Taxation Theory, Practice & Law Assignment: Holmes Institute, T2 2019

This assignment solution addresses key concepts in taxation theory, practice, and law, focusing on the Australian context. The analysis includes a detailed examination of City Sky Co's input tax credit entitlements under the Goods and Services Tax (GST) framework, evaluating eligible credits and the impact of property transactions. Furthermore, the solution delves into the capital gains tax (CGT) consequences for Emma, analyzing various asset sales, including land, shares, and personal property like stamp collections and a piano. Calculations are provided to determine taxable CGT amounts, considering relevant expenses and the application of CGT rules, such as the 12-month holding period and the exclusion of assets purchased before a specific date. The assignment also identifies the legal issues involved in the CGT calculations, highlighting the importance of understanding the Australian tax organization's regulations.

Running head: TAXATION THEORY, PRACTISE AND LAW
Taxation theory, practise and law
Name of the Student:
Name of the University:
Authors Note:

TAXATION THEORY, PRACTISE AND LAW
1
Table of Contents
Answer to Question 1: City Sky Co of the input tax credit entitlements analysis.........2
Answer to Question 2:..................................................................................................3
1. Capital gain tax (CGT) consequences of Emma’s for the financial year of 2015:. . .3
2. Detecting the legal issues utilised in calculating the CGT consequence of Emma
for 2015:........................................................................................................................5
References:..................................................................................................................6

TAXATION THEORY, PRACTISE AND LAW
2
Answer to Question 1: City Sky Co of the input tax credit entitlements analysis
One of the major decisions that were made by the Australian tax organisation
was regarding the goods and services tax that was imposed on organisations
operating in Australian land. The goods and services tax are mainly calculated on
most of the transactions that is conducted within Australia. The goods and service
Tax act relatively provides information regarding the overall actions that needs to be
imposed by organisation under certain scenarios and transactions, as it would help
them to determine the actual GST payable at the end of the year. In addition, the
case examines is relatively conducted for City Sky Co, which is registered under the
organisation act eligible for availing input tax credit whenever it is applicable for the
organisation. The analysis directly indicates that adequate credit condition needs to
be satisfied for the organisation to avail the GST credit from the transactions
(Ato.gov.au, 2019).
The certain GST credit conditions needs to be maintained, where tax invoices
need to be upheld from the supplier, as relevant GST needs to be paid on purchases
of the goods that is been purchased. In addition, the GST ACT also requires the
organisation to register within under the ACT, as it will be helpful in claiming the tax
input credit for the transaction under the GST. Further, requirements of GST
regulations have indicated that the overall GST input tax credit can be claimed within
4 years. Lastly, relevant GST tax credit for the organisation needs to be submitted by
the company to the ATO to adequately creating the tax credit for the financial year
(Ato.gov.au, 2019).
The case analysis of city sky organisation is relatively evaluated for identifying
the measures that can be taken by the organisation to claim the relevant GST credits
from their transactions. From the relevant evaluation, it is determined that the
company has been registered under the GST act, which enables the organisation to
claim relevant tax credits on purchases for both goods and services. Moreover, the
company has been planning to develop residential 15 properties vacant land to be
sold separately to different customers (Ato.gov.au, 2019). Additionally, the analysis
also indicates that the organisation is taken services from the local lawyer for the
construction purposes, which relatively states about the overall GST payments that
has been conducted by City Sky Co.
The City Sky Co has purchased immovable property, which is neither goods
or services and therefore it cannot be considered under the GST act. The case study
indicates that no GST will be applicable on the purchase of the vacant land, as it is
considered as provision of black credit, where any goods or serviced used for
construction of the immovable property is relatively not considered under the GST
input tax credit. Therefore, the overall construction materials used by the
organisation to build the apartments is not considered to be under the GST tax input
which directly makes the City Sky Co not eligible for any kind of GST credit. Some
researchers indicated that GST credits can be identified by utilising the relevant laws
and guidelines published by the ATO, as it help the organisation to determine the
credit input it could charge on their purchases.
However, the case study of the City Sky Co also indicates that reliable
services have been taken for sorting out some legal advice from the lawyer.
Therefore, under the GST clause, it could be understood that any GST that has been
paid by the organisation to the lawyer is relatively considered as the GST tax credit
and is eligible to take the relevant refunds. Nonetheless, the analysis has directly

