Question:
Question 1
Show the issues to consider when deciding whether a receipt is income according to ordinary concepts.
You should explain relevant cases. Identify at least 3 examples of ordinary income.
Describe how it is different to statutory income and exempt income.
Show, with reference to legislation or case law, whether the subsequent are ordinary income, statutory income or exempt income in the hands of the recipient:
- A gift received from a close friend who is also a former employer
- A lump sum amount of $8,000 get by an employee for a broken leg suffered as a result of an accident at work
- A furniture retailer receives $12,800 commission from a supplier for selling goods on consignment
- A cash prize of $500 for being named 'employee of the month'
- Profit of $6,000 from the sale of shares by an insurance company
- John was reimbursed $1,100 for half of the cost of a new fence between his residential rental property and a neighbor.
You should describe why you have come to your decision in each case above.
Question 2
Show the essential criteria for determining whether a fringe benefit has been provided.
Show, with reference to legislation, whether the following are fringe benefits, and if so, how to determine the value of the benefit:
- Employer paid $1,400 for an annual bus/rail ticket for an employee to use exclusively for travel between home and work each work day.
- A company pays $5,000 of the private school fees on behalf of the child of its Chief Financial Officer.
- A car is provided for employee sales representatives to visit customers every business day. The car will also be used by employees on weekends and holidays.
- An employee is provided a $150 award by his employer for improving safety conditions in the business.