Taxation Law Case Studies: Australian Taxation Office

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QUESTIONS ABOUT TAXATION LAW

Table of Contents
Question 1...................................................................................................................2
1. Capital Gain Tax in relation with antique painting................................................2
2. Capital Gain Tax in relation with historical sculpture............................................2
3. Capital Gain Tax in relation with antique jewellery...............................................3
4. Capital gain Tax in relation with picture...............................................................3
Consequences of Capital Gain Tax.........................................................................4
Question 2...................................................................................................................4
1. Income of Barbara with reference to case scenario.............................................4
2. Income evaluation of Barbara with reference to the alternative scenario............4
Question 3...................................................................................................................5
Investigating the arrangement for collecting the income of Patrick..........................5
Reference List.............................................................................................................6

Question 1
1. Capital Gain Tax in relation with antique painting
As per the given case study, an incident took place when Helen decided to sell off a
portion of her ancestral assets for accumulating an adequate amount of fund for her
active business of fashion designing. It was required as the business required a
certain amount of money for its sustainable purpose. Thus, Helen took a decision to
sell an antique piece of painting worth an amount of $12000 in the year 2018. It
painting was purchased by Helen’s father 33 years before in the year 1985. It is
evident from the transaction processed by Helen that she derived a considerable
amount of profit from that antique masterpiece. In this context, as per the Australian
Legislation, purchasing as well as selling off a valuable asset is considered under the
Capital gain Tax in the country. As per this concept of Capital Gain Tax, all the
movable assets that can be collected from various places such as auction, direct
buying from the owner before the year 1985 within September are excused from
paying the unpaid Capital gain Tax of Australia (Australian Taxation Office, 2019). In
this connection, it is also mentioned that all the items that were subjected to selling
after the year 1985 are considered to be under the Australian GST.
Capital gain Tax is included under the section 104-230 of the Income-tax
assessment Act 1997 within the Australian Legislation from the time of occurrence
(Commonwealth Consolidated Acts, 2019). Thus, as per the provisions of this Act,
Helen is required to pay 28% of the tax as the Australian Capital gain tax. This
calculation is derived below:
Applicable Tax Rate 28%
PARTICULARS
Selling Price 12,000
Initial value(Less) 4,000
Capital gain 8,000
Tax @ 28% 2240
Net profit on the sale of the painting 5,760
Table 1: Capital gain tax applicable to Helen
(Source: Created by the learner)
From the above calculation in Table 1, it can be clearly estimated that Helen has to
shell out amount as per the Australian legislation. The Capital Gain Tax has
amounted to $8000 as compared to the total tax amount of $2240. It implies that the
net profit of sale is $5760, which was the profit amount that Helen gained for the
sustainability purpose of her business.
2. Capital Gain Tax in relationwith historical sculpture
For the sole purpose of business sustainability, Helen had to sell an ancient
sculpture worth an amount of $6000 in the year 2018. This asset was bought in the
year 1993 at an amount of $5500. As per the Australian legislation, Helen has
realized well in advance that the online selling price of this asset will be much higher
as compared to the physical process of selling this antique asset. It can be stated
that it is a fact that all the items bought before the year 1995 and having the item

price fixed below $500 are considered to be an exempted product with respect to the
Australian Capital Gain Tax (Australian Taxation Office, 2019). In the year 1999, the
Australian Government has announced a 50% rebate in the income tax over the
income of every working professional for the purpose of improving the faith among
the Australian citizen in terms of income Tax policies of Australia. On the other hand,
it can further be calculated that Helen has paid the stipulated amount of loyalty tax
amounting to 28% that has been organized by the Australian legislation. This
calculation of the Tax amount is mentioned as following:
Applicable tax rate 28%
PARTICULARS Amount ($)
Selling price of the sculpture 6000
Purchasing price of the sculpture 5500
Capital gain from sales 500
Capital gain tax @28%(Less) 140
Net gain 360
Table 2: CGT regarding the selling of historical sculpture
(Source: Created by the learner)
From the above calculation, it is evident that Helen is required to pay the stipulated
amount of capital gain Tax as opposite to selling the same piece of ancient sculpture
within the boundary of the country. It can be further stated that the total gain amount
of the selling off transaction has amounted to $500. The total amount of capital gain
after selling the sculpture has been calculated to be an amount of $360 in addition to
an extra tax amount of $140.
3. Capital Gain Tax in relation with antique jewellery
In addition to selling off the antique painting as well as the sculpture, Helen has
further sold a piece of antique jewellery. This jewellery item was collected in the year
1987 for a whopping amount of $14000. For accumulating money, Helen had
decided to sell the piece of jewellery in the year 2018 for an amount of $13000. As
per the policies agreed by the Australian legislation in case of Capital Gain tax, all
the items that have been purchased before the year 1995 by paying the required
amount of cost. This costing amount is calculated to be below the amount of $500.In
addition to this, paying this costing amount for any antique jewellery product is
considered as an exempted product within Australia (Australian Taxation Office,
2019). Australia has been facing an all-time low in case of jewellery price in
Australia. Therefore, in case of this antique jewellery, Helen has suffered a massive
loss during the time of its selling. It is because the jewellery was purchased well
before the year 1995. The capital exemption was considered to be under the
legislation. It implies the reason Helen could not avail the actual value of the
jewellery in the current year of 2018.
4. Capital gain Tax in relation with picture
Helen further decided to sell off the picture bought by her mother in the year 1987 for
an amount of $470. It is presumed that Helen has to sell it by the year 2018 for an
amount of $5000. It implies that Helen had successfully made a considerable profit
during this transaction. It helped her for raising the fund for the sustainability purpose

