I've been thinking a little about the question of whether capital gains count as assessable income, for the purposes of establishing whether the losses on an investment could be generally deductible, per Fletcher, etc.
S. 51AAA tells us that capital gains don't count as assessable income for the purposes of establishing whether an expense is deductible in a particular year.
But, per the Ormiston ruling:
"The respondent [ATO] suggested [the reason Ormiston spent 4 years slowly renovating the property was] either engaging in a hobby of home renovation or to protect the capital value of the investment property. If the latter, it would be reasonable to extend the motive to realisation of a profit on a subsequent sale of an improved property. Such a profit would be, in whole or in part, taxable income. While it is common for taxation on profits on sales of assets to be referred to as ``capital gains tax','' there is no tax by that name, solely the inclusion of all or part of a profit in assessable income."
So, why did the AAT ignore S.51 AAA?
Incidentally, this is purely an academic exercise for me, it's not related to any particular property.
Cheers
Jonathon
S. 51AAA tells us that capital gains don't count as assessable income for the purposes of establishing whether an expense is deductible in a particular year.
But, per the Ormiston ruling:
"The respondent [ATO] suggested [the reason Ormiston spent 4 years slowly renovating the property was] either engaging in a hobby of home renovation or to protect the capital value of the investment property. If the latter, it would be reasonable to extend the motive to realisation of a profit on a subsequent sale of an improved property. Such a profit would be, in whole or in part, taxable income. While it is common for taxation on profits on sales of assets to be referred to as ``capital gains tax','' there is no tax by that name, solely the inclusion of all or part of a profit in assessable income."
So, why did the AAT ignore S.51 AAA?
Incidentally, this is purely an academic exercise for me, it's not related to any particular property.
Cheers
Jonathon