question archive Jane and Sally are employed school teachers who have a very wide general knowledge
Jane and Sally are employed school teachers who have a very wide general knowledge
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Jane and Sally are employed school teachers who have a very wide general knowledge. Both decide to enter a television quiz program called “Lease of the Decade”. Under the rules, contestants receive $100 for each appearance, but if questions are answered correctly, they receive substantial cash prizes and other prizes, such as household items and holiday packages. The holiday packages cannot be transferred or redeemed, but the organisers of the program allow them to be converted into alternative venues and accommodation.
Jane and Sally go on the show but Jane is eliminated in the first contest and receives her $100. Sally, however, makes 10 appearances. She wins cash prizes of $50,000, household appliances worth $20,000 and a trip to Europe with her family valued at $30,000.
Discuss the assessability of these prizes.
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Answer:
Tax Ruling IT 167: As per the ruling the prize money cannot be considered the ordinary income; however as Sally performed on 10 shows therefore is an indicator of the skills and regularity for the prize and therefore can be categorized to be an ordinary income
Pre-conditions: Because of section 118-3 the prizes under any circumstances would not be allowed to assess under capital gains tax. Because the overseas trip cannot be converted into cash thus would not be an ordinary income.
Section 15-2 of ITAA97: The section will be applicable on the prizes when categorized to be not an ordinary income. However in the similar circumstances the applicability of this section by case law remains untested
An amount of $100 as a services reward will be treated as an ordinary income for both Jan as well as Sally. However they must establish a nexus relationship
