Question 1: Capital Gains Tax
A. The capital gain context of the family home
As per the case study, Jasmine is a citizen of Australia and her place of birth is the UK. She is 65 years old and wishes to sell all of her assets and go back to the UK. She has a family home that is purchased in the year 1981 for the amount of $40,000 and in the present year, the net worth of the house is $650,000. In this regards, Jasmine has to pay CGT as per the legislation of Australia. As for instance, all assets that are purchased before or on 20 September in the year of 1985 are excused from the capital gain tax (Australian Government, 2019). As the property of Jasmine has bought before 1985 then it can be considered under the exemption. The selling of this property jasmine can make a profit of $610,000.
B. The capital gain or loss regarding the selling of car
In the regards of selling of car initial price is $31,000 and the selling amount is $10,000. In this transaction, there is a loss of 21,000 as the car has considered as a decreasing asset value in the country. In addition to that, as per the legislation of Australia Jasmine has to pay CGT (Australian Government, 2019). In addition to that, it has known that Jasmine has bought the car in the year 2011. Furthermore, in the year 1999, the government of Australia has introduced an extension of about 50% regarding individual taxpayers based on the actual capital gain. However, there is no such incident of exemption of tax as per CGT. Around $2800 has to pay CGT at a rate of 28%. Therefore, net loss in the selling of the car is $23,800.
C. The capital gain regarding the sale of the business
For selling of a business, Jasmine has to pay some CGT as per the legislation of the country. Jasmine has set up a small cleaning business whereas she wishes to sell the ownership as she is shifting in the UK. The selling price of the business is $65,000 and the price of the equipment is $75,000. In addition to that goodwill, allowance is $60,000. Moreover, the total price of selling is $200,000 and the initial value of the business is $125,000. In addition to that, all of the business property has sold as per its best market value in Australia. From the data, it is clear that Jasmine has conducted a successful business in the platform of cleaning business in Australia. For moving in the UK she has decided to sell all of the assets.
As per the Australian legislation, Jasmine has to pay CGT at the rate of 28% (Australian Government, 2019). However, the total amount of tax is 21,000 and the net profit in the sale is $54,000. In addition to the selling price, there is some extra amount in the net selling price such as the price of business equipment and goodwill allowance. The current market of small business in Australia is more profitable than its previous structure in terms of profit. Apart from that, the total capital gain is $75,000 in the concerned country. Therefore, it has found that Jasmine has gained a huge amount in the spelling of business authority.
D. The capital gain in the context of selling the furniture
Regarding the selling of the furniture, Jasmine has got $5000 as a selling price. In addition to that, among all the furniture none of the single items has cost more than $2000. In the regards of the legislation, Australia all the gaining capital has to pay CGT in the country (Australian Government, 2019). In this case, Jasmine has to pay $1400 as the tax at a rate of 28% regarding the selling of furniture in the Australian market. Therefore, it can be found that she has gained $3600 as a net profit during the transaction.
E. The capital gain regarding the selling the paintings
As per the case study, it has identified that Jasmine has some old paintings and she wishes to sell all of them for shifting in the UK. It is also known that most of the painting is collected from a second hand market in Australia. In addition to that, the cost of any painting is not more than $500. Among all of the painting, one is purchased as the fresh piece from the shop. The cost of this special painting is $1000 at the time of purchase and at the time of selling this particular painting has got a market value of $5000. In this transaction of money, Jasmine has to pay CGT as per the legislation of the mentioned country (Australian Government, 2019). In this case, the rate of the CGT is 28% on the taxable asset. The owner of the painting has to pay $9800 as the Tax on the net profit in the selling. As per the calculative data, it has seen that Jasmine has gained $25,200 as a net profit in the selling. Therefore, it can be stretched that the owner of the painting has gained a huge amount in the Australian market.
Question 2: Capital Allowance
Issue: Identification and discussion of the problem
As per the case study, there is an incident of importing and installation of CNC machine. John has a motor vehicles accessory and parts making company in Australia. For enhancing the performance of the business, he has decided to purchase a CNC machine from Germany. In the year 2014, he bought the machine followed by another guiding rod installation in the year 2015. As per the legislation of Australia, he has to pay CGT against his purchase in the context of declining value assets.
