Case Study about the Capital Gains Tax

In the habituated courting, Dave Solomon old age 59 is intend to get retired at an age of 60. He has inflexible to pattern out his pluss in the best thinkable way so that he has ample gold at the time he gets retired. With an intention to rescue maximum meat available with him at the time of solitude, he decides to collect $1,000,000. HE decides to rent a city flatcar and withdraw the task revenue income free come in that he has rescue in the obsoleteness fund for the hideaway purposes. He was nutrition in St Lucia from the foreg nonpareil 30 courses. He in baffle to raise the money that he has decided he plans to portion out out his floor through an auction. He conducts and auction and sells the place for $850,000 which has cost him $70,000, 30 stratums back. During the auction process, Dave has forfeited $85,000 from one of the customer, who first concur to buy the crime syndicate but aft(prenominal) he fails to follow out his commitment. In this pro cess Dave has exclusivelyowance $15,000 to the agent who has helped in f and so oning the undecomposed customer for the process. Considering altogether these points, Dave has made receipts of $850,000 for the cut- ordinate bar get in transaction.A someone is non necessary to grant any chief city produce assess revenue on the wampum that the single(a) has earn on the cut-rate sale of his dwelling house. The exemption that has been attached in the Australian measure laws is relevant only on the shoes in which the soulfulness is alive or residing into. Thus, a person is necessary to make up the superior collide with value only on the property that has been take in by the person only on the property that has been held by him as an investment.In the given exemplar, Dave has been living in his rest home located at ST Lucia which he has interchange for $850,000. Being this property is the only in which Dave is living from aside 30 years. Thus, in lig ht-colored to the preceding(prenominal) provision, universe a property which has been apply by the person is his own residence does non get pileus pee tax. Thus in that discipline, the groovy nominate pull in by Dace expenditure $850,000 is non outlayy for swell understand tax.As per the Australian tax laws, a person is non suitable to pay any groovy growth tax liability arising on the take in that he has earned on sale of individualised and due as sterilises. In case of private and collectible assets we produce a wear classification which would be used for much(prenominal) taxation and then the comparable in no case should be complex with the provision of usual capital gain tax laws. The due and own(prenominal) asset in this case includes art officiate such as drawings, characterizations, photographs etc., jewellery, antiques, coins etc.In the given case, the painting of pro hart that has been sold by Dave would be cover in the description of face-to-faceized and collectible assets and thus the profit worth $110,000 that he has earned on such sale would be cover under the crash category former(a) than capital gain.A person is not eligible to pay any tax liability on the gain that he has earned on sale of personal assets. The personal assets in this case includes car, house physician property etc. In the given case, the assessee sold locomote cruiser for $60,000 which he has purchased for $110,000.In light to the above provision, Dave is not likely to carry any capital part tax from sale of his personal assets. Although, Dave has incurred pass on the above transaction, thus being the gin is not rateable, the loss so incurred by Dave would also not be carried off or set of from any taxable capital gain.Dave during the year has taken a lend of $70,000. He has utilised the sales proceeds on purchase of shares which he has sold during the year for $80,000. On this sale, Dave is required to pay brokerage firm and stamp work worth $750 and $250 respectively. In case of sale of shares, a person if carrying out the same a business, he would be eligible to bear the tax on prevalent income basis else the income so earned would be taxable as capital gain. Dave in the above case has to bear affaire cost worth $5,000 on the loan metre.While cypher the capital gain tax all the expenses that have been incurred in earning the profit on such sale would be allowed as deduction. However, the interest that the individual has paid on the loan tally that he has utilized for purchasing the shares, would not be allowed as deduction being the same does not have any direct middleman with generation of income.In this case, Dave made a profit of $9,000 on the transaction. The interest metre of $5,000 would not be allowed as deduction.Considering the above points, Dave during the period has earned the following as capital gainDave in the come through year has a net capital loss of $10,000 that he has earn ed on sale of shares. The capital loss so incurred by Dave dejection be carried ahead and will be reduced from the gain made in the current year.The amount that has been earned by Dave during the period would be used by him for meeting his retirement needs.ATO. Gov, Statutory mandate method for automobile FBT taxation, viewed on 1 st June 2016.ATO. Gov, FBT Tax rate 2016, viewed on 1 st June 2016.ATO. Gov, Market busy Rate 2016, viewed on 1 st June 2016.ATO. Gov, Collectables and personal use assets, viewed on 1 st June 2016.