Kelly vs FCT- Is the prize assessed for tax?

Page No 30-31 FACTS: Footballer being paid a fixed amount og each match played. Taxpayer had knowledge that umpires voted for a player as the best and fairest during the season player will be awarded a medal. Knowledge that TV provided $20,000 to medal winner. Taxpayer wasnt expecting a medal but won both the medal and $20,000. Income from personal services is distinguished from capital receipts. Distinguished between ordinary incomes in the context of ordinary income compared to capital. DECISION Although taxpayer didnt expect to win, taxpayer knew he was eligible for medal/ $20,000. The prize was related to employment which increased grants flowed directly which is based on players skill and performance. Nexus- Sportsperson will be assessable, whether received from the employer or third parties FCT vs Cooke & Sherden Business Income Cash or Convertible- Page 40-41 Statutory - Sec. 21A ITAA36 (over $300 - s.23L) Sec. 26(e) ITAA 1997, Division 70 Definition of trading stock as defined in s70-10 ITAA97 FACTS: Taxpayers carried out business as direct soft drink retailers. Holidays provided by a manufacturer to retailers who achieved certain sales targets of the manufacturers goods were held not to be assessable under s25(1) or 26(e) ITAA36. DECISION The taxpayers were not assessed on the value of a holiday primarily on the convertibility issue either because there was no income as the holiday was not convertible into cash, or it was income of nil value because that was the amount into which it could be converted. As holidays could not be transferred to other persons or otherwise convertible to cash they would not constitute ordinary income. They were not assessable under s 26 (6) because the taxpayers has not provided services to manufacturers. Buyer- seller relation not marketing. The decision exposed gaps in the tax law coverage of business benefits, in that the decision indicated that non-cash business benefits, if structured appropriately so as not to be convertible into cash, could avoid taxation. To deal with this sort of problem, s21A was introduced into ITAA36 in 1988. Under s21A, a non-cash business benefit that is not convertible into cash is to be treated as if it is convertible to cash. (p281 ATL) SECT 21 Where consideration not in cash
SECT 21A Non-cash business benefits (1) For the purposes of this Act, in determining the income derived by a taxpayer, a non-cash business benefit that is not convertible to cash shall be treated as if it were convertible to cash. (2) For the purposes of this Act, if a non-cash business benefit (whether or not convertible to cash) is income derived by a taxpayer: (a) the benefit shall be brought into account at its arm's length value reduced by the recipient's contribution (if any); and (b) if the benefit is not convertible to cashin determining the arm's length value of the benefit, any conditions that would prevent or restrict the conversion of the benefit to cash shall be disregarded.

Payne vs FCT Necessary to determine the nature of the rights. Pg 124 (Textbook) s15-2 ITAA 1997- What are benefits assessable. FACTS: These flights were paid for by her employer, as were any accommodation expenses involved in these business trips. Qantas was a major audit client of KPMG, and it was KPMG policy that where possible its employees would travel for business purposes on Qantas flights, although this was not a requirement of Qantas. Payne decided to become a member of the Program. She completed the application form during the flight, detached it and returned it to a Qantas crew member. She paid the $95.00 membership fee at that time by using her own personal credit card. DECISION: T h e r e f o r e , t h e n e x u s b e t w e e n employment of the taxpayer and benefit in a form of the free flights is not satisfied. Moreover, this nexus requirement, as a benefit being a product, incid ent or consequence of employment must exist before a benefit; in this case flight reward points are granted. Free flights earned by Payne due to Flyer program were was not Statutory Inco me (S15-2 ITAA 1997). They co uld not be sold or converted to money. Benefits under $300, are classified as an exempt income under s. 23L (2), thus are not assessable) Westpac vs FCT 1996 FACTS: A fringe benefit was provided when the banks usual loan establishment fees were waived in respect of loan applications by bank employees. The bank argued that the benefit was the waiver of the usual fees. The bank further argued that the benefit was not provided as the bank did not perform any positive act but merely failed to charge an amount. Hill J, however, accepted the Commissioners contention that the benefit was the Service provided by the bank to its staff member in assessing the loan application, considering it, reviewing security (if security is offered) inspecting the property, considering any other relevant matters and co mmunicating the banks decision. Alternatively, there was a benefit in the bank co mmitting itself to making the loan. Once the benefit was described in this manner it was clear that it was conferred by the bank on the employees and hence provided to them. Interest rates. Establishment fees that the bank usually charged to the public were not normally charged to its employees. The bank argued that the forgoing of the establishment fees was part of the loan fringe benefit and was taxable only under FBTAA Div 4 relating to loan fringe benefits. This would mean that the taxable value of the fringe benefit would be limited to the difference between the interest rate charged and the benchmark interest rate. The Commissioner argued that services associated with the establishment of the loan were a residual fringe benefit. Held:
Although a loan fringe benefit within FBTAA Div 4 could not at the same time be a residual benefit under FBTAA Div 12 that did not mean that Div 4 operated as an exclusive code for all benefits in any way related to loans. Div 4 did not deal with the provision of services antecedent to the making of a loan. Rather such services were dealt with under Div 12 dealing with residual benefits. Lindgren J (with whom Lockhardt and Sackville JJ agreed on this point) said at 151: In my view Div 4 catches in respect of any year of tax only the making of a loan as defined where the recipient is under an obligation to repay the whole or a part of the loan during the whole or a part of that year. The Bank's investigation, assessment and determination of an application, writing of the letter of approval and receipt of the signed acknowledgment do not, of course, themselves generate an obligation to repay.