Question

Taryn would like to open a new business as an interior designer, to funds her ambition she sold some of the following assets: 1. Antique Painting that was given to Taryn by her father 5 years ago. Taryn’s father bought it on 20 August 1984 for $2,500. Taryn sold it on 1’st June 2020 for $25,000 2. Taryn sold her car (Toyota Corolla) for the amount of $12,000 on 20’th May 2020, she bought on 1’st January 2015 for the amount of $20,000 3. Taryn sold her Harry Potter’s collection for the amount of $1,500 on 4’th January 2020, she bought it second hand on 10’th October 2018 for $350. 4. Taryn sold her gold necklace for $2,000 on 20’th March 2020, she bought it for $1,200 on 8’th August 2018 5. Taryn sold a sculpture for $6,000 on 1 January 2020, she bought it on December 1994 for $1,500 Advise the Capital Gain Tax Consequences for the above transactions,

Answer 1

Please refer from taxation ruling TR 2004/18

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When you sell an item, the selling price minus your basis in the item, usually the amount you paid for the item will equal your gain or loss. Anytime you sell one of these items and the sale results in a gain, you will be taxed on the item. If you had held an item for more than one year, you will be allowed to deduct 50% of the capital gain.

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Capital gains tax generally does not apply when you inherit property, you will have to pay it if you sell or dispose of the property. In this case, the antique painting, $25,000 - $2,500 = $22,500 will be taxable with normal rates

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The IRS prohibits taxpayers from claiming any personal losses on their tax return. Therefore, Taryn sold her car and incurred an $8,000 loss; unfortunately, she will not be able to claim that loss on her taxes.

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Sold the harry porters collection after holding it for one year and three months, also she sold her scripture after she had held it for more than one year, this may be termed as a long term gain and they will be charged differently. Capital gain for collection being $ 1,150 and $4,500 for the scripture.

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Personal capital assets is an all-encompassing category and includes almost everything you own. This one is generally taxed with normal tax rate. The capital gain for the necklace, which is $800, will be taxed with normal rates.

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References

Minas, J., Lim, Y. and Evans, C., 2018. The impact of tax rate changes on capital gains realisations: evidence from Australia. Austl. Tax F., 33, p.635.

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Crowley, A., 2020. Discretionary trusts, non-TAP gains, and foreign beneficiaries. Taxation in Australia, 54(11), p.624.

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Koshiba, K., 2020. Between Inheritance and Commodity: The Discourse of Japanese Ethnolinguistic Identity among Youths in a Heritage Language Class in Australia. Journal of Language, Identity & Education, pp.1-14.