Taxation Law

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

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Answer to 1:
Requirement 1:
The regime of CGT is applicable from 20/09/1985. Correspondingly, the word pre-
CGT and post-CGT is frequently imposed on the assets that are purchased or dealings that is
taking place before or subsequent the date of introduction of CGT regimes (Dietsch and
Rixen 2017). A gain that is held as the capital is not held as ordinary income within the
legislation of income tax. Accordingly, under the “section 102-20, ITAA 1997” a capital gain
or loss happens when transaction associated to the CGT originates. Upon disposing the asset
CGT event A1 takes place within the legislation of “Sec104.10(1)”.
Helen disposed the painting having the sales of $4,000. It can be stated that the
antique impression is a Pre-CGT asset because it was purchased before the introduction of the
CGT system (Stoilova 2017). Therefore, Helen is required to exclude it from the capital gains
regimes and hence no tax is applicable.
Requirement 2:
As clarified in the “section 108-10 (2), ITAA 1997” collectable is a type of asset that
is largely used by taxpayer or kept for own enjoyment purpose. The assets generally comprise
of the artwork, antique coin or the medallion. It also includes the manuscript or book or the
postage stamp (Spiro 2018). When the collectables are bought for below $500 then capital
gains or loss is excluded within “s118.10(1), ITA Act 1997”. While an important explanation
has been made under the “section 108-10 (1)”, capital loss that is obtained from the
collectables is only permissible to be subtraction against the capital gains from the
collectables (Belitski, Chowdhury and Desai 2016).
The case study evidently puts forward that Helen purchased a sculpture for a sum of
$5,500 during 1993. The collectables were sold for $6,000 on 1st January 2018.

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Consequently, the sale of collectables has given rise to capital gains. The gains from the
collectables will attract capital gains tax liability.
Answer to 3:
The antique jewellery was purchased for a sum of $14,000 during October 1987 and
was sold for $13,000 in present tax year. As a result, the sale of antique jewellery for Helen
has given rise to capital loss. As explained in the “section 108-10 (1), ITAA 1997” the capital
loss that is suffered from the collectables is only permitted for deduction against the capital
gains that is obtained from the collectables (Everaert, Heylen and Schoonackers 2015). As
understood in the current situation of Helen, she has made the capital gains from the sale of
historical sculpture. With respect to the “section 108-10 (1), ITAA 1997” similarly, the
capital loss that is suffered from the sale of antique jewellery by Helen can be deducted from
the capital gains from the sculpture.
Answer to 4:
The “subdivision 108-C of the ITAA 1997” is related with the private use asset.
Accordingly, under the “section 108-20 (2), ITAA 1997” a personal use asset (PUA’s)is
generally defined as the non-collectable assets that is majorly kept or used by an individual
for their own use in the form of boats or right of purchasing the asset that is primary used or
kept by the taxpayer for their private usage and enjoyment (Black 2017). “Section 108-20
(3)”, explains that the PUA’s do not includes of the land or buildings. Furthermore, “section
118-10 (3)”, explains that the where the capital gains are made from the private use assets
that is purchased for $10,000 or less then capital gains is exempted in this situation.
Accordingly, “section 108-20 (1), ITAA 1997” explains that if the sale of personal use asset
has given rise to a capital loss then the taxpayer will not be permitted to claim income tax
offset for the loss against the capital gains (Van den Berg 2016). They are simply ignored.

