Question

State whether or not the following items forn part of the assessable income of an Australian resident taxpayer under any provisions other than the capital gains tax provisions. Provide reasons for your answer including references to legislation,case law and any relevant ATO Guidance. a. A table purchases at a garage sale for $50 and sold for $200. b. Five-hundred shares in a company allotted at a price of $1 each to employee of the company. At the time of issue, shares of the company were being traded on the ASX at $1.50 but at the end of the year of income their price had dropped to $0.90. c. The profit on sale of investments by a life assurance company. d. A prize in a literary competition won by a journalist. e. A legacy bequeathed to a tax payer in considerationof his acting as an executor under a will.

Answer 1

While calculating Assessable Income of an Australian Resident Taxpayer following should be included:

1. GROSS INCOME:Income before tax from your day to day activities of business including sales made online and offline and foreign income if any. It doesn't include Goods and service tax(GST).

2. OTHER BUSINESS INCOME:Income that is not part of your day to day business activities like changes in the value of trading stock, capital gain and cash prizes for your business and isolated transactions intended to make a profit.

a. Disposal of non-trading stock assets: A table purchases at a garage sale for $50 and sold for $200 will form part of Australian Resident taxpayer as it Is disposal of non trading stock. The Income will be of $150($200-$50) and will be considered in Other Business Income.

​​​​​​b. Decrease in Trading Stock Value:If during the year there is an decrease in your trading stock's value then the decrease amount should be included in your assessable income as other business income(loss) .The decrease will be the value of your trading stock at the beginning of the year minus the value of your trading stock at the end of the year.($1.5-$0.9) *500=$300 and will be considered as other business loss.

c. Isolated transactions intended to make a profit:The profit on sale of investments by a life assurance company will be considered in other business income it was an isolated transactions intended to make a profit.

d. Business prizes :A prize in a literary competition won by a journalist. will be considered in other business income as prize is received on the basis of Profession/Business of Journalism.

e. Capital Gain:A legacy bequeathed to a tax payer in considerationof his acting as an executor under a will not be considered in OTHER BUSINESS INCOME as it is not a transfer.

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