1. Receipts from clients ($128,000) The $128,000 received from Ronnie’s customers in regard to Ronnie arranging false documents is income on ordinary concepts. First, Ronnie’s business is running a migration agent. As a sole trader, he obtained the money from his clients as the proceeds of operating his agent. Second, although the money derives from arranging false documents in his business which is an illegal activity, it does not prevent it being characterized as ordinary income.FC of T v La Rosa indicated that the profits the taxpayer gained from unlawful activities was sufficient to be treated as assessable income.
The facts of illegal trading in FC of T v La Rosa is indistinguishable from Ronnie’s facts of arranging false certificates. Both of them were involving certain dishonest business. Also, in Lindsay & Ors v Inland Revenue Commissioners (264 P593), the court decided that it was immaterial that the particular method of carrying on the business was tainted by a certain illegality.Accordingly, under s 6-5, the $128,000 is the receipts from Ronnie’s business. And it is immaterial that it is from dishonest business, just like in Lindsay & Ors v Inland Revenue Commissioner. 2. Cash received from the will ($320,000) The cash Ronnie received from the will of his father does not fall in the scope of income.
First, since Ronnie’s business is operating a migration agent, the cash benefit from the will is irrelevant to the receipts of running his business, and therefore the proceeds of business principle under s 6-5 cannot apply here.Second, the relationship between Ronnie and the cash giver is father and son. Therefore it is not in respect of employment or services rendered. Neither s 15-2 can apply.
Rather, Ronnie’s father left the money in the will indicates that he made it the gift to Ronnie as a result of their father-and-son relationship. Whereas, in Scott v FCT, a mere gift obtained on a personal relationship is not income In addition, since there are no death duties in Australia, Ronnie has nothing to do with such duties. 3. Trading on e-bayThe $600 obtained from the sale of Ronnie’s DVD recorder is not income. First, the money is received from a commercial transaction of selling Ronnie’s old DVD recorder on eBay, but not from Ronnie’s business of running a migration agent. Hence, it is not the proceeds made from Ronnie’s ordinary course of business.
Importantly, applying the reasoning of FCT v the Myer Emporium, the recorder was for Ronnie’s personal use and Ronnie’s surprise to get the lump sum $600 suggests that he did not have purpose of making profit from it.Therefore s 6-5 and s 15-15 cannot apply. Moreover, the benefit of the sale is not relevant to other employment or services rendered by Ronnie based on the given facts, thus s 15-2 cannot apply either. Second, the DVD recorder is a CGT asset according to the definition of asset in s 108-5. It was acquired at 2007 which was after 19 September 1985, therefore the CGT regime applies. Disposal of the recorder raised a capital loss of $590 to Ronnie.
However, according to s 108-20 (1), the capital loss Ronnie made from a personal use asset is disregarded.