Question

1. Fred has been unemployed for six months. He has been using the Jobs R Us Pty. Ltd. employment agency for the past four months to try to find employment. In March of this year, a new case manager, Bert, was given the task of finding a job for Fred. Within a week, Bert, had found Fred a full time job. Fred bought a $500 gold watch and gave it to Bert to say thank you.

Advise Bert as to whether the watch is assessable income. Refer to case law and legislation in your answer. 10 marks

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1. In addition to Bert’s fortnightly salary, his employer pays his telephone and internet package of $120 per month, and as a reward for being Employee of the Month for June, Bert received a $500 bonus.

Advise Bert of the tax consequences of the above employment package. Refer to case law and legislation in your answer

Answer 1

Advise Bert as to whether the watch is assessable income. Refer to case law and legislation in your answer.

The Gold watch worth $500 presented by Fred to Bert is subject to Gift tax under the hand of Fred the receiver of the gift .  The Internal Revenue Code (IRC) considers a gift to be any property that's transferred to a non-spouse beneficiary with no cash or other monetary value received in exchange and when no exclusion applies. Hower there is an annual exclution of gift to an amount of $15000.

In addition to Bert’s fortnightly salary, his employer pays his telephone and internet package of $120 per month, and as a reward for being Employee of the Month for June, Bert received a $500 bonus.

Taxable income under the head salaries includes salary and all allowances which the employer pays to the employee in terms of the contract of employment. Or additional allowances are includiable to the head salaries and in the case of Bert in the question the

Fortnightly salary + telephone and internet pacakage of $120 + the bonus of $500 paid by the employer is taxable under the head salaries for deriving the taxable salary.

An employee's labor is typically compensated in the form of wages, salary, and sometimes tips, commissions, fringe benefits, bonuses, and awards. All this compensation are subject to taxes.