Taxation Law: CGT, Collectibles, Personal Exertion Income, Loan Repayment

This document discusses the tax implications of the sale of various assets, including antiques, sculptures, and jewelry, as well as the tax implications of personal exertion income and loan repayment. It covers relevant sections of the Income Tax Assessment Act 1997 and relevant case law.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

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Answer 1
Issue 1
The tax implications of the proceeds from the sale of an antique impressionism painting as
sold by Helen for a price of $12000.
Rule
Section 102.20 ITAA97: CGT event occurs with the occurrence of a transaction relating to
a CGT asset and any gain or loss arising from the same is required to be treated as a CGT
gain or loss, which is taxable under the CGT tax liability. However, the asset needs to be
purchased prior the date of 20.09.1985.
Section 104.10 ITAA97: disposal of a CGT asset by the procedure of sale is required to be
assessed as an A1 category to CGT event and needs to be taxed likewise.
Application
In the present case, an antique impressionism painting is sold by Helen for a price of
$12000, which has been bought by her father in the month of February in the year 1985 for a
price of $4000. The acquisition of the painting has been made prior to the prescribed date for
the application of CGT. The implementation of further sections of the Act will not be
necessary as the same has been purchased in the pre-CGT period and hence the same is
required to be disregarded from the computation of CGT liability.
Conclusion
Hence, the sale of the antiques impressionism painting is to be kept outside the purview of
the computation of CGT liability.

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Issue 2
The tax implications of the proceeds from the sale of an historical sculpture as sold by
Helen for a price of $6000.
Rule
Section 108-10(2) ITAA97: collectible is an item that has been acquired as well as
possessed by the person paying the tax for being used personally for enjoyment. This item
includes jewellery, artwork, antiques and other similar objects.
Section 118.10 ITAA97: In its general sense, collectible is treated as a CGT asset for the
purpose of taxation. Again, for the purpose of being subjected to CGT, a collectible needs to
have the worth of anything beyond the amount of $500.
Section 110-10 ITAA97: any collectible, which has a worth amounting to anything less
than the amount of $500 will be admitted to computed under the computation of CGT
liability. The same is required to be treated as an exemption from the calculation of CGT.
Application
In this given instance, there has been sale of a historical sculpture effected by Helen for a
proceed of $6000, which has been bought by Helen for a price of $5500. This needs to treated
as a collectible as it is an item that has been acquired as well as possessed by Helen for being
used personally for enjoyment. The price of the sculpture also exceeds the price of $500 and
hence is to be included in the CGT assessment. Hence, the historical sculpture is required to
be treated as a CGT asset and the proceed from the same as a CGT gain.
Conclusion
The proceed from the sale of the historical sculpture is to be treated as a CGT gain.

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Issue 3
The tax implications of the proceeds from the sale of an antique jewellery as sold by Helen
for a price of $13000.
Rule
Section 108-10 ITAA97: a loss that has been sustained by a taxpayer for the sale of a or
with respect to transaction involving a collectible treated as a CGT asset needs to be claimed
in the form of an offset against a CGT gain with respect to collectible only. The offset cannot
be treated as against any other CGT gain unless it is a CGT gain from a collectible.
Application
In this case, the sale of an antique jewellery as sold by Helen for a price of $13000 bought
for a price of $14000 has sustained a loss and the same needs to be treated as a CGT has
been sustained from the sale of an collectible and the same is to be treated as an offset against
the gain from the sale of the historical sculpture.
Conclusion
Sale of jewellery is to be treated as a CGT loss to be claimed as an offset.
Issue 4
The tax implications of the proceeds from the sale of an picture as sold by Helen for a
price of $6000.
Rule
Section 108-20 ITAA97: item possessed by a taxpayer needs to be included in the
computation of CGT only if the value of the same is not exceeding the value of $10000.

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Application
In this case, as the cost of the picture is $470 and the same has been sold for $5000, the
same cannot be treated as a CGT asset as it is an asset owned for personal use and the same
has been sold for a price less than $500.
Conclusion
Hence, the sale proceed of the picture is to be disregarded for the purpose of calculation of
CGT liability.
Answer 2
Issue
The facts of the case provided presents the two set of issues. Firstly it needs to be analysed
that weather the payments received by Barbara can be constituted to be an income that she
has earned by the implementation of personal exertion. Secondly it needs to be analysed that
if the book she has written was in the pursuance of a hobby and the decision of selling the
same has been achieved later on whether that too will amount to an income from the
application of personal exertion assessable in the hands of Barbara.
Rule
Section 6-1 ITAA97: An income which a person generates by the implementation of
personal exertion is required to be treated as income from personal exertion. This form of
income includes any income that an employee receives under the employment he has been
engaged with for the services that he renders towards the employer. It covers wages,
commission, salaries, allowances, pensions and any other perquisites data accrued by an
employee by virtue of his employment.

