BLB3134 - CC Marketing Pty Ltd - Statutory Income Provisions Under The ITAA36 or ITAA97 & Section 6-5 - Law Assignment Help

Assignment Task    
 

The Problem:

Part A

CC Marketing Pty Ltd (CC) runs a marketing business in East Brighton. It is comprises of 4 sales managers: John, Mark, Jim and Andrew, all specialising in different marketing areas. The company has operated extremely well in the past because of the range of services that they offer to their customers including: printing services, design services, television and radio marketing services and general social media and website set up and monitoring services. John has been solely responsible for the ‘printing services’ area of the company. In October 2019, the board of directors of CC felt that John was not performing as well as they had hoped in his position. ‘Printing services’ sales of CC were down in the last few months and if this continued the company was looking at sustaining a loss of $4M in the 2019 - 2020 financial year.

In order to address these concerns, the board of directors appoint an assistant marketing manager for ‘printing services’, to try to bring John’s performance into line. As part of the new arrangements, John is told that he no longer will look after all of Melbourne’s ‘printing services’ sales area, but that it would be divided into 2 parts. He would be responsible for the East side, and the new assistant ‘printing services’ marketing manager - the West side. Because of the changes, John’s 
employment contract is to be altered as follows:

1. John is to be paid a lump sum $100,000 if he agrees to the new arrangements and stays on for the next 3 years. If he elects to leave at any time before the expiration of the three years, this amount is to be reimbursed back to the company on a pro rata basis.

2. If John does not agree with the new arrangements, he can take a termination ‘package’ of $200,000 to be paid in 3 yearly instalments but only if he agrees not to work for any other marketing company in Melbourne for the next 3 years. On 27 October 2019, John also sells 2000 of his CC shares at the market price of $2.50 each.
He originally purchased these shares on 27 November 2018 for $1.50 each. John has dabbled in the buying and selling of shares over the last 5 years. He keeps detailed records of his transactions, and in the last financial year he made an overall profit of $5,000.

Part A

Required: Discuss the tax implications of the above proposed and actual transactions according to:
a. Section 6-5? 
b. Other statutory income provisions under the ITAA36 or ITAA97 (not inc. CGT)? 

Part B

In July 2019, board of directors of CC had agreed that it was time to move the firm to new premises. After some negotiations it was agreed that CC would enter into a lease for new premises located in Hampton. In order to encourage CC to move, the building’s owner of the Hampton premises JAYjo Pty Ltd (JAYjo) agreed to pay CC a lump sum lease incentive of $150,000. Due to an oversupply of premises suitable for marketing firms in the area, such incentives were commonly given.

Required: Advise CC as to the assessable nature of the $150,000 according to the Myer
Emporium doctrine.

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