Workshop 3 - Ordinary income Questions before workshop Question 1 Is ordinary income defined in either ITAA? Why, or why not? Question 2 Discuss the following comment: All individuals and companies need to pay tax on every receipt of money received throughout the income year. If you receive any amount of money you need to pay tax" Question 3 Which of the following are assessable as ordinary income under 56-5 ITAA97, and why? 1. Wages and tips received from part-time employment 2. Employer's present of two tickets to Monster World worth $300 3. Employer's present of two non-transferable tickets to Monster World worth $300 4. Gift of $400 conditional on mowing neighbour's lawn for three months 5. An unfranked dividend 6. Weekly compensation payments to a self-employed person out of a personal disability insurance fund. Question 4 Mason is a professional golfer. He works full-time at an international golf as one of their resident golf professionals. At times during the year, he attends professional tournaments caddying for a few of his professional golfer colleagues. Mason regularly receives tips as a result of his efforts in tournaments. Mason has earned the following in the CIY: Salary $80,000 Tournament bonuses $8,000 Tips $12.000 Total $100,000 In addition to the above, Mason also received a sizeable bonus of $10,000 cash as a thank you caddying for a winning player and some golfing equipment valued at $6,000 from one of his clients at the golf course. What is Mason's assessable income for the current income year? Workshop 3 - Ordinary income Questions during workshop Question 1 What are the 3 main characteristics of ordinary income? Question 2 What are the 6 main categories of income producing activities? Question 3 You have a $400,000 mortgage at 10% with BILK Bank. In addition you have entered into an arrangement to lower the interest rate if you forgo the interest payments made on your deposits. The bank, naturally, pays 5% on deposits, however under the arrangement the interest you would have received is offset against your mortgage How much interest, if any, will be assessable to you and why? Question 4 What is the essence of the decision in the Myer Emporium Case? Question 5 Cleavon likes to collect coins. Over the past 15 years he has collected a large and varied collection. Cleavon decides it is time to have his collection valued for insurance purposes and is stunned to find it is valued at $1.5m primarily due to one coin worth $850 000 he picked up for $5 at an auction 15 months ago according to his immaculate records. He decides to sell this coin through an online auction to the highest bidder. Are the proceeds of this activity ordinary income under s6-5? Assume Cleavon saw the coin and knew it was rare and valuable and bought it with the intention of selling it within 6 months to a collector. Is the amount received assessable income under 56-5? What do you see as the critical differences between the two scenarios? Workshop 3 - Ordinary income Questions before workshop Question 1 Is ordinary income defined in either ITAA? Why, or why not? Question 2 Discuss the following comment: All individuals and companies need to pay tax on every receipt of money received throughout the income year. If you receive any amount of money you need to pay tax" Question 3 Which of the following are assessable as ordinary income under 56-5 ITAA97, and why? 1. Wages and tips received from part-time employment 2. Employer's present of two tickets to Monster World worth $300 3. Employer's present of two non-transferable tickets to Monster World worth $300 4. Gift of $400 conditional on mowing neighbour's lawn for three months 5. An unfranked dividend 6. Weekly compensation payments to a self-employed person out of a personal disability insurance fund. Question 4 Mason is a professional golfer. He works full-time at an international golf as one of their resident golf professionals. At times during the year, he attends professional tournaments caddying for a few of his professional golfer colleagues. Mason regularly receives tips as a result of his efforts in tournaments. Mason has earned the following in the CIY: Salary $80,000 Tournament bonuses $8,000 Tips $12.000 Total $100,000 In addition to the above, Mason also received a sizeable bonus of $10,000 cash as a thank you caddying for a winning player and some golfing equipment valued at $6,000 from one of his clients at the golf course. What is Mason's assessable income for the current income year? Workshop 3 - Ordinary income Questions during workshop Question 1 What are the 3 main characteristics of ordinary income? Question 2 What are the 6 main categories of income producing activities? Question 3 You have a $400,000 mortgage at 10% with BILK Bank. In addition you have entered into an arrangement to lower the interest rate if you forgo the interest payments made on your deposits. The bank, naturally, pays 5% on deposits, however under the arrangement the interest you would have received is offset against your mortgage How much interest, if any, will be assessable to you and why? Question 4 What is the essence of the decision in the Myer Emporium Case? Question 5 Cleavon likes to collect coins. Over the past 15 years he has collected a large and varied collection. Cleavon decides it is time to have his collection valued for insurance purposes and is stunned to find it is valued at $1.5m primarily due to one coin worth $850 000 he picked up for $5 at an auction 15 months ago according to his immaculate records. He decides to sell this coin through an online auction to the highest bidder. Are the proceeds of this activity ordinary income under s6-5? Assume Cleavon saw the coin and knew it was rare and valuable and bought it with the intention of selling it within 6 months to a collector. Is the amount received assessable income under 56-5? What do you see as the critical differences between the two scenarios