Australian Taxation Law Case Studies: Homework Assignment

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Taxation Theory, Practice, and Law

Table of Contents
Introduction.................................................................................................................................................3
Question 1...................................................................................................................................................4
Question 2...................................................................................................................................................7
Question 3.................................................................................................................................................10
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13

Introduction
The entire task in this assignment has been divided into three case laws. In case of law first,
Helen is emerging entrepreneur who wants to start the business of fashion designer so she
arranges the funds by selling out their personal items which involve historical sculpture, antique
items or jewelry and photographs. By selling out the above-said articles, Helen requires to pay
capital gain tax as per the provision of Australian Taxation Government. In the second case law,
the story of Barbara has been discussed who is an economist and commentator and agree to write
a book on the principles of economics and $13000 in return. Thus, the statutory provisions of
income tax notified by the Australian Government would apply on the computation of taxable
income. In case law 3, Australian taxation provision of income tax applies to the net income of
Mr. Patrick.

Question 1
Helen is an emerging incubator, started her profession in the field of fashion designing but she
requires some funding for the sourcing of their startup. Thus, Helen has sold some of her
personal assets for supporting their funding requirements as follows:
 Helen sold the antique painting which her father purchased in the year 1985 at the price
of $4000. However, Helen sold the painting at a price of $12000 on 1st December 2018.
 Helen purchased the historical sculpture in December 1993 at the price of $5,500 but she
sold that on 1st January 2018 at the price of $6000.
 She also sold the one piece from antique jewelry set on 20th March 2018 at the price
$13000 while it purchased at the price of $14000 in October 1987.
 Helen also sold the picture which her mother bought in March in the year 1987 at the
acquisition price of $470. However, Helen sold that at the price of $5000 in the month of
July of the year 2018.
Helen has to face following tax provision under the head of capital gain tax treatment
notified by the Australian Taxation authority.
Australian taxation authority has notified some provision of capital gain tax in respect to the
assets which the assessee has acquired that on or after 20th September 1985. However, it
excludes the following sets of items with respect to the CGT provisions as follows:
Collectables: It is the category of items which mostly involve personal usage items as shown
under.
Thus, it includes such as jewelry items, Antique items, Painting sculpture, photograph, and
new things emerges after reproducing process, Manuscript and historical coins as well, etc
(Kess et, al., 2018).
Collectables also involve those items as well which create any debt or any other interest
earned by the borrower by the mortgaging of above said articles of collectibles (Kess et, al.,
2018).

The Australian Taxation Authority also notified some exempted taxation provision from
capital gain tax, applicable in the following scenario also as under:
 If the buyer acquired the set of collectibles at $500 or less.
 If the acquirer bought an interest in collectibles at the price of $500 or less on or
before 16th December 1995.
 If the market value of interest on collectibles is up to $500.
The acquirer also exempted from capital gain tax if the assessee had purchased these
collectibles up to the value of $500 on or before December 1995 (ATO. 2019).
However, the losses suffered by the assessee from the buy and sale process then the losses
suffered from capital gain loss would only be set off from the income of capital gain arises either
from the same set of collectibles or different. Moreover, the losses suffered from collectibles can
also eligible for carrying forward of losses (ATO. 2019).
The above-said transaction of Helen has faced following tax treatment as CGT provisions
defined by the Australian taxation authority as below:
S.
No Items
Acquisitio
n Date
Acquisition
Price($)
Selling
Year
Selling
Price(($) Taxation
1
Antique
painting 1985 4000 2018 12000
Not
Taxable(Note
.1)
2
Historical
Sculpture Dec-93 5500 Jan-18 6000
Not
Taxable(Note.
2)
3
A part of
Antique Jewel Oct-87 14000 Mar-18 13000 (1000) as loss
4 Picture Mar-87 470 Jul-18 5000 Not
Taxable(Note.

3)
Assessable
value Nil
Notes
Note 1.
Capital gain tax provision notified by the Australian taxation government which
comes in effect from December 1985
However, Helen's father has acquired an antique painting in February 1985 which is prior to
the effective date of applicability of CGT provisions
Note 2
Historical sculpture acquired by Helen in the year 1993 in December month at the acquisition
price of $6000. However, it can be said that the interest in acquisition takes place prior to
December 1985. Thus it can be exempted from the levy of capital gain tax.
Note 3
Helen's mother bought the picture in the year 1987 at the price of $470, Thus as per the CGT
provision of Australian taxation authority the price of acquisition below to the $500. Thus, it is
being exempted from taxation provisions. Hence not taxable
Thus, the net taxable amount payable by Helen on the above said the transaction is ($1000). It
can be said that the assessee has suffered from losses from the sales proceed of collectibles, thus
the assessed is being eligible to carry forward the loss of capital gain from collectibles for set off
in the next assessment year (ATO. 2019).