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The case study evidently puts forward that Helen sold the picture for an amount of
$5,000 during 1st July 2008. The picture was purchased by her mother for a cost of $470.
Therefore, it is clearly understood that the picture is a PUS’s. The sale of picture has given
rise to capital loss. With respect to “section 108-20 (1), ITAA 1997” the sale of picture has
given rise to a capital loss (Kaplan and Nadler 2015). Then in such situation Helen is not
permitted to claim income tax deductions for the loss against the capital gains. The loss
should be simply ignored.
Answer to question 2:
As it has been explained in the “section 393-10, ITAA 1997” where a taxpayer earns
income from the salaries, bonus, commission, fee, pension and identical type of retirement
benefits that is received in capacity of the employee, or any kind of proceeds from the
business then it is treated as the earnings from the individual exertion (Rose and Karran
2018). The income from personal exertion also comprises of the earnings that is derived from
any kind of property which forms the part of the services or worker remunerations falling
inside the purview of the income derived from the personal exertion in respect of the time and
services of the taxpayer. It is notable that “section 6, ITAA 1997” does not takes into the

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account the interest income and excludes the receipts of business lending, rents and dividends
from the purview of the definition (McLaren 2015).
The receipts that is related to performance of contracts or the service provision then it
is held as the character of payment to the recipient. There must be adequate amount of nexus
among the amount and earning capacity of the taxpayer. According to the “section 6-5 (1),
ITAA 1997” the taxpayers is assessed for tax on the basis of the ordinary income (Whitehead
et al. 2018). As held in “FCT v Dixon (1952)” receipts earned from the income generating
activity will be held as ordinary proceeds. There should be a link among the receipt and the
earnings creating act. Similarly, in the case of “FCT v Brent (1971)” the reward for services
was held taxable by the taxpayer for coming in the media interview. The taxpayer received
the exclusive right of publishing her life story and as a result the taxpayer was considered
taxable for the receipts.
As per the “Copyright Act 1968” a copyright is regarded as the type of personal
property. The copyright act explains that the payments that amounts to sale of rights must be
viewed as royalties because it does not amount to payment for the use of the item of property.
Upon assigning the copyright that amounts to significant sterilisation of the rights of actual
copyright owner, it must be treated as the disposal of asset and not the receipt of royalty. The
court of law in “FCT v McCauley (1944)” explained that payment that is received from the
part or full assignment of copyright cannot be held royalty within the ordinary definition
(Black 2018). This is because the payer will be owner of property and that amount that is
received by the recipient would will cease to be property owner.
The current case study highlights that Barbara received a payment that amounted to
$13,000 to write a book. With respect to the “section 6, ITAA 1997”, the amount will be
treated as the income from the individual effort (Brown 2017). The receipt by Barbara forms

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the part of the services or remunerations falling inside the purview of the income derived
from the personal exertion in respect of the time and services of Barbara.
In the later part the copyright of the book that was written by Barbara was sold for a
sum of $13,400. Citing the case of “FCT v McCauley (1944)” it can be stated that the money
received from the sale of copyright of book will be considered as chargeable proceeds. The
fact that the taxpayer here sold the copyright of book will be treated taxable for the income
rather than being held for capital gains tax purpose. This is because the payment was made to
Barbara in exchange of her time and services rendered. Barbara will accordingly be treated
taxable on the income under the ordinary concepts of “section 6-5, ITAA 1997” for selling
the right, interest and title that ultimately got published.
She also sold the manuscript of her eco book to library for a sum of $4,350 and
interview manuscript that was collected at the time of writing of economic book. Quoting the
case of “FCT v Brent (1971)” the receipts mainly constitute income from the personal
exertion because it involved Barbara own use of skill and exertion. Therefore, the amount
will be held as proceeds under the ordinary conception of “section 6-5, ITAA 1997” and will
be counted in the taxable earnings of Barbara.
If in the alternative case, Barbara decides to write the economic book in the free time
and later takes the decision of selling the value that would be received would be held as
ordinary income from personal exertion. This is because it would involve personal efforts of
Barbara and consequently the amount will be considered for taxable purpose within the
ordinary sense of “section 6-5, ITAA 1997”.
Answer to question 3:
Patrick lent his son $52,000 for the setting up new business and also involved the
interest of $6000 at the end of five-year period. The excess amount of $6000 will be included

