Taxation Law Individual Assignment - HI6028, Holmes Institute

This assignment solution addresses several taxation issues related to the sale of collectibles, including an antique painting, a historical sculpture, and jewelry, analyzing their CGT implications under the ITAA97. It examines whether these items qualify as CGT assets and the timing of their acquisition. Furthermore, the document delves into the concept of income from personal exertion, distinguishing between ordinary income and capital receipts, particularly in the context of writing and selling a book, as well as the sale of its copyright and manuscripts. The solution also explores whether a loan repayment can be considered assessable income, considering the presence of an additional amount beyond the original loan, and referencing relevant case law such as Hayes v Federal Commissioner of Taxation, Hobbs v Hussy, and Hochstrasser v Mayes to support the analysis. The assignment covers the taxation of various income sources and asset disposals.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Author Note

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1
T1
The issue rising from the present situation is the tax implication of the antique painting that
has been sold by Helen.
Any item that has been acquired by the taxpayer for the purpose of being used personally is
required to be treated as a collectible u/s 108-10 ITAA97. For the purpose of being treated as
an CGT asset collectible needs to be acquired on or after the date of 20th September 1985. In
case it can be proved that the collectible has been acquired in a subsequent date, it will be
treated as a CGT asset and the sale of the same will treated as a CGT event A1 u/s 104-10 of
the ITAA97. However the acquisition of the asset is said to have occurred when the taxpayer
is conferred with the ownership of the same u/s 109-5 of the ITAA97.
In the present instance the painting can be treated as a collectible as the same has been held
by Helen for being used in a personal capacity. However the acquisition of the same has been
affected by Helen’s father prior to the mentioned date. But in this case as the sale has been
affected by Helen the acquisition of the painting by Helen need to be considered. The asset
has been passed on to Helen from his father, actual date of acquisition of the asset by Helen is
not clear. Hence if the asset has been received by Helen prior to the prescribed date it will not
be assessable in her taxable income.
T2
The issue rising from the present situation is the tax implication of the Historical sculpture
that has been sold by Helen.
Any item that has been acquired by the taxpayer for the purpose of being used personally is
required to be treated as a collectible u/s 108-10 ITAA97. For the purpose of being treated as

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an CGT asset collectible needs to be acquired on or after the date of 20th September 1985. In
case it can be proved that the collectible has been acquired in a subsequent date, it will be
treated as a CGT asset and the sale of the same will treated as a CGT event A1 u/s 104-10 of
the ITAA97. However the acquisition of the asset is said to have occurred when the taxpayer
is conferred with the ownership of the same u/s 109-5 of the ITAA97. Collectible me include
any artwork, antique object, coins as well as other similar objects.
In this present situation the historical sculpture needs to be treated as a collectible and the sale
of the same needs to be treated as a CGT gain. The collectible has been acquired by the
taxpayer Helen in the year 1993, hence it can be treated as a CGT asset. While computing the
CGT liability arising from the same, the cost proceed of the sculpture needs to be deducted
by the cost base of the sculpture.
T3
The issue rising from the present situation is the tax implication of the Historical sculpture
that has been sold by Helen.
Any item that has been acquired by the taxpayer for the purpose of being used personally is
required to be treated as a collectible u/s 108-10 ITAA97. For the purpose of being treated as
an CGT asset collectible needs to be acquired on or after the date of 20th September 1985. In
case it can be proved that the collectible has been acquired in a subsequent date, it will be
treated as a CGT asset and the sale of the same will treated as a CGT event A1 u/s 104-10 of
the ITAA97. However the acquisition of the asset is said to have occurred when the taxpayer
is conferred with the ownership of the same u/s 109-5 of the ITAA97. Collectible me include
any artwork, antique object, coins as well as other similar objects. Any collectible loss will
required to be treated as an offset against a collectible loss only. In a particular year, if there

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has been no collectible loss the collectible loss accrued needs to be carried forward to the
subsequent year.
In the present case the jewellery has been acquired by Helen in a subsequent date to that of
the mentioned date. The jewellery can be treated as a collectible and as the cost base of the
same is greater than the cost proceeds the same need to be treated as a collectible loss. Hence
the loss needs to be treated as an offset against the collectable gain only. If there are no
collectible losses in a particular year this loss needs to be carried forward to the subsequent.
T4
The issue in the present situation is the sale of a picture by Helen.
For the purpose of being treated as an CGT asset collectible needs to be acquired on or after
the date of 20th September 1985. In case it can be proved that the collectible has been
acquired in a subsequent date, it will be treated as a CGT asset and the sale of the same will
treated as a CGT event A1 u/s 104-10 of the ITAA97. However the acquisition of the asset is
said to have occurred when the taxpayer is conferred with the ownership of the same u/s 109-
5 of the ITAA97. Collectible me include any artwork, antique object, coins as well as other
similar objects.
In the present situation the picture has been acquired by Helen from her mother who has
acquired the picture subsequent to the mention date. This will make the picture eligible for
being treated as a CGT asset as well as a collectible. Hence the picture needs to be treated as
a collectible while computing its CGT liability.
2
The concept income from personal exertion has been discussed u/s 6.1 pertaining to the
ITAA 97. This section discusses income from personal exertion as any income that a

