Australian Taxation

1.) Miles OLand owns a large pastoral holing on which there are a number of oak trees. He use the land for grazing sheep and wants to have the trees cleared for further grazing land. While researching the coast of having the land cleared Miles discovers that a logging company is prepared to pay him $1,000 for every 100 metres of timber they can take from his land.

Leaving aside any capital gains tax issues, advise Bill as to whether he would be assessed on the receipts from this arrangement? Would your answer be different if he was simply paid a lump sum of $50,000 for granting the logging company a right to remove as much timber as required from his land?

2.) In 1979, Dr. Seymore Brightly and optometrist who lived and worked in Sydney purchased a 20-acre parcel of rural land on the outskirts of the city for $100,000. Over the years, he used the property as a hobby vineyard for growing grapes and making a non-commercial quantity of wine and as a weekend retreat for relaxation.

Recently, the surrounding area has become more developed and the property has increased in value. Dr. Brightly has also recently run into financial difficulties as a result of a malpractice suit and he is considering selling the property.

Advise Dr. Brightly as to whether he would be required to include any amount in his assessable income as a result of the sale. Would your answer be different if he had decided to develop the property three years ago and he had subdivided it into 20 one-acre allotments and constructed roads and buildings on it and sold off the allotments separately over a period of one year?

3.)Hyde, Cash & Lye is a large firm of tax advisors. In the previous financial year, it billed one of its clients $150,000 for tax advice that it had provided. The firm has recently discovered that the client has fled to Panama following a dispute with the ATO and cant be reached. They decide that they will not be able to recover the fee so decide to write it off and make a note in minute of the partners meeting to that effect.

Is Hyde, Cash & Lye entitled to a deduction under Section 25-35 ITAA97 for this amount? What would happen if, in three years time, they get a court order to bankrupt him and recover $50,000 of this debt?