The paper "Taxation Law" is a great example of an assignment on finance and accounting. Dave has lived in the residence for the last 30 years having purchased it at $70,000. Australian tax principles indicate that when one sells his/her residence, it will be deemed tax-exempt as far as the capital gains tax is concerned. This will be so where the residence has been used as one’ s family home during the time the seller owned it. It must be noted however that for this to apply, the residence must not have been put to use for producing assessable income.
If the above conditions apply, then one can claim full CGT exemption. As stated above, Dave has used this property as the family residence for the last 30 years. Since the case does not give any indication that Dave used the residence for any income-generating activity, it will be assumed that the residence was solely used as a family residence. Therefore, it is clear based on the above facts in regard to relevant taxation laws that Dave’ s residence is CGT exempt and hence he will be entitled to claim full CGT exemption from the gain he has made after selling the residence. The paintingDave also sells a painting by Pro Hart that he had purchased on 20th September 1985 for $15,000.
He sells the painting at an auction on 31st May of the current tax year for $125,000. The Australian tax law would treat this as the sale of an individual collectible and hence a CGT even. This is because the law stipulates that the sale of individual collectibles will attract CGT on the gain made unless the asset in question had been acquired for $500 or less.
However, Dave acquired his painting at $15,000 and thus the gain made will attract CGT deduction. The luxury motor cruiserDave purchased the luxury Motor cruiser that he has moored at the Manly Yacht club in late 2004 for $110,000 and he then sells it for $60,000 on 1st June of the current tax year. The law would treat this as a personal use asset and thus liable for CGT deduction for any gain made from the sale.
Taxpayer.com.au, 2016, Tax & You, Retrieved on 28th May 2016, from;