TAXATION THEORY, PRACTISE AND LAW
3
indicated that GST cannot be obtained from any kind of vacant land that has been
bought by the organisation or from any redevelopment expenses. Consequently, the
development expense that has been incurred by the organisation to complete the
project is not considered under the GST credit terms. Conversely, the overall
payment made by the organisation to the lawyer of $33,000 can be considered under
the GST credit loss and reverse charge mechanism can be allowed (Ato.gov.au,
2019).
Answer to Question 2:
1. Capital gain tax (CGT) consequences of Emma’s for the financial year of
2015:
Emma's CGT on Land during 2015
Particulars Amount Amount
Land (Sale price) $ 10,00,000.00
Expense on legal fees $ 5,000.00
Improvements incurred $ 27,500.00
Expense on sales $ 25,000.00 $ 57,500.00
Cost of purchase $ 2,50,000.00
Stamp duty on purchase $ 5,000.00
Legal fees on purchase $ 10,000.00 $ 2,65,000.00
Total profits from land
sale $ 6,77,500.00
Emma's CGT on Shares during 2015
Particulars Amount Amount
Shares
Share price (Selling) $ 50,850.00
Expense on brokerage fees $ (1,017.00)
Share price (Buying) $ (3,500.00)
Total profits from shares sale $ 46,333.00
Emma's CGT on Stamp Collection during 2015
Particulars Amount Amount
Stamp Collection
Stamp Collection (Selling price) $ 50,000.00
Expenses on auction fees $ (5,000.00)
Stamp Collection (Buying price) $ (60,000.00)
Total loss from Stamp Collection
sale $ (15,000.00)
Emma's CGT on Piano during 2015
Particulars Amount Amount
Piano
Piano (Selling price) $ 30,000.00

TAXATION THEORY, PRACTISE AND LAW
4
Piano (Buying price) $ (80,000.00)
Total loss from Piano sale $ (50,000.00)
Emma's CGT during 2015
Particulars Value
Total profits from land sale $ 6,77,500.00
Total profits from shares sale $ -
Total loss from Stamp Collection sale $ -
Total loss from Piano sale $ (50,000.00)
Taxable CGT Amount $ 6,27,500.00
Tax percentage on long term capital gain in
2015 20.00%
Total CGT taxes of Emma during 2015 $ 1,25,500.00
The calculations in the above table directly highlight all the relevant measures
that have been taken for identifying the capital gain tax consequences of Emma for
the financial year of 2015. The relevant analysis has been conducted on the basis of
tax laws that have been described by Australian tax organisation. The calculations
directly indicate that the overall payment that needs to be made by Emma for the
financial year of 2015 is $125,500.00. The derivation of the calculations has been
conducted by adequately analysing the overall transactions that has been conducted
by Emma during 2015 (Ato.gov.au, 2019). The relevant sale of the land shares
stamp collection piano is adequately evaluated capital gains tax consequences for
the financial year of 2015. The calculations has directly indicated that the overall
CGT consequence of Emma does not include two relevant transactions that has
been conducted during 2015.The ignorance of these two transactions is due to the
relevant assumptions and laws that has been laid out by the Australian tax
organisation. Hence, adequate evaluation needs to be conducted by individuals
before detecting the level of capital gains tax consequences for their long-term
assets. Some researchers indicated that with the help of capital gains tax calculation,
individuals and companies are able to detect the level of tax consequence that they
liable for the long-term asset transactions conducted during the financial year
(Eccleston, 2014).
The relevant transactions that was conducted by Emma during the 2015
financial year was the sale of the land for 1 million, which is considered to be under
the capital gains tax consequence calculation. The relevant analysis of the
calculation in the case that the overall expenses that has been incurred for the
purchase, improvements and sale expenses are deductible from the overall income
of the land. Therefore, the calculations in the above table directly potteries the
overall expenses that have been incurred such as legal fees, romance, stamp duty,
25 price and other relevant expenses. The calculations utilise all the information
regarding the expenses and income that was generated by the land to detect the
actual capital gains tax consequences for the financial year. The land was relatively
purchased during 1991, which is considered to be taxable under the capital gains tax
threshold as the purchase date is after 28 September 1985 (Ato.gov.au, 2019). As
per the CGT law, all the relevant income that has been generated after deducting the
expenses will be considered as taxable income. Henceforth, the CGT taxable
amount for the land is at the levels of $ 677,500.00.

