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Taxation Law

In: Business and Management

Submitted By auvicchloe
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Taxation for Business Decision Making

(a)
In this case, Colourvision is an Australian resident for taxation purposes and it received a capital gain generated from the sale of the land. This capital gain should be taxed under CGT.

Rules for CGT 1. Capital gains from the realization of investment on assets that acquired on or after 20 September 1985 are caught by CGT. Relative law can be found in Part 3-1 (ss.100-1-121-35) and Part 3-3 (ss.122-1-152-430). 2. Section 102-5 contains the rule that net capital gains are included in the taxpayer’s assessable income. And section 102-15 contains the rule that net capital losses can be carried forward to offset future capital gains. 3. CGT is triggered by the happening of a CGT event. There are currently 54 kinds of CGT events (s.104 of ITAA1997) and each CGT event specifies the time of CGT event and how the capital gain is calculated. In this case, the sale of land in this case can be classified into CGT event A1, which is disposal of a CGT asset (s.104-10). The time of the CGT event A1 is when the taxpayer enter into the disposal contract (generally the date on the contract), not when the disposal asset is settled. If there is no disposal contract, CGT event occurs when the ownership changes. In this case, the time of disposal of the land is on 1 January 2014, when the sale contract was signed, instead of 1 April 2014 when the sale of the land was settled. 4. Div 108 ITAA97 contains the concept of a CGT asset. There are as set of general rules for CGT assets (s 108-A) and special rules for “collectables” (s.108-B) and “personal use assets” (s.108-C). According to the general rules for CGT assets, the land in this case is a tangible CGT asset. And the land was acquired on 1 January 1986 (after 20 September 1985), so CGT can be applied to it.

Calculating CGT gain or loss 1. The cost base of a...

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