Somsak Saelim is a tax lawyer working full-time for a small firm in Sydney CBD called Alba
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In January 2023, Somsak extends his stay with his family as he enjoys looking after and riding horses. However, he continues to work from home on a full-time basis. He joins a local dressage club. He also entertains the local neighbours in suburban dressage competitions. On one occasion, he won a prize of $3,000, however this was paid by his uncle who is the founder of the organisation committee. Somsak is also approached by a NSW horsing league to race horses for particular seasons. The league pays him $30,000 if he agrees not to race for any other horsing league. Somsak accepts this offer.
Six months later, Somsak grows tired of working as a lawyer. He decides to work part-time for Alba and Sco Legal to spend more time racing horses. He starts training his own horses. He also researches breeding and training techniques in order to keep up to date with the latest information. He helps his family sell any untrained offspring through the local newspaper. The horses sell for $2,000 each. However, this was well below the expenses associated with maintaining the horses.
A year later, Somsak resigned from Alba and Sco Legal and committed to breeding, training, and racing horses full-time. He breeds six brood mares, a stallion and a colt, and builds into a modest-sized stable. He collects a great deal of literature on horse breeding and training. He also makes relevant contacts with local and overseas breeders. Somsak also develops ideas for successful and profitable breeding programs and identifies relevant target markets to sell trained horses. He estimates he can sell each horse for $110,000. He sets up a computer system to monitor the breeding program and keeps detailed breeding records and records of all expenses associated with the horses.
PART A: Advise Somsak on whether any of the gains made from his activities related to horse breeding, training, and racing would form part of his assessable income. Please support your answer with relevant legislation and case law.
PART B: Advise Somsak on whether he may need to consider any GST obligations from his activities related to horse breeding, training, and racing. Please support your answer with relevant legislation and case law. You do not need to show any GST calculations.