Taxation Law: CGT, Personal Exertion Income, and Interest on Loan

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

TAXATION LAW1
Table of Contents
Answer to question 1:...................................................................................................2
Answer A:..................................................................................................................2
Answer B:..................................................................................................................2
Answer C:..................................................................................................................3
Answer D:..................................................................................................................4
Answer to question 2:...................................................................................................4
Answer to question 3:...................................................................................................7
References:................................................................................................................10

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Answer to question 1:
Answer A:
The broader concept of CGT comprises of the comparison among the capital
proceeds and the cost price of the asset. Capital gains tax is applied commonly to
the assets or the events that takes place on or after the 20th September 1985. So, it
should be understood that the pre-CGT and the post-CGT is regarded as the
regularly used word for referring the assets that is purchased or the events that are
occurring prior to or after the date (Graetz et al. 2015). The taxpayer should denote
that the concept of CGT is entirely based on the capital gains or capital loss
originating from the sale of the assets or from the other specified events.
The case facts suggest that Helen is the fashion designer and she is
considering to fund her business. As a result, in December 2018 an antique painting
which the father of Helen purchased in February 1985. As a result, the asset was
eventually sold for $12,000 with the original purchase price being $4,000. Therefore,
the painting should be classified as the pre-CGT asset because Helen’s father
purchased the painting before CGT regimes was introduced. Consequently, the
capital gains that is made from the painting is exempted in this case.
Answer B:
As per the CGT regime, the net amount of the capital gain which has accrued
to the taxpayer in the particular income year, represents the gain that is included into
the taxpayer assessable income for that year. A capital gain or the capital loss is
ascertained upon subtracting the right cost base associated to the asset or the other
event to derive the sales proceeds from the assets that are sold. Accordingly, a CGT
event A1 happens under “s-104-10 (1)) of the ITAA 1997” when the CGT asset is

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disposed. Under the legislation of “s-108-10 ITAA 1997” collectables include the
assets that the taxpayer has kept for their personal use. The items that generally
under this definition is the antiques, art work such as sculptures or the rare stamps
(Lang et al. 2018). “Section 102-5, ITAA 1997” includes the net amount of capital
gain for the income year in the taxpayer assessable income.
The case study suggests that the sculpture that was purchased for $5,500 in
the 1993 has been finally sold in 2018 for $6,000. The sale of collectable under the
“s-104-10 (1)) of the ITAA 1997” has given rise to CGT event A1. Upon selling the
collectables she has made capital gains of $500. Therefore, under “section 102-5,
ITAA 1997” Helen needs to include the net amount of capital gain for the income
year in her assessable income.
Answer C:
Helen in the year also stated that she had sold the antique jewellery piece for
$13,000. The purchase price of the jewellery was $14,000 and it was purchase on
1987. Therefore, upon selling the jewellery she incurred a capital loss. The taxpayers
should denote that the capital loss is not permitted for deduction from the taxable
income, rather it is allowed for off-set from the capital gains that is made in the year
or from the future years so that the net amount of capital gains is ascertained. The
special rules of collectables explain that capital loss should be separated and should
be deducted only from the capital gains from other collectables under “s-108-10
(1)”. Helen can off-set the capital loss of antique jewellery from the gains made from
historical sculpture (Sakurai and Braithwaite 2019). However, the remaining amount
of loss should be carried for by Helen to be offset from gains in future years.