Taxation: Capital Gains Tax Implications and Personal Exertion Income

TAXATION
STUDENT iD:
[Pick the date]

Question 1
The current scenario pertains to the taxpayer Helen who during the given year has
disposed the following four assets whose capital gains tax implication ought to be
outlined considering the given case facts and reference to appropriate statutory law.
1) Asset 1: Antique Impressionism Painting
The relevant information pertaining to this asset is summarised below.
 Date of purchase = February 1985
 Price of purchase = $ 4,000
 Date of sale = December 1, 2018
 Sale price = $ 12,000
 Nature of asset = Long term (As holding period exceeds one year)
A key requirement with regards to levying capital gains tax has been outlined in
s.149(10) ITAA 1997 as per which no CGT would be levied on asset lying under the
category of pre-CGT assets. These are typically those assets which are outside the
ambit of CGT as they were purchased at a time when capital gains were not taxed.
The cut off data is September 20, 1985 and any asset purchased before this date
would be pre-CGT asset (Austlii, 2019). The given asset purchased by Helen’s father
is a pre-CGT asset and thereby would not result in any CGT related liability for
Helen.
2) Asset 2: Sculpture
The relevant information pertaining to this asset is summarised below.
 Date of purchase = December 1993
 Price of purchase = $ 5,500
 Date of sale = January1, 2018
 Sale price = $ 6,000
 Nature of asset = Long term (As holding period exceeds one year)
As outlined in ss. 108(10) ITAA 1997, sculpture would be classified as a collectible
asset which is a CGT asset. The trigger for computation of capital gains/(losses) is
provided by the sale of the asset which constitutes a A1 CGT event as mentioned in
ss. 104(5) ITAA 1997. The following formula would be used as per ss. 104(10) for
the computation of capital gains/(losses) on asset disposal (CCH, 2013).
Capital gains on sculpture = $6,000 - $5,500 = $ 500
Considering the asset is long term, Division 115 ITAA 1997 would allow lowering of
CGT liability by levying of discount method but the same would be applied at the edn
after adjustment of any capital losses (if present) (Barkoczy, 2018).
3) Asset 3: Antique Jewellery
The relevant information pertaining to this asset is summarised below.
 Date of purchase = October 1987
 Price of purchase = $ 14,000
 Date of sale = March 20, 2018
 Sale price = $ 13,000
 Nature of asset = Long term (As holding period exceeds one year)
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As outlined in ss. 108(10) ITAA 1997, antique would be classified as a collectible
asset which is a CGT asset. The trigger for computation of capital gains/(losses)
is provided by the sale of the asset which constitutes a A1 CGT event as
mentioned in ss. 104(5) ITAA 1997. The following formula would be used as per
ss. 104(10) for the computation of capital gains/(losses) on asset disposal
(Gilders et. al., 2016).
Capital losses on antique jewellery = $14,000 - $13,000 = $ 1,000
The capital losses on the above collectible asset cannot be adjusted the other
taxable income of Helen. It can only be used to offset the capital gains derived from
sale of collectible assets. If such gains are not available in the current year, then the
pending losses would be carried to the next year and this would continue till the
losses are not fully adjusted (Krever, 2017).
4) Asset 4: Picture
The relevant information pertaining to this asset is summarised below.
 Date of purchase = March 1987
 Price of purchase = $ 470
 Date of sale = July1, 2018
 Sale price = $ 5,000
 Nature of asset = Long term (As holding period exceeds one year)
As outlined in ss. 108(10) ITAA 1997, picture would be classified as a collectible
asset. An essential condition for capital gains to be taxable on collectible is
highlighted in s. 118(10-1 as per which the purchase price must be atleast $ 500.
This condition is not satisfied for the picture and thereby no capital gains tax would
apply (Reuters, 2017).
Net CGT position
Only two assets have capital gains/losses which would potentially lead to CGT
implication.
Capital gains on sculpture sale = $ 500
Capital losses on antique jewellery sale = $ 1,000
Hence, net capital losses for Helen = $ 500
As there is overall capital losses, hence no CGT implication arises. The losses would
be taken forward to future tax years to offset against future capital gains from
collectible asset disposal (Deutsch et. al., 2016).
Question 2
Case Facts: The given taxpayer is renowned as an economic researcher besides a
commentator. In the given case, she has been offered to write a book which is gladly
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