of her fashion business. As per the rules and regulations, as mandated by Australian
legislation, the Capital Gain tax of Australia is considered to be exempted for the
items that have been bought before the year 1995. In addition to this, the price of
these items must be below $500.Only then, these will be considered to be under the
capital gain tax. As per the rules mandated by Australian legislation, a total amount
of 10% of GST is applicable for the transaction depending on its base value. As per
the scenario, the picture has been bought previously in the year 1995. Thus, this is
considered to be under the capital gain tax exemption in terms of Australian
legislation. Therefore, it is concluded that Helen has gained a total profit margin of
$4530 by selling the picture in the year 2018 (ato.gov.au, 2019).
Consequences of Capital Gain Tax
TOTAL CGT APPLICABLE FOR HELEN
Particulars Selling
price
Purchase
price
Profit/loss Tax
deduction
Net
profit/loss
Impressionism
Painting
12000 4000 8000 2240 5760
Historical
sculpture
6000 5500 500 140 360
Jewellery 13000 14000 -1000 -280 -720
Total CGT to be paid 2100 5400
Table 3: Total liability of CGT for Helen
(Source: Created by the learner)
From the above calculation in the Table 3, it is observed that Helen has to definitely
pay an additional liability tax as compared to the Capital Gain Tax. Thus, Helen
faced some consequences as per the Australian tax policy at the time of tax
payment. On the other hand, Helen has made a huge profit of $5760 and paid a tax
of $2240 to the Australian government. On the contrary, Helen faced a tax related
issue of $1000. This is because, in the year, 2018 Australia has faced an all-time low
in jewellery price within the country.
Question 2
1. Income of Barbara with reference to case scenario
Barbara by profession, is an economist as well as a commentator. A publication
company that goes by the name of Eco books Ltd house is located in Australia. It
has offered Barbara to publish a book by the name “Economic Principle” that
explains the different principles of the subject Economics. Barbara has decided to
sign the book for an amount of $13,400 with the publication house in Australia. The
publication house had paid her in a cheque for signing the offer. She also sold the
manuscript of the book to the library of the publication house for an amount of
$4350.
On the other hand, she also proceeded to sell the manuscripts of the interview taken
at the time of book publication. This interview advices the writer to collect a sufficient
number of points for the book. On the contrary, the manuscript has been sold for an
amount of $3200. In Australia, the overall transaction of the money is generally
considered under the Capital Gain Tax. From this part, the parties are allowed to

