Australian Tax Office classifies assets under CGT in three forms i.e. those under collectable form, personal assets and others as normal assets (ACCOUNTING, M ,2017.Pg.3) This classification is therefore what is used to categorize the below discussed items that is in question.
(a)The jewellery in question costing $5000 is classified under the collectable asset under capital gain as stipulated in Australian Tax Office on CGT. It is classified under collectable asset mainly because it is deemed to be kept and used for leisure, enjoyment, fun or personal use by the owner or persons associated with the owner. Jewellery together with other items that are deemed collectable have special treatment and consideration for CGT purposes hence not all collectable assets qualify for CGT.
Australian Tax Office regulation states that capital loss on collectable assets can be used to net off or reduce the value of future capital gain but only to limited collectable assets.They appear in examples of jewelleries, books and journals ,antique ,stamps as well as any interest or debt that are deemed to result from the latter mentioned assets (Barnes and Stephens,2012.Pg. 91.)Thus collectables assets whose cost value are $500 and below do not qualify to have its capital loss reduce the future capital gain or even have its capital gain form part of the income.
Ideally based on this term the jewellery in question cost 10 times above the minimum set Australian Tax Office threshold of $500 since we are informed that it costed $5000. Hence going with this incase of disposal of this collectable jewellery of $5000 the regulation allows and require the owner to report any capital gain on the income or allow the reduction of capital loss if any on future capital gain. This summarizes the fact that incase this jewellery or any other collectable costed less than $500 automatically this exempts the asset for capital gain tax.
The other consideration made on collectable asset for Capital Gain Tax is that if an interest or share of the collectable of $500 or less was acquired before 16th December 1999 there exist exemption of CGT on this asset. The Jewellery in question by virtue of not being informed when it was acquired it passes this test by a big margin since its value cost still stands to be more 10 time the minimum base line of $500.Finally the last test of collectable asset capital gain tax exemption is when the asset market value interest is less than $500 thus just as it happens to the latter test of year of acquisition i.e. 16th December 1999, this is likewise defended by the value of $5000.
The $5000 jewellery therefore forms under collectable asset for capital gain tax purposes since it has its historical cost at 10 time above the minimum base line of $500 hence an aspect that makes it free from capital gain tax exempt (Cheng and Yong 2013,Pg.27.) Hence tasking the owner of this $5000 jewellery in case of disposal disclose and declare any gain earned as capital gain in his or her income or if it is a loss on disposal of the same jewellery he or she should likewise carry forward the capital loss for future capital gain reduction but of course upon declaring the same in the loss schedule.
(b)The other form of assets in which Capital Gain Tax takes form is the personal asset classification. According to Australian Tax Office on what is a capital gain tax asset? defines personal asset as those assets that are used, kept or maintained for own personal need or enjoyment of the same by own self or proxy that are associates in nature (Arkwright,2009.Pg 124.) It is further outlined by the tax man regulation to be likewise a debt or an interest earned resulting from an activity that does not gain or generate part of the assessable income within that tax year (Evans, 2004.Pg .371.)
Examples of assets classified as personal includes the likes of personal boats, cars, furniture and house items like television, radio, phones among others. There exists a capital gain tax exemption on assets sold as a set or individually but only up to a limit of $10000.This however class of asset is however special since there is no capital loss that is claimable in nature for future reduction of capital gain earned simply because they are deemed to be owned purposely for personal needs and enjoyment.
As the regulations state that there is no capital loss claimable on personal use asset I therefore wish to declare that the $3000 second hand car item purchased does not attract any capital loss if any upon disposal. Likewise, I wish to state that upon disposal of the same asset there exist no capital gain on this second hand car simply because its cost value is less than the $10000 minimum base outlined by the law by $7000 difference.
However if the second hand car purchased is meant for income generating interest or purpose the approach on the capital gain tax is different since the gain is not going to fall under the exemption class mainly because it is generating income that adds up to the assessable income. For instance, if the car costing $3000 was being used for personal use i.e. going for leisure drives in parties, church, town, cinemas or any other activity that does not generate income the capital loss by default still fails to be considered while capital gain tax fails to take place likewise because it is less than the $3000 base tier upon disposal.
The above scenario is different from a second hand car purchased at $3000 whose use is to transport electrical stuffs like laptops that are on daily basis sold to generate income that are assessed as income for tax purpose (Allerdice,2014. Pg. 230.) This asset is not deemed personal since it is not meant for leisure or own personal enjoyment but is meant for tax purpose hence upon disposal of the same it is expected that any gain resulting from this should be added back to the income as part of assessable income and if any capital loss occurs resulting from this it should be pushed forward for future claim regardless of the base tier as defined in the regulation (Burnheim and Bobbin,2017. Pg.12.)
(c)Ideally if an asset is seen not to fall under the collectable or personal category for capital gain tax purpose by default it is therefore classified as other assets for capital gain tax purpose courtesy of Australian Tax Office regulations. They are deemed others mainly because by default they have minimum base tier for capital loss consideration either does it have special base limit for its gain upon disposal be termed as capital gain (Woellner, Barkoczy, Murphy, Evans, and Pinto, 2010. Pg.5.)
