Faced with financial difficulties, Ardmono (Aust) Pty Ltd (AAPL), an Australian company that manufactures the highly reputable Sunrace brand of bicycle accessories, decided to sell its business to a related company, Ardmono (Japan) Pty Ltd (AJPL). However, AJPL did not have sufficient funds to purchase the business outright and instead entered into a licence agreement on 1 July 2018 with AJPL that allowed AJPL to use AAPLs Sunrace trademark for 10 years in consideration for payment of an annual royalty.

AAPL, however, still wanted to realise a lump sum. On 1 September 2018 it sold the rights under its licence agreement with AJPL for $4 million to Common Bank, an unrelated Australian financial institution.

With reference to legislation and case law, advise AAPL whether the $4 million constitutes assessable income. Ignore any capital gains tax implications.