Delia Jones is a senior executive in the Sydney office of a small technology company called TechSmart Pty Ltd (TSL). She has worked at TSL since 2014. Delia needs to do her income tax return for the 2019 income year and she has come to you for advice. She provides the following information about her income and expenditure. Part A - Delia's Receipts She receives $700,000 per annum in salary from the TSL. Delia's investment portfolio comprises of the following:

Asset Acquisition Date Acquisition Price Notes

Real Property 15 May 2016 $1.2m Home at Manly in Sydney

Real Property 10 August 2012 $500,000 Property is a house near the beach at Crescent Head on the NSW North Coast used as weekender

Shares 20 June 2013 $1.4m Shares in BHP Ltd

In August 2018, the human resources manager had a meeting with Delia. The manager advised Delia that because she had performed at a high level during the year, she would receive a two week holiday in Tasmania in recognition of her contribution to the success of TSL. The holiday was fully paid for by TSL and she was the only person who could take the holiday. The value of the holiday was $20,000.

Delia loved getting away from Sydney to go surfing on the weekend at Crescent Head. She bought her surfboards from Punt Boards, the local surf shop on the NSW North Coast. She was also arty and she started painting designs on her surfboards in her garage at home in Sydney. Her friends liked her art and in September 2017 asked her to do the same thing on their surfboards. She charged prices for her painted designs that only covered the cost of the materials. She paid for the paints and other materials using cash and never asked for a receipt.

Punt Boards became interested in Delia's activity and in October 2018 Punt Boards offered Delia the opportunity to rent some space within their shop for her to work in and sell her painted boards directly to the public. Delia accepted the offer and she also entered into a contract with Punt Boards for the supply of the surfboards that she painted and sold in their shop. Delia entered into a contract with Art on the Beach, the local Art Gallery, for the supply of art materials. She employs a student in the afternoons to clean the shop space and help with the customers.

Delia's art was becoming well known around the area. She also set up a website to show off her designs. She engaged an accountant to help her develop a business plan and advise her on how to grow the revenue from selling the surfboards. In December 2018, she entered one of her surfboards in an exhibition held at the Art Gallery and she won the prize for best artwork. She received a silver trophy from Mick Hanning (a retired surfer and owner of the Art Gallery) worth $10,000. She earns $12,000 from her art activity in the 2018 income year and $75,000 in the 2019 income year ($10,000 before she moved into the space at Punt Boards). Delia decided that she wanted to move out of the space at Punt Boards into her own studio where she could paint and sell her boards. Delia owned a property near the beach with a house and a large outbuilding on it that she used as a weekender. She thought that the outbuilding would be a good place to do her art activity. The weekender was on a 3 ha block of land that she bought back in 2012 as a friend told her that Crescent Head was popular and the land would increase in value in the next 10 years. She engaged an architect to help her renovate the weekender. The architect advised Delia to find another place for her studio and demolish the weekender and turn the land into 20 holiday cabins and sell them. Delia thought this was a good idea. Delia built the holiday cabins using a builder who charged her $1.3million to do the construction. The value of the land at the time the construction commenced was $1.1million. She sold the 20 holiday cabins in June 2019 for $5.6million.

Delia also received the following income in the 2019 income year: $70,000 in dividends from shares she owned in BHP together with a franking credit of $30,000; $15,000 in interest from her sister Philly on a loan.

Required: Using legislation and case law, explain to Delia whether:

(a) the gains in the above-mentioned transactions would or would not constitute assessable income under the income tax legislation. Include calculations if required. If your decide that an amount is a capital receipt assume it is not assessable income for the purposes of this Assignment (ie, there is no need to calculate the capital gain).

(b) she has a GST liability in respect of any of the transactions relating to the surfboard activity and how the liability is calculated. Assume that all entities are registered for GST. All amounts are GST-inclusive (where applicable).