MLC301 Principles of Income Tax Law - Assessment Questions

QUESTION 2. 17

Consider the following situations and discuss whether they are income in ordinary concepts or not. Note: Where no dates are given, the previous tax year is to be assumed.
(a) On winning a major professional tennis tournament Mark received from the tournament organisers $100 000 cash and a gold trophy which cost $10 000 to make.
(b) In recent years, some people have entered into a barter system where they may exchange the use of something they own (e.g. lawn mower) for some other goods or services (e.g. fresh vegetables). Some of these systems have become quite sophisticated and now have a point system to compare different goods and services (e.g. the use of the lawn mower for 2 hours might be worth 10 points and a bunch of carrots may be 2 points). Discuss whether the exchange of goods for domestic use is income in ordinary concepts under s 6-5. If the goods exchanged were used in a business, for example, one farmer agrees to help his neighbour with his harvest in return for the use of the neighbour’s bull to mate with his cows, would your answer be different? (c) Your client owns a house in Warrnambool and intends to move permanently to Melbourne to work. However, she does not wish to sell her house in Warrnambool but intends to rent it for $350/week. At the same time she wishes to rent a place in Melbourne for about the same price. If your client goes ahead with this arrangement, will she have income in ordinary concepts from the rent received on the Warrnambool house? Would it make any difference if she was not paid the rent on the Warrnambool house but the tenant agreed to pay your client’s rent on the Melbourne house?