Taxation Law: Income Assessment, Car Fringe Benefit, Loan Tax Treatment, Capital Gains Tax

TAXATION LAW
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Question 1
The given case is concerned with a famous mountaineer Hilary who has received certain
payments. The main issue is to assess if these payments can be considered as income arising
on account of personal exertion under the ambit of s. 6(5).
Payment from newspaper
Hilary was approached by the local newspaper that paid $ 10,000 to her for writing her story.
The key fact to notice here is that Hilary does not have writing experience nor is she known
for her writing skills. Anything written by Hilary would not have any value commercially.
Then, the key question which arises is as to why the payment was made to Hilary. The only
explanation that would arise is that the money was paid to Hilary so that the information
about her life can be obtained by the newspaper. Clearly, this information would be of
interest to the newspaper considering the fact that Hilary was famous and thus people would
be interested in knowing about her life and mountaineering expeditions. The act of writing
had served only a medium which enabled the transfer of information but did not produce any
commercial good or service (Barkoczy, 2015).
The consideration of writing as mere medium is validated by the decision pronounced by the
honourable court in the Brent vs Federal Commissioner of Taxation (1971) 125 case. In this
case also the wife of a famous robber was given money to reveal details about their marital
life. The mode of collection of this information was interviews and these continued for about
2 weeks. However, the court held that the interview session acted as merely the mode of
transfer of the pivotal information which is the asset (Woellner, 2014). The details of the
given case closely resemble that of present situation. As a result, the $ 10,000 payment would
not be labelled as personal exertion based income. The payment is essentially capital receipt
earned through exchange of information.
Payment from Library
The manuscript of the story along with some expedition photographs have been sold to the
library. In relation to the manuscript, it is imperative to consider that the museum is not
paying for the manuscript since Hilary has written it. Any literary work by Hilary would not
have worth considering Hilary does not have necessary skills for the same. However, the
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manuscript becomes valuable owing to the subject matter which relates to Hilary and since
she is famous, thus the manuscript becomes valuable (Gilders et. al., 2016).
In relation to the expedition pictures, the worth of pictures does not come from the activity of
clicking photos since Hilary is not any famed photographer whose work is sought after. But
again the subject matter is imperative. This is because the photos depict the various
photographs related to the expeditions carried out by Hilary which is valuable since she is
known as a mountain climber. Thus, the photograph skills do not have any role to play in the
value of the photographs. Owing to this, the income derived from the sale of photos is not
related to the activity of clicking photographs. Thus, the income would be termed as personal
exertion based income and instead would be termed as capital receipt (Gilders et. a., 2016).
Intention Change
If the story is now written based on self-satisfaction instead of the motive to earn money, then
also the appropriate tax treatment would essentially remain the same. This is because the
central activity of writing is not related to income as it does not lead to anything productive.
Based on the explanation above, writing is just a means of asset transfer and thus, the
underlying intention does not real matter. The underlying intention would become useful
when the act of writing was contribution to proceeds which is not the case here (Sadiq et. al.,
2016).
Question 2
Section 9, FBTAA 1986 highlights the formula to be deployed in computing the car fringe
benefit related taxable value. This is given below (Woellner, 2014).
The key inputs denoted as A, B, C,D & E can be computed based on the information
provided coupled with the relevant FBTAA provisions as highlighted as follows (Barkoczy,
2015).
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