Taxation Law: Capital Gains Tax, Personal Exertion Income, and Interest on Loan

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
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TAXATION LAW1
Table of Contents
Answer to question 1:...................................................................................................2
Answer to question 2:...................................................................................................3
Answer to question 3:...................................................................................................5
References:..................................................................................................................7

TAXATION LAW2
Answer to question 1:
Capital Gain Tax regarding antique impressionism painting
As noted in “sec 100-25 (1), ITAA 1997” capital gains tax is limited on the
assets to which it is applied and to those that are acquired on or following the 20 th
September 1985. Up to 21 September 1999 only the real gains that are made is
applied for tax under the capital gains tax regimes (Minas, Lim and Evans 2018). As
a result of this the cost base of the capital gains tax asset was indexed for the
purpose of inflation if the CGT asset sold that was held for greater than 12 months.
Assets which is purchased before the 20th September 1985 and gains derived
thereon, is not liable for CGT because they exempted assets.
The antique painting here is purchased by Helen before the 20th September
1985. In other words, the painting is purchased on February 1985 which is before the
introduction of the CGT regimes. however, the painting was sold in 2018 December.
The purchase price was $4,000 while the sales value stood $12,000. So the sale of
painting has led to capital gain. As the asset is bought before the CGT introduction
date so it is pre-CGT asset and the capital gains here is exempted for Helen.
Capital Gain Tax regarding historical sculpture:
The provision of CGT is applied on the actual or the realised gains. Under
“sec 102-5 (1)” The capital gains are taxable for the taxpayer as the statutory
income and also included in the assessable earnings. “Sec 104-10, ITAA 1997”
deals with the disposal of CGT asset (He et al. 2016). When the CGT asset is sold
then the CGT event A1 happens. A collectable implies items such as antiques,
sculptures, rare books, jewellery listed in “sec 108-10 (2), ITAA 1997” that is used
for personal enjoyment purpose.
An art work in the form of sculpture was purchased in 1993 for $5,500. Helen
sold it for $6,000 in 2018. The sculpture is regarded as an item of collectable under
“sec 108-10 (2), ITAA 1997”. The sale of sculpture has given rise to CGT event A1
under “sec 104-10, ITAA 1997”. The capital gains made is considered taxable as
statutory income under “sec 6-10” and will be included in Helen assessable income
based on “sec 102-5 (1)”.
Capital Gain Tax regarding antique jewellery piece:
Notably, “sec 108-10 (1), ITAA 1997” explains that capital loss from
collectables are quarantined and is only allowed to be offset against the capital gains
from other collectables (Harding and Marten 2018). This implies that amount that is
leftover from capital loss is carried forward to future years under “sec 108-10 (4)”.
The taxpayer here Helen has bought the jewellery for $14,000. The jewellery is sold
on 20 march 2018 for a loss of $1,000 from the actual purchase price. Abiding by the
quarantined rule given under “sec 108-10 (1), ITAA 1997” the capital loss must be
quarantined and can be offset against capital gain from sculpture. On the basis of
“sec 108-10 (4), ITAA 1997” while the remaining amount of $500 as the unused
capital loss should be carried forward to future year.
Capital Gain Tax regarding picture:
“Sec 108-20 to 108-30” list down the personal use asset. These assets must
not be mistaken as collectables (Hellwig and McAllister 2018). Rather in includes