maintain section 2.2 of the Australian contract Law policies for the valid rules
and regulations (Australian taxation office, 2019). In order to demand the profit of
the Eco Books publication house, a legal context is essentially implemented by the
Australian legislation.
Barbara by profession is an economist as well as a commentator. A publication
company that goes by the name of Eco books Ltd house is locatedin Australia.This
has offered Barbara to publish a book by the name “Economic Principle” that
explains the different principles of the subject Economics. Barbara has decided to
sign the book for an amount of $13,400 with the publication house in Australia. The
publication house had paid her in cheque for signing the offer. She also sold the
manuscript of the book to the library of the publication house for an amount of
$4350. On the other hand, she also proceeded to sold the manuscripts of the
interview taken at the time of bookpublication. This interview advices the writer to
collect the sufficient number of points for the book. On the contrary, the manuscript
has been sold for an amount of $3200. In Australia, the overall transaction of the
money is generally considered under the Capital Gain Tax. From this part the
parties are allowedto maintain section 2.2 of the Australian contract Law
policies for the effective rules and regulations (Australian taxation office,
2019). In order to demand the profit of the Eco Books publication house, a legal
context is essentially implemented by the Australian legislation.
2. Income evaluation of Barbara with reference to the alternative scenario
From the estimated income of Barbara, some issue may arise in case any legal
documents are provided along with the court paper of Australia. There exist some
specific legislative steps to avail suitable profits from the publication house. The
relevant case in relation to the case study is surrounding the Bold Gold Corporation
of Australia. This company is an expert in creating and moulding decks of the boats.
These mouldings of the boats are obtained by the employee Mr. Swarbrick. The
invention of this individual is being applied in the competitive, bold gold business
(classic.austlii.edu.au, 2019).
An issue faced by Mr. Swarbrick was that he did not bother to register his design of
the mouldings or the instrument used to create the mouldings. The registration of
these two items is necessary as they are considered under the Design Act, 1906. Mr.
Swarbrick failed to prove the fact that his design was good enough to be considered
as “Work of artistic Craftsmanship”.Thus, these items could not be protected under
the Australian Copyright Law. The failure of Mr. Swarbrick’s argument cannot be any
protection due to the Copyright Act 1968. The argument was presented in the High
Court for an appeal. The court held the judgement by stating that any designs do not
have any connection with its aesthetic appeal of the work. The high court concluded
the judgement by saying that the designs of Mr. Swarbrick were substantially found
to be dictated by some functional consideration in order to meet the requirements
essential for the design (eresources.hcourt.gov.au, 2007).
Question 3
Investigating the arrangement for collecting the income of Patrick
From the given case scenario, David, son of Patrick, borrowed an amount of $52000
for investment in his business based on verbal communication among two
individuals. David made a commitment of five years for returning the amount to

Patrick by adding 5% of the interest in addition to the loan amount that is considered
under assessable income. On the contrary, Patrick did not want to give consent to
take the interest although David repaid his loan amount with an additional investment
of 5% within a span of three log years. It resulted in an issue with legal contract
following the policy of Fringe Benefits Tax (FBT). As per this policy, Patrick has to
pay the income tax amount only after receiving the total amount of money in addition
to the added interest rate (Australian Taxation Office, 2019). Any transactions within
the amount of $37,000 to $90,000 are considered tax payable in Australian
Legislation. If they both had followed the same legal statement, Patrick has to pay a
minimal amount of charge for the transactions that come under assessable income
(legislation.gov.au, 2018).
From the given case scenario, of Max and Hanna runs an active business, which is
assessable under the income range of $200,000 for a particular financial year. The
Australian Legislation charged the owners of an amount of $60,000, according to the
Australian Income Tax regulation (taxsuperandyou.gov.au, 2019).

Reference List
Australian Government. (2019). Case Study On Assessable Income. Available
at:https://www.taxsuperandyou.gov.au/content/case-study-hanna-and-max
[Accessed on: 12 April, 2019]
Australian Taxation Office. (2018). Assessable Income. Available
at:https://www.ato.gov.au/Business/Income-and-deductions-for-business/
Assessable-income/ [Accessed on: 12th March, 2019]
Australian taxation office. (2019). Capital Gains Tax. Available
at:https://www.ato.gov.au/General/Capital-gains-tax/ [Accessed on: 13th March,
2019]
Australian taxation office. (2019). CGT Assets and Exemptions. Available
at:https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/
[Accessed on: 17th March, 2019]
Australian taxation office. (2019). Fringe Benefits Tax (FBT). Available
at:https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/ [Accessed on: 17th
March, 2019]
Australian taxation office. (2019). GST. Available
at:https://www.ato.gov.au/Business/GST/ [Accessed on: 21th March, 2019]
Commonwealth Consolidated Acts. (2019). Income Tax Assessment Act 1997.
Available at: http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/
s104.230.html [Accessed on: 12th March, 2019]
consultaustralia.com.au (2012). AUSTRALIAN CONTRACT LAW. Available
at:https://www.consultaustralia.com.au/docs/default-source/contracts-liability/
Consult_Australia_Response_to_AGD_Discussion_Paper_on_Contract_Law_-
_July_2012.pdf?sfvrsn=0 [Accessed on: 12th March, 2019]
Federal Register of legislation. (2019). Copyright Act 1968. Available
at:https://www.legislation.gov.au/Details/C2017C00180 [Accessed on: 12th March,
2019]
High Court of Australia. (2007). Case study of Mr. Swarbrick. Available
at:http://eresources.hcourt.gov.au/showCase/2007/HCA/17 [Accessed on: 15 April,
2019]