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taxpayer receives as a reward for the labour and efforts he has extended towards the
achieving of income. Any income that accrues by way of the employment of a person is
required to be treated as income from personal exertion while assessing the income of a
particular taxpayer. Such an income accruing in relation to employment includes salaries,
wages, superannuation allowances, earnings, pensions, gratuities and any other such receipts
that a taxpayer receives in this furtherance.
As has been made evident from the case of Hayes v Federal Commissioner of Taxation. 96
CLR 47 1956, a business income will also be treated as in income from personal exertion if
the taxpayer has been operating the business alone or has been conducting the business as a
partner.
U/s 393 of the ITAA 97 an income will also be included in the assessable income of the
taxpayer if the same has been received as a subsidy or as a bounty while carrying out
business operations.
Income that a person receives from extending an interview in the media pertaining to a life
story towards a media channel will be treated as income that is assessable in the hands of the
taxpayer u/s 6.5 of the ITAA 97.
It has been held in the case of Hobbs v Hussy(1942) TC 153, receipt will be treated as an
ordinary income if it can be established to have been derived from the application of personal
exertion.
In the present case, the $13,000 that Barbara has received on the offer to write a book will be
required to be treated as an ordinary income as the same has been received by Barbara for the
personal exertion she has extended towards writing the book as offered by Eco Books Ltd.
This is because she has applied personal labour and efforts to write the book.

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The $13400 that Barbara has accrued by selling the copyright of the book to the Eco Books
Ltd needs to be treated as a capital receipt. This is because copyright is treated as a CGT
asset, which construes its selling to be a CGT event and the proceeds from the same as a CGT
gain.
The $4350 that has been earned by Barbara is required to be treated as income from personal
exertion. This is because any receipt that has been extended for the purpose of assigning the
manuscript of the book is required to be treated as income from personal exertion.
Similarly, the $3200 will also be treated as an income from personal exertion as the same has
been earned by selling the manuscripts of the interview.
Alternative situation
The issue rising from the present situation is whether the amount received by Barbara would
have the same implications, if the book has been written by her as a hobby in her spare time.
Any receipt that a taxpayer receives can be treated as an ordinary income if the same has
been received with the motive of earning profit. This has been made evident by Tax Ruling
97/11 that receipt that can be accrued from a hobby will not be accessible in the hands of the
taxpayer.
In case the book has been written by Barbara as a hobby in his spare time, there will be no
intention of earning profit in such a service rendered. Hence it will not be treated as an
income assessable in the tax liability.
Hence, it can be stated that if the book has been written by Barbara in her spare time, it would
not be treated as assessable income.

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3
In the present situation the main issue is whether the loan amount that is repaid by David can
be treated as an assessable income in the hands of Patrick for the given income year.
Any income that has been derived by ordinary concepts of income is required to be treated as
ordinary income for the purpose of section 6.5 of the ITAA 1997.
The receipt that a particular taxpayer receives in an income year is required to be treated as
an income assessable in the hands of the taxpayer only if such receipt can be construed as a
gain or has been derived by the taxpayer as a benefit. This can be explained with the case of
Hochstrasser v Mayes 1960 AC 376.
A receipt needs to comply with all the requisites of an income to be treated as assessable
within the income of a taxpayer for the tax purposes. In this context, two requirements are
required to be satisfied by a receipt to be construed as a taxable income. Firstly, the receipt
needs to comply with all the essentials of a valid income and secondly it needs to accrue
some benefit or gain to the taxpayer. This can be illustrated with the case of Bective v Federal
Commissioner of Taxation [1932] HCA 22.
It has been held in the case of Scott v Commissioner of Taxation (NSW) 1935 35 SR, receipt
is only allowed as an income if the same can be established to have added certain benefit or
gain towards the individual paying the tax.
In the present situation, Patrick has advanced a loan towards David his son for the betterment
of his business. The loan amount that has been extended was $52,000. At the end of 5 years,
there has been an agreement between Patrick and David that an amount of $58,000 will be
repaid by David towards Patrick with respect to the loan repayment. However, the loan was
not secured by any security deposit. If the loan has been repaid with the same amount that has
been extended it would have amounted to a mere receipt and not a gain. But in this case there

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has been an additional amount of $6,000 that has been agreed upon by David and Patrick to
be made payable along with the loan amount. An additional amount on top of the loan
amount can be treated as a gain being caused to Patrick. Any receipt that can be treated as a
gain in the hands of the taxpayer will be treated as an assessable income in a particular
income year. This can be explained with the case of Bective v Federal Commissioner of
Taxation [1932] HCA 22.
Again, it is evident from the facts of the situation that at the end of 5 years the loan amount in
its entirety has been repaid by David towards Patrick. However, along with the loan amount
there has been a payment of an additional 5% on the amount borrowed. This additional 5%
needs to be treated as a gain or benefit that has been additional accrued to Patrick. Although
there has no intention on the part of Patrick to earn an income from the loan extended, it will
be accrued as a benefit and will be regarded as an income assessable in the hands of Patrick.
Hence the loan amount that repaid by David can be treated as an assessable income in the
hands of Patrick for the given income year.

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Reference
Bective v Federal Commissioner of Taxation [1932] HCA 22
Hayes v Federal Commissioner of Taxation. 96 CLR 47 1956
Hobbs v Hussy(1942) TC 153
Hochstrasser v Mayes 1960 AC 376
Scott v Commissioner of Taxation (NSW) 1935 35 SR
Tax Ruling 97/11
The Income Tax Assessment Act 1997 (Cth)