Principles of tax income law Essay Example | Topics and Well Written Essays - 2750 words

Principles of tax income law - Essay ExampleIn Johns case, he is an employee of a real estate agent but he is carrying emerge personalised investment activities. This can be seen with the purchase of the motel in order to sell it protrude as a castergarten later. A purchase of this kind can be considered as an investment carried out with the intention to make a profit. In terms of the bigger picture, Johns investment activity can be considered as a business activity in ordinary usage since he invests money in order to derive a profit. Receipts or profits created through business activities are treated as ordinary income for most circumstances3 4. In cases where there may be earnings complications or where receipts cannot be created from proceeds of business, income may not be seen as ordinary5. However, in Johns case, if the real estate sold out it would have produced a simple income receipt that would have been considered as ordinary income. The onset of the flood and the clear ing up of the land can further be considered as business activities on Johns part in order to add nurture to his property. The assessment that Johns land carried resistance hot water reservoirs merely added even to a greater extent value to his land. John is now being offered money based on the value addition on the motel site he purchased. The value addition activities of John can be seen as business activities analogous to any other(a) value addition properties carried out by any other business. As long as there is sufficient connection between Johns income derived from the sales event of land and value addition on the land, Johns income will be categorised as ordinary income according to FCT v Consolidated Press Holdings Ltd (No 2)6 7. A test of Johns circumstances reveals that he purchased land with a view to make profit and his final transaction with Green Energy results in profit. much(prenominal) income is considered ordinary income for taxation purposes. Problem Questio n 1B The capital gains tax (CGT) applies to any forms of capital gains made when an asset is disposed off except for certain saveions. about exemptions related to CGT in Australia are based on items of personal use as well as exemptions to promote certain business activities. Moreover, the CGT enforced in Australia provides for rollovers under certain circumstances. The contention behind CGT is to tax income that falls within the capital gain category so that it cannot be drained off for other purposes. Assessments for CGT rely on considering any net gains as part of the taxable income structure for a single tax year8. The net gains may result from the sale of owned assets or from any other forms of disposal of assets. Any form of assets held by an individual for a period of one year or more are given a fifty percent discount when considering the CGT on disposal9. CGT was introduced to Australia in 1985 and any assets held by a person before this are exempt from CGT. Assets acquir ed by a person in or after 1985 are considered alone in CGT deductions10. In the case of Kimberly, her assets were mostly formed well after 1985 so CGT applies to most of her assets except those that are exempt under current CGT laws. In addition to this observation, it is noteworthy that up to 1999, CGT applied after an assessment of the consumer set index (CPI). Under this scheme, changes in the price of an asset due to consumption