Question 2
As per the case of Barbara who is an economist researcher and commentator by profession. She
is expertise in the field of economics. Therefore, she gets an offer from the Eco Books Limited
for writing a book for them on the topic of Economic principles and the title of the book is
“Principles of Economics”. She accepts the offer of $13000 of writing a book on the topic of the
principle of economics. Moreover, the Barbara also transfers their copyright on books of
economic to The Eco Books Limited and at the end, the book is published by the Eco Book's
Limited. Apart from their income from copyrights, Barbara also sells out their notes in the form
of the manuscript to the Eco Books Limited library for the price of $4350. She also earns an
income of $3200 by selling out their collective notes of interviews taken of industrialist as well
as an economist.
On the above-said case, the Australian Taxation authority has applied provisions of taxation on
intellectual property rights as specifically stated in the Income tax act of Federal government.
Intellectual property rights refer to the rights which attain by the person or the company
according to their intellect which gives the result of unique product or services based on unique
methodology created with the intellect of inventor(Davoudi et, al). However, the inventor safe
their product from competition by registering their concept or methodology in the copyright
board which protects the intangible assets from the stealing of the unique concept for a specified
period till registered themselves under the copyright board. In the case of Barbara who agrees for
writing a book of economics for the Eco's Books Limited in return, she gets $13400 and it will
be taxable as a personal income. Hence, it will be taxable if the amount crosses the exemption
limit (ATO. 2019).
Statement showing the assessable value Barbara as follows:
Particulars
Amount($
)
Income from the sale proceeds of copyright 13,400

Income from the sale proceeds of manuscript 4,350
Earnings from collecting of manuscript 3,200
Income before exemption 20,950
Less: Exemption Limit 18,200
the Total Assessable Value 2,750
Net tax chargeable amount ( W.No 1) 0
Working Notes :
1 Computation of tax payable amount for the year 2018-19 as shown below:
Taxable Income Income Tax
$0 -$18200 Nil
$18,201-$20950 522.5
Tax levies 523
Add: Medical surcharge
@2% 55
Net Tax Paid 578
The net assessable value of Barbara as computed above it would be of the amount of $20950
after adding of their total earnings which she earns from the selling of copyright on the
economics books as well as the notes written in their own hands in the form of manuscript and
also include the revenue earned from the selling of collectives notes written while taking the
interview. The Australian Taxation Government through their notification in the official gazette
prescribed the exemption limit of $18200 applicable for the financial year 2018-19. Thus the net
taxable amount would be computed would be $2750 and the tax rate of 19% levies on the taxable

amount. Thus, the computed net tax amount is $523 after the availing of the exemption limit.
Moreover, the Australian Government also levies the medical charge at the rate of 2% on the
assessable value of Barbara. The Barbara would be liable to pay the net taxable amount of $578
for the financial year 2018-2019 including medical surcharge to the income tax authority of the
Australian Government. The tax levies on the personal income of Barbara, which she earns from
the selling of manuscript and collective notes of interview (ATO. 2019).
If in the case if Barbara has written a book on economics principle without any contractual
obligation in her free time and after completion of writing if book is being sold out to the Eco
Book’s Limited then the income generated from the sales proceed of copyright would be
consider as personal income of Barbara and pay tax accordingly to the income tax provisions of
the Australian Government (ATO. 2019).

Question 3
As per the case of Mr. Patrick and his son Mr. David, Mr. David has started his business but at
the initial times, he does not have any investment to deploy them in their startup. Thus, Mr.
David has taken the help of his father Mr. Patrick for the financial assistance in their startup idea.
And Mr. Patrick agrees to provide financial assistance to his son of $52000 without any
contractual agreement. Even his father not charged interest on the principal amount of loan. But
Mr. David repays the loan amount with $58000 at the end of five years. Mr. David also repays
the loan amount after two years with an additional interest of 5% over borrowed amount. The
principal amount, as well as the interest payment, would be taxable in the income of Mr. Patrick
of the respective assessment year. The principal repayment amount of loan would be taxable at
the rate of 2% and interest income of respective years would be chargeable at the rate of 10%
and Mr. Patrick has the responsibility to obey the income tax law provisions of Australian
Government.
Statement showing the net repayable amount by Mr. David along with interest
as follows:
Particulars Amount($)
The principal amount of loan 52000
Extra Interest levies 6000
An interest charge @2% 2600
Net payable amount 58000
Net amount paid 60600
Statement showing the net tax payable amount paid by Mr. Pattrick
Particulars Amount($)
Amount of Interest 2600
Extra Interest charges 6000

Net interest payable amount 8600
Tax rate levies on interest income 10%
Net Tax payable amount 860
Statement showing the net tax payable amount by Mr. Patrick on the principal amount of loan as
below:
Particulars Amount($)
Loan repayment amount 60600
Taxable amount
Tax levies @2% 1212
Net Tax chargeable Amount 2072
Statement showing the net tax paid by Mr. Patrick on loan repayment amount as well as
on interest:
Particulars Amount($)
Tax payable amount in 2 years 2072
Divided by the no of years 2
Tax levies in the current year 1036
Thus, the net tax payable amount paid by Mr. Patrick in each assessment year of $1036 it
comprises the tax rate of 2% levies on principal repayment amount and 10% on their interest
income earned in their respective financial years.

Conclusion
By referring to the above-said case laws, it can be concluded that the Australian taxation
provision of income tax has been applied to the above-said provisions. For instance: Helen
would not be liable to pay tax as it suffers from loss as per the capital gain tax provisions of the
Australian Government. Moreover, Similarly, the Australian taxation provision applies to the net
income earns by Barbara through intellect as well as the net taxable income of Mr. Patrick.