TAXATION THEORY, PRACTISE AND LAW
5
The second transaction that was conducted by Emma during 2015 was the
sale of shares that were purchased during 1982. The sale amount of the shares was
at the levels of $50,850.00, which is considered to be under the taxable amount.
However, the shares that was sold by Emma during 2015 is not considered to be
under the capital gains tax law, as the purchase event was relatively before the
actual CGT event of 28 September 1985 (Ato.gov.au, 2019). Therefore, as per the
rules of ATO, any asset that was purchased before 28 September 1985 will not be
considered under the CGT event and is non-taxable under the long-term asset
capital. Consequently, the overall income that was obtained by selling the shares is
relatively not considered under the CGT act and will not be taxed for the financial
year of 2015.
The third transaction that was conducted by Emma was the sale of stamp
collection, which was purchased during the January of 2015 and sold during the
same year. There was a loss of $15,000 from the sale of stamp collection as the
purchase price was $60,000, whereas the overall selling price was only $50,000 with
option total fees of $5,000. This relatively makes a total loss of $15,000 for the
overall selling of stamp collection during 2015. However, the transaction directly
lacked capital gain tax rule, as it did not fulfil the twelve months threshold. As per the
rules, any asset that is held for more than 12 months is considered to be taxed under
capital gains tax law (Ato.gov.au, 2019). Therefore, by analysing the case of Emma,
it could be understood that she did not hold the stamp collection for more than 12
months as the overall purchase was conducted on January 2015 and the selling
process incurred in the same year. Hence, the loss of $15,000 is not deductible from
the overall gains that have been achieved by Emma during 2015 by selling the long
term assets.
The last transaction that was conducted by Emma in 2015 was the sale of
piano, which was bought during 2000 and sold in 2015. The piano was relatively sold
at a loss of 50,000, which can be adequately deducted from the overall income
generated from capital gains. The Piano that was transacted by Emma during 2015
relatively falls under the CGT act, as the asset was held for more than 12 months.
Moreover, the Australian tax organisation also indicates that any loss that is incurred
after selling the capital assets of individuals or organisations is deductible in nature
(Ato.gov.au, 2019). The losses that were incurred from piano will be deducted from
the capital gains of Emma in 2015. The law of capital gains also state that if the
losses from the capital assets are not recovered in a particular year then it could be
forwarded to future year until it is fully exhausted by deducting all the relevant capital
gains obtained by the same individual or company.
2. Detecting the legal issues utilised in calculating the CGT consequence of
Emma for 2015:
The calculation that was conducted for Mr during 2015 relatively utilizes
different laws that were imposed by the Australian tax organisation for detecting the
consequence of capital gain tax. The threshold requirement of 12 month holding
period is adequately analysed for each asset to identify it whether it falls under the
category of capital gains tax or not. Furthermore, the calculation of the purchase
date is relatively conducted to detect whether the purchase was conducted before 28
September 1985 or after the event, as it relatively helps in detecting whether the
asset falls under the CGT law (Ato.gov.au, 2019). The evaluation of these two laws
has been relevantly been conducted for identifying the assets that has been

TAXATION THEORY, PRACTISE AND LAW
6
conducted for Emma, as it will be helpful in determining the actual capital gain tax
amount that she is liable to pay to the Australian tax organisation.
References:
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Business/GST/Accounting-for-GST-in-your-
business/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/general/capital-gains-tax/acquiring-assets-and-
keeping-records/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Business/GST/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Business/GST/When-to-charge-GST-%28and-
when-not-to%29/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-
capital-gain-or-loss/Working-out-your-capital-gain/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/general/capital-gains-tax/selling-an-asset-and-
other-cgt-events/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Business/GST/Lodging-your-BAS-or-annual-
GST-return/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-
exemptions/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/general/capital-gains-tax/acquiring-assets-and-
keeping-records/
[Accessed 14 September 2019].
Ato.gov.au, 2019. Ato.gov.au. [Online]
Available at: https://www.ato.gov.au/general/capital-gains-tax/shares,-units-and-
similar-investments/
[Accessed 14 September 2019].
Eccleston, R. a. W. T., 2014. From Calgary to Canberra: resource taxation and fiscal
federalism in Canada and Australia. 45(2)(Publius: The Journal of Federalism), pp.
216-243.