2.1 Jasmines Home
As per the note, it has been determined that there is loss in the capital gain happening to CGT assets. It includes that the assets procured before 20/9/1985 is termed as tax-exempt from capital gain tax. The major residence is the asset that is not subjected to capital gain tax. According to Sec 118-110 (1) main residence is exempted only when the private residence is declared as the main home where the taxpayer lives. Hence, there are different factors that should be taken into consideration while applying exemption on main dwelling.
It is such as follows:
1)The time period the taxpayer lived in the house
2)The taxpayer family residence place
As per the above discussion, it is to be noted that to develop main exemption it is necessary to attain some degree of physical occupancy.
Based on Jasmine case, she is the resident of Australia who has decided to move to the UK. The home was purchased by her in the year 1981 and now she has sold her home for 0,000.
At the time of purchase of house, she paid $40,000 so she can acquire the house. Under sec 118-110 (1) Jasmine house is qualified as the main residence exemption as the house was used by Jasmine for the dwelling purpose (Brown and Davis, 2012). The house is not used for generating income. Further, the Jasmine earned capital gain that will be exempted further as her house is considered as the pre-capital gain tax asset as it was purchased before 20/9/1985.
2.2 Car Sale
When there is happening of capital gain tax event the capital gain or loss takes place.
Under the section 104-10 (1) CGT event happens when there is loss in capital or gain in the capital.
Non-collectible assets can be termed as the assets that used or kept by the taxpayer for the purpose of private employment according to subdivision 108-C. There are different examples such as motor vehicle, furniture, boat, and household things are given under section 108-20. The major aspect of using personal asset can be any type of capital gain that is avoided when the base cost of $10k low is acquired in terms of assets under section 118-10 (3). Therefore, it is essential for the taxpayer to keep details of the assets purchased to ensure they are for value greater than $10k. Section 108-20(1) provides detail that, capital loss in order to organize asset of private use is not counted for the purpose of tax.
Jasmine purchased the car in the year 2011 that cost $31,000. Recently the car sold by Jasmine worth $10,000 . Under the section 104-10 (1), ITA Act 1997 the car selling has transpired a CGT event A1. Under section 108-20 the car is considered as the personal use asset. Jasmine bear capital loss by disposing the car under section 108-20 (1) needs to be ignored.
2.3 Sale of Business
There are different conditions that are under the Australian tax law as noted under Div 152 that would be helpful for the businesses that are small. Hence the conditions are described as below:
It should be categorized as a small business that contains gross business revenue that should not be more than $2 million
The assets of CGT should be used actively in the business
There are different types of concessions that are available in small business. It is as follows:
From capital gain tax there is 15-year capital gain
There is a deduction of capital gains by 50% after striking 50% discount
There is a concession in the retirement up to $500,000 on the proceeding of capital gains
For using capital gain roll-over relief to purchase replacement assets
In terms of goodwill, a CGT event is applied in terms of business closure by the payer of tax on a permanent basis. In order to trigger this CGT event the business must be closed completely.
While moving permanently to the UK Jasmine has sold its small cleaning business. The business assets of Jasmine fetched $65000 on the other hand goodwill business fetched $60,000. The small business concession is qualified by Jasmine as her business turnover is presumed not more than $2 million. It has been determined that capital gain taxes of Jasmine are the active assets. So, the exemption of 15 years can be held by Jasmine since the day she held the assets for more than 15 years. The CGT event C1 led to goodwill disposal. Due to her business permanently ceased she is retiring from her business. The concession can be availed by Jasmine and the capital can be disregarded with the goodwill.
2.4 Furniture Sale
Taxpayers had to follow simple rules when they take decision to sell the assets that are used privately. According to section 118-10 (3), when there is sale of assets that are used privately by the taxpayer which is purchased for $10k or less then this provision require taxpayer to ignore capital gains (Lanis and Richardson, 2012).
2.5 Furniture Sale:
The furniture is the Australian assets of jasmine. She purchased that for $2000 and now decided to sell that in $5000. In the present year Jasmine fetched sales at $5,000. Under the section 104-10 (1), ITA act 1997 the sales have transpired into the event of CGT A1.
