Question

Daniel is an employee and his employer paid $4,300 to a family holiday resort on the Sunshine Coast, Queensland for Daniel to spend one week in January 2015 there with his family. His employer provided this benefit to Daniel every year. If Daniel did not use the holiday, he could not transfer it to another person. Daniel, his wife Danni and their three children spent a week at the holiday resort. Which of the following features of ordinary income will the receipt of the holiday have most difficulty in satisfying?

1.The receipt must be characterised in the hands of the recipient.

2.The receipt should exhibit regularity or periodicity.

3.The receipt must have a sufficient connection with an income-earning activity.

4.The receipt of illegal amounts may still be considered to be income.

5.The receipt must be easily convertible into money.

Answer 1

The receipt must be easily convertible into money.

This option is correct answer.

Because A benefit in kind that cannot be converted into money is not income. As the holiday is not convertible into money, it will not be ordinary income. It is noted that the benefit is likely to be subject to fringe benefits tax as it is a non-cash benefit given to an employee.

The receipt must be characterised in the hands of the recipient and it is noted that the receipt of the holiday is likely to be the result of employment 1. A receipt should exhibit regularity or periodicity and, as the holiday is received every year it would appear to be a regular payment. The receipt must have sufficient nexus with the income-earning activity and it would appear that the holiday has a clear connection with employment. The receipt of an illegal amount may still be considered to be income but, as the holiday is not an illegal receipt, this condition should not cause a problem