These assets referred as other assets upon disposal they automatically generate gain or loss that in capital form that are deemed declarable for tax purpose as either capital gain addable in the income or capital loss on disposal carried forward for future set off Jones (2016.Pg. 67.) These other assets include; shares and interest in companies, land, leases, goodwill, trademarks and patents, foreign convertible notes, stocks and many others. All these mentioned assets are referred as others because they are owned for business use hence at the end of it all it is not hold for enjoyment but for business speculation purposes Minas and Lim (2013. Pg.192.)
This therefore makes the shares worth an amount which we are not told in BHP by default qualifies to be in this other assets category simply because whether a gain or loss on disposal of a capital nature occurs on these shares, an equivalent tax declaration is expected on this asset on share in the form that Tanti(2011.Pg 668), if it is a capital gain earned upon disposal the amount gained should be added as part of the assessable income for that purpose likewise if it is a capital loss it should be known that this loss is capital in nature and hence can only be used to set off only gains that are capital in forms thus carried forward for future set offs of the same.
(d)Although your home forms part of other assets because if you opt to dispose the asset at a gain or loss that income or loss is to be declared appropriately, there exist what is to be considered for the gain or loss to be declared for tax purpose as part of tax or an exempt (Blissenden ,2011.Pg 425.) A gain or loss resulting from your home disposal is however possibly considered an exempt for tax purpose but only if the owner of the home is able to trace back all the relevant costs i.e. including water and gas connection relating to that home in lieu of the residue sales generated upon disposal (Sørense and Johnson, 2010.Pg 236) if you the owner of the house you are able to proof and show that it is only you and your family is living and have been living in that home since you acquired the property, it is likewise where your personal needs and belongings are found in and finally where all your physical direction in case of traceability is found mainly mails and Australian electoral roll call register.
The other main consideration that is made for a home to be deemed capital gain exempted is if the home lies in sizeable land that is either 2 hectares or less and if there is proof that the home you own has never been used to generate revenue of whatsoever nature thus this and the latter above consideration makes your home qualify to be exempted from capital gain or loss upon disposal (Fitton,2013.Pg 300.)
As the above consideration makes your home free from Capital Gain Tax or rather it deems the gain as capital gain tax exempted, it should likewise be known there are scenarios that makes your home an item of capital gain tax as explained below in Australian Tax Office regulations on foreign residents and main residence exemption as reference in the 2017-18 Australian budget. This budget though not complete requires that all foreigners residing in Australia free themselves from claiming capital gain exemption hence are required to declare any gain or loss when disposing their homes (Sawyer and Sadiq,2017.Pg 24.) However this only happens to only foreigners who are not Australian residents for tax purposes to those who are and satisfy the consideration of a local Australian residence who owns a home qualifies for the exempt (Grudnoff,2016.Pg 6.)
If indeed one does not live in that home for the rest of his or her life and does not meet the consideration of a main dweller for capital gain tax exemption by may be using the home to generate revenue he or she is tasked by the law to declare the capital gain for tax purpose with an example being persons who have more than two home and partly live in all of them.
References
ACCOUNTING, M., 2017. TAXMATTERS. Small.
Allerdice, R., 2014. CGT provisions. Marks’ Trusts & Estates: Taxation and Practice, p.213.
Arkwright, R., 2009. Henry-an opportunity to reform the individual CGT regime?. Taxation in Australia, 44(2), p.81
Barnes, J. and Stephens, M., 2012. Capital gains tax basics.Concise Collection of Tax Fundamentals, A, p.91.
Blissenden, M., 2011. Accessing CGT concessions for the disposal of an active asset: rent or occupancy fee?. Taxation in Australia, 45(7), p.425
Burnheim, E. and Bobbin, P., 2017. Record keeping tax tips.Equity, 31(9), p.12
Cheng, A. and Yong, S., 2013. New Zealand and capital gains tax: A tax experts’ perspective
Evans, C., 2004. Taxing Personal Capital Gains in Australia: Causes of Complexity and Proposals for Reform. Austl. Tax F., 19, p.371
Fitton, G.D., 2013. Taxing employee shares in Australia-the best of worlds and the worst of worlds. Keeping Good Companies, 65(5), p.300.
Grudnoff, M., 2016. CGT main residence exemption. The Australia Institute Policy brief, January
Jones, D., 2016. Capital gains tax: The rise of market value?.Taxation in Australia, 51(2), p.67
Minas, J. and Lim, Y., 2013. Taxing capital gains-views from Australia, Canada and the United States. eJournal of Tax Research, 11(2), p.191
Sawyer, A.J. and Sadiq, K., 2017. Reflections on New Zealand’s ‘Experience’with Capital Gains Taxation.
Sørensen, P.B. and Johnson, S.M., 2010. Taxing capital income: options for reform in Australia. In Melbourne Institute, Australia’s Future Tax and Transfer Policy Conference (pp. 179-235)
Tanti, P., 2011. Capital gains tax: The obscure provisions.Taxation in Australia, 45(11), p.668
Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2010. Australian taxation law. CCH Australia
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