2.6 Paintings Sale
Collectables is termed as the assets that are used by the taxpayer for their private amusement. There is list that is made under 108-10 (2) include such as Antiques and Jewels, Artworks like paintings and rare stamps. In addition, capital gains are ignored when there is acquirable of collectible below $500. Under section 108-10 (2) the painting purchased by Jasmine is under collectibles (Richardson et al., 2013). Jasmine sold paintings that were through the capital gains should be avoided. It has been determined that the first element has failed to meet the cost base as single painting do not cost for more than $500.
After a certain period, Jasmine sold her painting for $5000 as she had purchased directly from an artist for $1000.Jasmine capital gain has occurred while selling the painting that is brought from the artist. The capital gain will be taxable for Jasmine under section 102-5, and the same should be included in the assessable income.
50% CGT discount 2,000
3.0 Case 2
3.1 Issue in the case
The major issue in the case is that taxpayer claims in terms of depreciating asset equivalent to having a fall in the value under section 40.25, ITA Act, 1997.
The permission is given to the taxpayer under the income tax to attain the deduction for outgoing that is attained at the time of making income from the business or the amount that is incurred in carrying the business. The business is benefitted from the value of assets that are provided to the business for number of years and it is decreased at the time of its effective life and at this time the deduction is enabled. Under the section 40.25, ITA Act, 1997 the capital cost allowance like depreciation is enabled to have deduction to the payer of tax equal to the assets that fall in the value. Moreover, there should be signified by the taxpayers that the deduction is allowed based on project life of asset.
Furthermore, it has also been examined depreciation assets can be defined as the assets that are depreciating in nature and there is anticipation to fall regarding the use on its based value under section 40.30 (1), ITA Act, 1997. It is essential for the taxpayer should know about the decline in assets as well as when the assets are held for the purpose of tax. The permission is granted to the asset holder to make deduction for the assets that are depreciated to reduce the value under s 40.25 (Taylor and Richardson, 2013). The notification can be given under the section s 40.25 (2) to the taxpayer to note down that decline in the depreciating asset value enables the limit of taxable purpose. On the other hand, taxable purpose usually implies under section 40.25 (7), that the assets are used in terms of chargeable revenue of the business (Devos, 2013).
There should be an understanding among the holder of depreciating assets that it depends wholly upon assets cost and Subsidy 40-C where the taxpayer is assisted with rules in terms of determination of cost of assets. The acquisition price that is paid for getting the asset is taken into consideration by the assets but it also includes installation cost and incidental costs of delivery into the base cost. In the cost base, Broken Hill Pty Co Ltd v. FCT (1969) different small expenses like expenditure as eliminating the asset is included.
John decided to purchase a machine for $300,000 after the successful inspection on 1st November 2014. The installation of machine by John is conducted on 15th January. The machine purchased by John satisfies the meaning of depreciating assets under s 40.30 (1), ITA Act, 1997. It is due to that CNC has some effective life and there is fall of machine in terms of value in terms of its use. Under the section 40-25, ITA, Act, 1997 the permission was given to John to make claim on the deduction in the value of CNC machine which was purchased during the year (Murray et al., 2019). John held assets under section 40.25 (2), ITA Act, 1997 for the purpose of taxation. The machine was purchased by John for generating chargeable business that proceeds during the business. At the same time, the depreciation asset cost is of two types such as cost base element and cost base of depreciating assets.
In order to compute the machine cost of CNC for allowance of capital, the rules of Sub-Div 40-C must be taken into consideration.
Taking into consideration the rules of Subdivision 40-C the CNC machine cost base for capital that is computed below:
1 Acquisition cost 300,000
2 Incidental cost-inspection cost 12,000
3 Enhancement capital cost- installation cost 5000
4 Capital expenditure installation cost 25000
On the basis of above analysis, Under section 40.25, ITA Act 1997 John is permitted to minimize equally to CNC machine decline in value that is held for the purpose of tax at the time of carrying the business at the normal rate.
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