HI5028 TAXATION T2, 2013 ASSIGNMENT 1 Due date: Friday 30 th August Instructions: This assignment is to be submitted by the due date in both soft-copy (Safeassign – Bb) and hard copy. The assignment...

1)
Meaning of Capital gain:
A capital gain or capital loss is the difference between what your cost of purchase is or what is your
cost of acquisition and at what price you have sold or the Sale Price.
If the Sales Price is more than the cost than capital Gain will come and if the Sales Price is less than the
cost than capital Loss will come
An Assesse will pay tax only if he is having capital gains. Though it is known to be as capital gains tax
(CGT), but it is one of the head of Income tax and it is never considered as a separate tax.
If an assessee makes a capital loss, he cannot claim it against income but it can be used to reduce a capital
gain in the same income year.
For Example: An Assesse sold 2 flats in 1 year, Capital Gain and Capital loss from this sale was $150000
and $100000, so he can set off and so net Capital Gain as $50000.
If your capital losses exceed capital gain in a year or the assesse doesn’t have a capital gain, he can
generally carry forward the loss and can deduct it against capital gains in future years.
For example:
In the above case if capital Loss was $ 200000 than Net capital Loss would be $50000, than the assesse can
carry forward the loss and set off in the year when capital Gain will be available.
Exemptions:
Various numbers of assets are exempt from Capital Gain Tax, which includes house and luxurious cars,
and depreciating assets which are used only for taxable purposes.
These basic policies should be followed before doing the case law:
1. Significant Accounting Policies
a. Revenue recognition
i. Sale of Products: Sales are recognised at the point of dispatch to the customers
ii. Sale of Services: Labour Charges are recognised at the point of dispatch to the customers.
b. Expenditure
Expenses are accounted for on accrual basis and provision is made for all known losses and liabilities.
c. Valuation of Inventories
Trading Stocks are valued at lower of cost and net realisable value.
Work in progress is valued at lower of cost plus overheads and net realizable value.
d. Fixed Assets
Fixed assets are stated at the cost of acquisition less accumulated depreciation. Cost of acquisition
comprises the purchase price and any cost attributable to bringing the asset to its working condition
for its intended use.
e. Depreciation
Depreciation is provided on Written down value basis in the manner prescribed under Australian
law... In respect of additions / deletions during the year, depreciation is provided pro-rata from the
date of such additions / till date of deletions.
f. Foreign currency transaction
Transactions in foreign currency are recorded at exchange rates prevailing on the date of the
transaction. The related gains or losses are recognised at the time of realisation. The yearend
receivables / payables are translated at exchange rate prevailing on that date and the gains or losses
are recognised in the Profit and Loss Account.
g. Investments
Investments are either classified as current or long-term based on the Management's intention at the
time of purchase and annual review. Current investments are carried at lower of cost and fair value of
each investment individually. Long-term investments are carried at cost less provisions recorded to
recognise any decline, other than temporary, in the carrying value of each investment.
h. Income Tax
Provision for current Income tax is made based on the taxable income computed as per the provisions
of the Australian Income Tax Act.
Deferred tax is recognised, using the tax rates and tax...