Taxation Law

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Answer to question 3:.................................................................................................................6
References:.................................................................................................................................9

2TAXATION LAW
Answer to question 1:
Requirement A:
The capital gains tax should not be viewed as the separate form of tax. The provision
of capital gain is applied on the assets that are purchased on or following the introduction of
CGT on September 20, 1985. The assets which is purchased before the CGT regimes got
introduced, should be treated as pre-CGT asset. Any kind of gains that is made from the pre-
CGT asset is simply ignored from the provision of CGT (Klein, Bankman and Shaviro 2013).
In other words the capital gains from the pre-CGT asset is exempted from tax.
The client here Helen held an antique impression painting which was acquired by her
father. The antique impression was acquired by her father in February 1985. This evidently
makes it clear that the asset is a pre-CGT asset because the client’s father here purchased it
before the CGT regimes were introduced. Upon the disposal of painting on 1st December
2018 the asset a capital gains were derived by the client. Since the painting is bought prior to
the introduction of CGT regime, the gains are exempted from CGT.
Requirement 2:
A CGT asset under “sec 108-5, ITA Act 1997” includes any form of property or the
legal or equitable right which may not be held as property. The CGT event A1 amounts to the
disposal of the CGT asset under “sec 104-10 (1), ITA Act 1997”. A person disposes the CGT
asset when there is an actual change in the ownership happens (Lockwood 2016). The
definition of collectables as per “sec 108-10 (2)” includes the art work, rare folio, antiques,
coins or medallion that are mostly for the enjoyment and usage of taxpayer on private basis.
“Sec 102-5, ITA Act 1997” explains that a person is required to include in their assessable
income net capital gain derived during the income year.

3TAXATION LAW
The client here Helen, disposes the sculpture which purchased back in December
1993. The sculpture was sold for $6,000 with cost base of $5,500. Within the legislative
provision of “sec 104-10 (1), ITA Act 1997” the disposal of sculpture led to CGT event A1.
Within the legislation of “sec 102-5, ITA Act 1997”, the capital gain that is made from the
collectable should be included by client here in her assessable income for the relevant income
year.
Requirement C:
There are special rules that is applied on the collectables. Denoting “sec 108-10 (1),
ITA Act 1997” on suffering capital loss from collectable the loss should be quarantined
(Berliant and Gouveia 2018). The loss from collectables must be reduced from capital gains
on other collectables. Similarly, the client here Helen has purchased the antique jewellery for
14,000. But it was eventually sold for a loss with the sale value of $13,000, thereby incurring
a loss of $1,000. The client here Helen is advised to lower the loss by setting the same off
against the gains from historical sculpture.
Requirement D:
The definition of the personal use asset (PUA’s) is given in “sec 108-20 (2)” as a
CGT asset apart from collectable that are used for private enjoyment (Kaplow 2019). These
assets usually comprise of boats, yacht, vehicles, electronic items, household items etc. While
“sec 118-10 (3)”, says that when noticing the cost of asset is less than $10,000 then the
taxpayer must ignore the capital gains made from those assets.
The client here Helen disposed the picture which is a personal use asset for a sale
price of $5,000 that her mother bought in March 1987 for $470. The case facts presents that
the picture has the cost price of less than $10,000. Under the legislation of “118-10 (3)” the