John Jones runs a small practice providing accounting and taxation services to local businesses. During 2009/10 he billed fees of $35,000 of which $30,000 has been received. An amount of $3,000 was also received from outstanding accounts from the 2008/09 year. One of his clients is Travelco, a local motel. In March 2010 Travelco provided Jones and his wife with free return air tickets to Bali. Equivalent fares would cost $2,000. 

Jones is also employed in a part time capacity as lecturer in accounting at Central University. His annual salary is $42,000pa. Jones has arranged with his employer for his salary to be paid on the 15th day of every month into his savings account with the State Bank Ltd. Jones uses the savings account to meet household expenditure. Jones also has a home mortgage loan with the State Bank. Under a separate agreement with the bank Jones has arranged for a balance of $5,000 to be maintained in the savings account and any balance to be transferred to his mortgage. He has also arranged for any interest on the savings account to be offset against the mortgage interest. For the year ended 30 June 2010 $300 was offset. 

Jones's wife Joan is an IT expert. For several years John and Joan had been developing software for an accounting package for use by small businesses. The system, 'J-Accounts', has been licensed and is used by 175 local businesses at a cost of $100 per year. A national software developer 'Cashbooks' has agreed to pay the Joneses $25,000 in return for the exclusive rights to use the program for five years after which time a new agreement for a further five years may be signed. 

Jones has an interest in history, particularly commercial history. In 2005 he purchased 500 old share certificates from an acquaintance who practised in the area of insolvency and liquidation. The total cost was $500. The certificates related to old companies that had been liquidated during the 1930s depression. They were very elaborate and ornate and Jones thought that framed they could be marketable as a decorative feature to hang in the offices of accountants and solicitors. In February 2010 he happened to mention the matter to Herman, a local decorator and picture framer. Herman suggested that if properly framed, numbered, and if an inscription was added, they could sell for $1000 each. The cost would be $100 per certificate. Herman agreed to sell the items on a commission basis of 10%. 

A local television station runs a quiz show called 'Who Wants to be Rich?' Contestants are selected randomly from the local telephone directory. Jones was lucky enough to be selected and he appeared on the show for five nights, answering every question and becoming 'Grand Champion'. He won $200,000 and a car valued at $30,000. 
Required: 

Advise John Jones what amounts would be included in his assessable income. Your answer should include a discussion of the following: 

• Whether he return on a cash or accrual basis. 
• Whether particular amounts are ordinary income or statutory income (including capital). 
• Under what sections of the Acts the particular amounts are assessable. 
• How the quiz show winnings are to be treated. 
• What are the tax consequences of the share certificate proposal. 
• What case law is relevant to the issues raised.