Law with Application: Discussion the cost of the first element regarding CNC machine
John has to pay some amount as the declining value in the context of depreciating the asset. As per Australian legislation the assets which are purchased before the year 2001, 1st July are exempted from the Decline in value asset rules of the country (Australian taxation office, 2019). However, John has to mandate this regulation of legislation and his asset is purchased before the year 2001. In the first stage of the purchasing, John has imported the machine from Germany for the cost of $300,000. The first element of the cost is the amount that has to pay before the first time use of an asset (Australian Government, 2019). As per this case study the first element of cost regarding CNC machine is $300,000 along with installation charge $25,000 as these amounts are paid before the first time use. The total amount of the first element cost is $325,000. In addition to that, John has to pay Capital Gain Tax against the purchase of the machine. In Australia, the rate of CGT is 28% on the current holding of assets (Australian Government, 2019). As for instance, all assets which are purchased before or on 20 September in the year 1985 are exempted from CGT (Australian Government, 2019). In this regards, the owner has to pay CGT in Australia.
In the context of declining value, the assets, which have the asset value less than $300, are exempted from the calculation of depreciating the asset. The total capital allowance for the installation of CNG in the context of Australian legislation is $437,760. However, in this case, the CNC machine is considered for calculating the declining value.
Law with Application: Discussion the cost of the second element regarding asset’s cost
In the second element regarding the cost of the asset are installation charge and inclusion of the guiding rod. In this regard, John has paid $25,000 as an installation charge along with $5,000 for including guiding rod to achieve better performance. The second element of the cost is the amount that has to pay after the first time use of an asset (Australian Government, 2019). In this case study, the second element of cost regarding CNC machine is $5,000 as the guiding rod has installed after the use of the machine. In addition to that, this entire element of the costs is imposed on the purchase after the year 2005 as per the legislation of the country.
The start time of the declining value of the depressing asset has started from the date in which the owner uses it for the first time (Australian taxation office, 2019). Apart from that, the allowance of the declining value is calculated only in the taxation purpose. A person need not to calculate declining value if it is used for non-taxable purpose along with a private holding. On the other hand, if the asset is used for tax purposes then declining value has to be calculated from its first use the date. In this case, John has to pay a declining value of CNC machine from 15th January 2015. In addition to that, there is some interference of GST. As per Australian legislation, there are 10% GST in most of the services and goods (Australian Government, 2019). In the context of depressing the value of the asset, “Ginza Pte Ltd v Vista Corporation Pty Ltd consolidated with Kontack Pty Ltd v Ginza Pte Ltd” can be taken as an example in the country of Australia. In this case, the value of goods as well as assets in Australia is discussed in court with a specific section of the legislation.
Law with Application: Concluding discussions
In the context of depreciation, the asset of John is considered under declining value as per the legislation. In the context of first element cost of CNC machine is $325,000 in which $300,000 is the actual cost of the machine and an additional $25,000 for the purpose of installation. The second element cost of the machine is $5000 for the installation of a guiding rod. The first element cost is calculated on the invested amount before the use. On the other hand, the second element cost is calculated on the amount that is invested after the use of the asset (Australian Government, 2019). The start time of the depreciation value of the CNC machine is 15th January 2015. The total cost of the machine is $342,000 by including all expenditure.
Conclusion
As per the above discussion, it can be concluded that the total cost of the CNC machine of John is $342,000 in the regards of capital allowance. In addition to that, the asset of John is considered under declining value from the mentioned date. CGT is also applicable to the asset as per the Australian legislation. Therefore, it can be stated that John has to pay some extra amount along with the actual cost of the CNC machine.
References
Australian Government (2019). Capital gains tax. Available at: https://www.ato.gov.au/General/Capital-gains-tax/ [Available on: 10 August, 2019]
Australian Government (2019). Capital gains tax. https://www.ato.gov.au/general/capital-gains-tax/selling-an-asset-and-other-cgt-events/[Available on: 10 August, 2019]
Australian Government (2019). GST. Available at: https://www.ato.gov.au/Business/GST/ [Available on: 10 August, 2019]
Australian Government (2019). The cost of a depreciating asset. Available at: https://www.ato.gov.au/Forms/Guide-to-depreciating-assets-2014-15/?anchor=The_cost_of_a_depreciating_asset#The_cost_of_a_depreciating_asset[Available on: 10 August, 2019]
Australian Taxation office (2019). Working out decline in value. Available at: https://www.ato.gov.au/Forms/Guide-to-depreciating-assets-2014-15/?page=7 [Accessed on: 10 August, 2019]
JADE (2019). Ginza Pte Ltd v Vista Corporation Pty Ltd consolidated with Kontack Pty Ltd v Ginza Pte Ltd. Available at: https://jade.io/j/?a=outline&id=145158 [Available on: 10 August, 2019]
