Assessment for taxation theory and practice

Question 1:
In the given scenario, the issue revolves around City Sky Co, which is a company dealing in investment and development of property. In the recent time, the company acquired a piece of land in South Brisbane. The plan is to build 15 apartments and then to sell those. The company appointed a local lawyer, Maurice Blackburn for the legal services required in the development of the project. $33,000 was paid as the fine. So, City Sky Co has hired Maurice Blackburn for development services worth of $30,000. Maurice Blackburn runs his business as sole trader and has a turnover of around $300,000 per year.
It has been mentioned that City Sky Co is registered for the purpose of GST and so automatically it will be eligible to avail the input tax credits whenever applicable. In Australia, GST is a
oad based tax at the rate of 10% which is applied on most of the goods and services consumed or sold in Australia (Australian Taxation Office).
Every business organization has to register for GST under the following circumstances:
· If the GST turnover amount exceed $75,000.
· If a new business is started and it is expected that the business will cross the above mentioned limit in the first year of the business itself.
· If the company is old but it has crossed the GST limit in the relevant year.
· If the organization is of non-profit nature and has crossed the GST turnover of $150,000 per year.
· If travel service is provided of taxi or limousine. Under this scenario the GST transaction amount limit is not considered. The condition applies for both the owners of the taxi and also on lease and rent of the taxi.
· If the organization want to claim for fuel tax credits.
If an organization does not satisfy any of the above mentioned conditions then it becomes optional for it to register for GST.
So, the businesses and the organizations which register for GST include GST in the price charged for the goods and services offered by them. Then they make claims for the GST paid in the prices paid while purchasing any goods and services.
But the business organizations also have to understand if the sales made by them are taxable or GST free. A list has also been provided by the Australian Taxation Office including the goods and services on which GST will not be charged.
GST is applicable on goods and services. Land is an immovable property, so it is neither a good nor a service. So, GST will not be applied on the purchase of land by City Sky Co. GST is not levied in real estate but is applied when a property is under construction. Vacant land is not a goods or service but it is capital assets. So, on the purchase of a vacant land, City Sky Co will b required to pay capital gain tax (CGT) and not GST (Australian Taxation Office).
If the vacant land has been purchased for the purpose of own consumption then there will be no GST charged on that land ever. Even if the vacant land is used for building rent property then also no GST will be charged. If the vacant land has been purchased for business purposes or with profit motive the sale proceeds from such activity will be considered as ordinary income and GST will be charged on that.
Further City Sky Co is planning to make apartments on vacant land. So, the purpose is business purpose or profit motive. As per the law, a good or service which has been received by a person for the purpose of construction of an immovable property or to extend the business activities are not eligible for the purpose of input tax credit. So, City Sky Co will have to pay GST after it sells the apartments to the final users but it cannot claim for the input tax credit for this purpose since there was no GST paid during the purchase of the land.
There is another transaction involved in the case where the company, City Sky Co paid service charges to the lawyer. Reverse charge is...