Sold Motor Cruiser at $60,000 and the price for which it was bought was 110,000 dollars in 2004
Based on the facts, the issue that arises here, what should be considered as the capital loss or capital gain and what should be done about it.
Income Tax Assessment Act, 1997
When the auction earnings are lesser than the base cost of the advantage of capital or while the base cost is fewer than the auction income then a capital loss or capital gain is said to take place (Sharkey, 2015).
According to section 118 of the ITAA 1997, exceptions are given to the person who pays tax in which he is granted the right to relinquish the capital profit on capital benefits sale of amount of insurance, components of PST, superannuation, undertaking capital amounts and main residence (Woellner et al., 2012).
To reduce the gain of capital, indexation and discount are the two methods that are utilized to decrease the capital gain. This is explained in sections 115 and 114 of the Income Tax Assessment Act, 1997. Percentage rate is functional under discounting (Millar, 2016).
Mr. Dave sold the dwelling home in which he stayed for more than thirty years plus the date of sale is 27/6/2016. The date of attainment if calculated thirty years reverse shall be 27 1986 June. This cannot be pre capital gain asset in addition to consequently shall not be subject to exemption as per sections 104 – 110.
Capital gain or loss will be = Sale proceeds – Cost base = 850,000 – 70,000
$780,000 is the capital gain
Discounted capital gain = $390,000.
Capital gain = $390,000
Since the asset of capital is a dwelling house therefore, it is subject to exemption as per section 118 of the ITAA. Conclusively, the gain of capital is not chargeable (Sadiq et al., 2016).
Capital gain or capital loss = $sale proceeds – cost base
= $125,000 - $15,000
In this case, the deal is proceeded after September 20, 1999 and the discounting method can be used.
Capital gain discounted = $55,000
Taxable value of capital gain = 55,000.
Hence, the capital gain or loss
= $60,000 - $110,000
= $50,000 capital loss
It will be allowed to place off beginning other resources gains or any other sourced income.
Sale proceeds = Sale price – Brokerage = $80,000 - $750 = $79,250
Purchase price = Cost of acquisition + stamp duty = $75,000 + $250 = $75,250
Capital gain or capital loss = Sale price – Purchase price = $79,250 - $75,250 = $4000
Reduced capital gain as per discount method @ 50 percent = $2000
Taxable capital gain = $2000
Capital gain from residence – Exempted
Capital gain from painting $55,000
Capital loss from motor cruiser ($60,000)
Capital gain from shares 2,000
Total Capital loss ($3,000)
Brought forward capital loss ($10,000)
Total capital loss carried forward ($13,000)
On 30th June 2016, there was a capital loss of the price for 3,000 dollars. The carried onward failure from previous year’s loss is10,000 dollars. Mr. Dave must not sell his asset at a enormous loss as no capital profit can be made from it. Capital gain can be achieved from house but that is excused. To hoard tax in the coming years a dwelling house can be bought and investments can be made that are free from tax and easy to avail (Barkoczy, 2015).
Barkoczy, S., Foundations of Taxation Law 2015, 6th ed. CCH Australia
Brown, C. (2013). Australia-taxation of trusts–the problem of aligning concepts of income. Asia-Pacific Tax Bulletin, 19(5).
Chalmers, J., Carragher, N., Davoren, S., & O’Brien, P. (2013). Real or perceived impediments to minimum pricing of alcohol in Australia: public opinion, the industry and the law. International Journal of Drug Policy, 24(6), 517-523.
Frazier, B. (2013). Resource Capital Fund III LP v. Commissioner of Taxation: Partners or the Partnership-Who Is the Relevant Entity under the Avoidance of Double Taxation Convention between the United States and Australia. Tul. J. Int'l & Comp. L., 22, 377.
Frecknall-Hughes, J., & McKerchar, M. (2013). Historical perspectives on the emergence of the tax profession: Australia and the UK. Austl. Tax F., 28, 275.
Lang, M. (2014). Introduction to the law of double taxation conventions. Linde Verlag GmbH.
Langton, M., & Longbottom, J. (Eds.). (2012). Community futures, legal architecture: foundations for Indigenous peoples in the global mining boom. Routledge.
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