Question 1

Judy is a judge. This was a stressful occupation, so for relaxation she had a keen interest in gardening. She has an extensive garden and has undertaken a number of courses in landscape design and flower arranging. Judy often sold flower arrangements to friends, friends of friends etc for weddings, funerals, birthdays, anniversaries and other special occasions. She is paid $150,000 per year as a judge. Is the amount she receives from the sale of the flowers assessable? Why?

Question 2

Mighty Mandrake, a well-respected magician, sued Global News for defamation. He won his action and was awarded $100,000 damages. Is the amount of damages assessable? Why?

Question 3

Albert Einstein was a very successful salesperson. He had worked for Excelsior Pty Ltd for the past 10 years. He had an extensive knowledge of the client base of Excelsior. The company was afraid that if Albert left he would be able to utilise this information to the disadvantage of Excelsior. Accordingly, an arrangement was entered into whereby Excelsior paid Albert $70,000 not to set up his own business in competition with Excelsior, or work for a competitor of Excelsior, for a 5 year period after leaving Excelsior. Is this amount assessable, and if so how will it be assessed?

Question 4

Roberta was a computer programmer. She worked for the MASB bank. Whilst working for the Bank Roberta met and married Andrew. He was the financial manager for the Bank. Roberta became pregnant and resigned her job at the bank. Twelve months after the birth of her child, Roberta set up her own IT consultancy business as a company. She called it TERA Pty Ltd. She and her husband were the owners of TERA Pty Ltd. At the end of the first year of running the consultancy business taxable income of $60,000 had been made.
Who will be taxed on this $60,000?