HI6028: Charlie an employee of Shiny Homes Pty Ltd (Shiny Homes) - Taxation Law

Internal Code: MAS6541

Taxation Law:

1) Charlie is an employee of Shiny Homes Pty Ltd (Shiny Homes). He is a real estate agent. Shiny Homes also operates a separate business on landscaping to ‘do up’ houses before it is put up for sale. From the period 1 July 2016 to 30 June 2017 the following events took place: • On 1 September 2016, Shiny Homes provided Charlie with a 4 wheel drive sedan value at $70,000. From 1 September 2016 to 31 March 217 the car traveled 80,000 km. He parked his car in his garage in the evenings. Before he goes away for his Christmas holidays, the car was sent to be serviced and he could not use his car for 2 days. He estimated that he uses 70% of the time was for a business purpose and the other 30% of the time for private use. Charlie also maintained a log book for 12 weeks and the following information were recorded: Question: Advise both Charlie and Shine Homes about their fringe benefit consequences of these events. You are required to compute the taxable benefit where necessary.You need to cite the relevant case law and/or legislation. 2) 1. Allan and Betty were living and working in Melbourne. They decided on a ‘tree change’, sold their Melbourne home and purchased a large country house on a 10-hectare block in central Victoria. Betty works part-time as an accountant and Allan as a locum doctor. Allan is popular with the elderly patients in the town and regularly is given home-made cakes and scones, along with his fee. On one occasion he treated a local wine maker’s dog for snake bite when the vet was unavailable and was given a dozen bottles of Monarch Brae shiraz in appreciation. The wine had a retail value of $360. 2. Allan and Betty enjoy gardening. They plan to establish a few hectares of grape vines and begin growing vegetables. They attend a continuing education course on organic farming and find in their second year they have a surplus of produce. Betty started making marmalade and relish using her mother’s recipes. Initially, she gave them to neighbors but they became so popular that she opened a stall at the Newtown Growers Market held on the second Sunday of every month. Allan sold some of the excesses to a local supermarket and now regularly supplies three retailers with sweet potatoes and pumpkin. They don’t keep records as they never intended to make a profit but estimate that in a good month gross receipts could be $500 to $600. Questions: (a) Advise Allan of any income tax consequences of para 1, above. (b) Citing relevant case law, explain how a hobby is to be distinguished from a business. (c) Advise Allan and Betty of any income tax implications in paras 2 and 3 above. (d) Advise the participants in the barter scheme of any income tax implications.