Problem
WILSON Furniture Pty Ltd ('WILSON') is a family-owned business which manufactures furniture from a leased factory building located in Clayton, Victoria. It sells its products mainly to retailers across Australia. The private company was established by the Wilson family in 1960, is an Australian resident and not a base rate entity for Australian income tax purposes. It is registered for GST in Australia. During the 2021/2022 income year, WILSON was involved in the events set out below.
Advice ALL THE PARTIES involved on the potential tax implications arising from the events. If you need more facts, be sure to indicate those which are needed and why.
One of WILSON's plan to grow its business is to run a marketing campaign to increase sales to retailers in Queensland where it has only a tiny market share. On 1 October 2021, WILSON received a lump sum of $770,000 (which included $70,000 GST) from another Australian furniture manufacturer, Beds & Lounges Furniture Pty Ltd ('B&L') for WILSON's promise not to sell its furniture to retailers in Queensland and not to open a factory in that state for a period of three years. B&L made the payment in order to prevent any rivals from competing with its business in Queensland.