50000, therefore, capital gain, or loss is nil since the cost price equals the sales
proceeds hence no need of Elwood to declare this income.
Part 3;
Interest on loans that have been invested on businesses that generate revenue is
considered allowable expenses for tax deductions hence the fact that Elwood loan was borrowed
for the importation of car even before the imposition of the strictness law the law allows him to
claim this interest expense as deductible allowance Blake lock and King (2017.Pg 15.)
Concerning the media campaign I wish to say it is not related to any income generation of
Elwood shipping company instead it is a fight back against the federal government on this law it
has introduced this therefore makes this campaign cost un-claimable for tax purpose as allowable
deduction.

TAXATION LAW
References;
Bailey, K., 2018. The murky forest of CGT relief. Taxation in Australia, 52(8), p.433.
Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data matching. Proctor,
The, 37(6), p.18.
Corias, J., 2012. What you should know about personal services income. Electrical Connection,
(Autumn 2012), p.110.
Evans, C., Minas, J. and Lim, Y., 2015. Taxing personal capital gains in Australia: an alternative
way forward. Austl. Tax F., 30, p.735.
Maisto, G. ed., 2009. Residence of companies under tax treaties and EC law (Vol. 5). IBFD.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.