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for taxable purpose because the loan was not given as the part of gift to the son and required
to be repaid. However, the capital amount of $52,000 will not be included for assessment
purpose for Patrick. The interest that is projected to receive by Patrick by the end of five
years will attract tax liability and must be show in the taxable income of the taxpayer.
However, there is a change in facts where the loan was subsequently repaid by the son
within the time of two years and included the additional amount of 5% as loan interest. As
held in “Hochestrasser v Mayes (1960)” in order to have the nature of income the item of
income character should be a gain for the one that derives it (Black 2018). An item of income
is derived by the taxpayer will be having the character of income when it comes home.
Similarly, the receipt of interest by Patrick will be considered as a rea gain which will attract
tax liability. Patrick will be required to show the amount in to include the income into the
assessable income under the ordinary concept of “section 6-5, ITAA 1997”.
A noteworthy explanation can be made by stating that the mode of payment that is
adopted by the son either a single cheque or any other method payment will not bear any
effect on the tax liability position of the income (Whitehead et al. 2018). The most important
aspect is that the intention of the parties holds important in determining the tax situation. It is
noteworthy to denote that in the context of the Son the power of treating the receipt remains
within the jurisdiction of ATO. The ATO has the power of treating payment made to the
relatives, acquaintance and friends where the situation of case warrants as gift.
The taxation rulings associated in the case of Patrick may result an impact on interest
which is received by the taxpayer and the same will attract tax. Patrick is allowed with the
gift tax limit of $52,000 since it is a capital amount. While the interest that is received by
Patrick is a having the nature of income and it will form the part of the taxpayer’s total
taxable earnings where appropriate taxes will be levied.

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References:
Belitski, M., Chowdhury, F. and Desai, S., 2016. Taxes, corruption, and entry. Small
Business Economics, 47(1), pp.201-216.
Black, C., 2017. The Attribution of Profits to Permanent Establishments: Testing the
Interaction of Domestic Taxation Laws and Tax Treaties in Practice.
Black, C., 2018. Taxation of Intellectual Property Under Domestic Law and Tax Treaties:
Australia. Taxation of Intellectual Property under Domestic Law, EU Law and Tax Treaties",
IBFD: Amsterdam.
Brown, K.B., 2017. Taxation and Development: Overview. In Taxation and Development-A
Comparative Study (pp. 3-14). Springer, Cham.
Dietsch, P. and Rixen, T., 2017. Global Tax Governance. ECPR press.
Everaert, G., Heylen, F. and Schoonackers, R., 2015. Fiscal policy and TFP in the OECD:
measuring direct and indirect effects. Empirical Economics, 49(2), pp.605-640.
Kaplan, R.A. and Nadler, M.L., 2015. Airbnb: A case study in occupancy regulation and
taxation. U. Chi. L. Rev. Dialogue, 82, p.103.
McLaren, J., 2015. The Taxation of Foreign Investment in Australia by Sovereign Wealth
Funds: Why Has Australia Not Passed Laws Enshrining the Doctrine of Sovereign
Immunity. J. Austl. Tax'n, 17, p.53.
Rose, R. and Karran, T., 2018. Taxation by political inertia: Financing the growth of
government in Britain. Routledge.
Spiro, P.S., 2018. Tax policy and the underground economy. In Size, causes and
consequences of the underground economy(pp. 179-201). Routledge.

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Stoilova, D., 2017. Tax structure and economic growth: Evidence from the European
Union. Contaduría y Administración, 62(3), pp.1041-1057.
Van den Berg, A., 2016. The effect of the Taxation Laws Amendment Act 25 of 2016 on
retirement planning (Doctoral dissertation, North-West University (South Africa),
Potchefstroom Campus).
Whitehead, R., Brown, L., Riches, E., Rennick, L., Armour, G., McAteer, J., Laird, Y. and
Reid, G., 2018. Rapid evidence review: Strengths and limitations of tobacco taxation and
pricing strategies.