Melissa is a tax accountant at the head office of a major retail store called RetailCo. Melissa's contract entitles her to an annual bonus of up to $15,000 depending on her performance rating. She has worked for RetailCo for 6 years and each year has received annual bonuses of $10,000-$15,000.
RetailCo offers Melissa and some other similar employees $50,000 in exchange for her agreeing to modify her contract, so that she no longer has the right to a bonus.
In recent months RetailCo has had negative media coverage regarding the fact that it had underpaid some of its employees' wages and superannuation (Melissa had not been underpaid). RetailCo offers to give all of its professional head office employees (including Melissa) $4,000 in exchange for them not saying anything negative to the media about their employer.
Required: Ignoring capital gains tax, discuss whether:
- the $50,000 received by Melissa constitutes ordinary and/or statutory income; and
- the $4000 constitutes ordinary income.
Where appropriate, support your answer with legislative and case authority.