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Section 393-10 ITAA97: However there are certain places where this income is also
available to a person who has not been employed with some employee. A person who has
been acting alone in a business or has been acting under the capacity of a partner in a
partnership firm. Income accruing from the same is also to be treated as an income from
personal exertion. Dividend, interest or rent which is not accrued from the principal business
of the taxpayer is also to be excluded from an income on from application of personal
exertion.
Section 6-5 ITAA97: The income that a person earns for the purpose of extending
interview towards the media in relation to any of the story pertaining to his life towards the
channel of media is required to be considered as an assessable income and it is required to be
taxed and assessed as an ordinary income in relation to the taxpayer.
Brent v Federal Commissioner of Taxation (1971) ATC 4195: Income that is received by
a taxpayer for the purpose of narrating a story belonging to someone's life any news related
interview with a view is needed to be assessed within the income of the taxpayer.
Pacific Film Laboratories v Commissioner of Tax [1970] HCA 36: Copyright in its
general sense implies a CGT asset that is required to be taxed under the computation of CGT
liability. However if the sole purpose of creating a copyright is to earn a receipt which is
beneficial then that copyright is required to be treated as in income from the application of
personal exertion.
Application
The facts of the provided case implies that the proceeds that Barbara has received amount
into $13,000 for the purpose of writing the book as ordered by the Eco Books Ltd is required
to be treated as a income from the implementation of personal exertion.

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The sale of the copyright of the book by Barbara is required to be treated as a CGT event
and the proceeds from the same is required to be treated as a CGT gain amounting to $13400.
The sale of the manuscript pertaining to the book by Barbara for a price of $4350 is to be
rented an income that has been on by virtue of personal exertion. The amount of $3200 that
Barbara has received for the sale of the manuscripts belonging to the interview is required to
be treated as income from personal exertion.
Again on the other hand if the book was written in the spare time by Barbara and it was
decided to be sold afterwards for the purpose of accruing some income is required to be
treated as a income from hobby. Any income from hobby is not be taxable in the hands of the
taxpayer as an income from personal exertion.
Conclusion
In the first situation the income will be assessed as an income form the application of
personal exertion but in the alternative situation, it is a non-assessable income as arising from
hobby.
Answer 3
Issue
The facts of the instant scenario presents issue that whether the amount received by
Patrick as a repayment of the loan extended will be considered as an income which is taxable.
Rule
D.F.C. of T. v. Purcell (1921) 29 CLR 464: The sum of money taxpayer receives in a
particular year of taxation is required to be analysed under the tax laws to be rendered as a
taxable income. A receipt that an individual is accrued with need to confirm with all the
essentials of an income to be considered assessable in the hands of the taxpayer. The sum of

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money is required to be advantages for the taxpayer who is receiving it for the purpose of
including at in the assessable income of him.
Millard v. FCT 108 CLR 336: A sum of money that has been paid to the taxpayer is
required to be something which is profitable as well as beneficial towards the person paying
the tax. It needs to be something which is favouring the taxpayer and adding towards his
taxable income. Unless an amount received comply with this requirement it cannot be treated
as a income for the purpose of tax assessment.
Federal Wharf Co Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24: Under
tax assessment requirement receipt needs to be viewed as a game to the taxpayer for the
purpose of rendering it taxable. They need to be or change in income of the individual for the
receipt that has been received by the taxpayer.
Section 6-5 ITAA97: An income is required to be treated as an ordinary income if the
same has been accrued from the ordinary concept earning income.
Application
It has been observed from the facts of the given circumstances that Patrick has extended a
loan towards his son David. An amount of $52,000 has been given by Patrick towards David
and has agreed to be repaid amount of $58,000. There has been an additional amount of
$6000 that has been agreed between David and Patrick to be paid at the time of the
repayment of the loan on the elapsing of 5 years. This can be treated as a gain of $6,000 that
has accrued to Patrick. This amount being a gain is required to be treated as in income, which
is assessable in the hands of Patrick. This can further be supported with the case of Federal
Wharf Co Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24.
Again at the conclusion of 5 years he has been paid an additional amount of 5% on the
amount for he has extended as loan by David. Although there has never been any agreement

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between the two regarding any interest payable by David at the end of 5 years, but this 5% is
required to be treated as an interest. Consequently this interest will be treated as a gain that
has occurred to Patrick. Hence it needs to be treated as an income in the hands of Patrick and
will be accessible in the tax year under Section 6-5 ITAA97.
Conclusion
Hence, the effect of the arrangement will be taxable in the hands of Patrick.

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Reference
Brent v Federal Commissioner of Taxation (1971) ATC 4195
D.F.C. of T. v. Purcell (1921) 29 CLR 464
Federal Wharf Co Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24
Millard v. FCT 108 CLR 336
Pacific Film Laboratories v Commissioner of Tax [1970] HCA 36
The Income Tax Assessment Act 1997