Item $1-$ Megan's Income

Megan earns a salary of $$650,000$ per annum from Starlight Films. In the $2023$ income year, Megan received an Academy Award $(\text{'}$Oscar$\text{'})$ from the American Film Academy for her work in producing a film. She started to receive a great deal of media attention. She entered into a restrictive covenant with her employer Starlight Films where she agreed not to do any media appearances without her employer's approval in return for a payment of $$30,000.$

Megan's investment portfolio comprises of the following:

Asset Acquisition Date Acquisition Price Notes

Alpaca farm $24$ June $2005$ $$200,000$ Property is a $20$ hectare $($ha$)$farm with a house and farm buildings near Lake George.

Shares in Rio Tinto $10$ June $2018$ $$1$m

She spends most weekends at her Alpaca farm near Lake George. She owns a home in Nicholls that is her main residence. The Alpaca farm has a house, several farm buildings, and the land where the alpacas graze. She is a member of the local farmers' association and attends lectures on keeping alpacas for their wool. She hires a shearer every year to shear the alpacas. At first, she kept the alpacas as pets and let the shearer dispose of the wool clippings from shearing the alpacas. After a few years, Megan realised that her alpacas were producing a significant amount of wool and that it is highly valued by clothing manufacturers. Megan started selling alpaca wool to the fashion houses in Melbourne. She keeps records of her income and expenses. Megan received $$250,000$ from selling alpaca wool in the $2023$ income year.

Recently, a property developer approached Megan. The developer advised her to redevelop the farm buildings into twenty$-$five townhouses. The farm buildings were located in a separate area to the farm and her house, so she decided to subdivide the property into two $10$ ha lots of equal size $($Lot A and Lot B$).$ Lot A had the house and farm, which she retained for her personal use and for keeping the alpacas. Lot B had the buildings that would be redeveloped into twenty$-$five townhouses. The cost of the subdivision was $$20,000$ for Lot A and $$50,000$ for Lot B$.$

She engaged a builder to build the twenty$-$five townhouses on Lot B and worked closely with him on the design of each townhouse. At the time the development commenced, the market value of Lot A was $$1,500,000$ and $$1,250,000$ for Lot B$.$ The construction costs for the townhouses built on Lot B was $$24$m$.$ Shortly after completion, Megan sold the twenty$-$five townhouses built on Lot B for $$32$m on $30$ June $2023.$

Megan also received the following income in the $2023$ income year:

$$ $$25,000$ in unfranked dividends from shares she owned in Rio Tinto. There was no franking credit attached to the dividends.

Item $2-$ Megan's Expenses

Megan incurs the following expenditure during the $2023$ income year:

$$ She pays $$30,000$ for alpaca food.

$$ She pays for the alpaca food using her credit card. She pays $$1,500$ in interest to the credit card company for the purchase.

$$ She receives an $$800$ speeding fine on the way to Melbourne to attend a fashion show where the models were wearing clothing made from the wool of Megan's alpacas. Megan has a stall at the fashion show where she displayed the alpaca wool from her farm.

$$ On $1$ May $2023,$ she buys a laptop, costing $$3,000.$ The Commissioner states that the laptop has an effective life of three years. She uses the laptop $75\%$ for her employment and the rest of the time for streaming Netflix.

$$ She travels from her home at Nicholls to the farm at Lake George on Friday afternoons, returning on the following Sunday night, by taxi, at an annual cost of $$5,000.$

$$ She pays the shearer $$24,000$ each year to shear the alpacas. He is not an employee.

$$ Megan is thinking about starting a new business selling her alpacas for meat. She asks her accountant to investigate the feasibility of the business before she decides. The accountant's report cost $$4,000.$ Megan decides not to start the business.

$$ Megan decides that she needs to improve her skills farming alpacas. She travels to the United States for $4$ weeks to study alpaca farming techniques. She spends $3$ weeks travelling around California visiting alpaca farms discussing the latest techniques. She then spends a week visiting wineries in the Napa Valley area of California on a food and wine tour with friends. The total cost of trip $($airfares and accommodation$)$ was $$16,000.$

Item $3-$GST liability

Required:

Using legislation and case law, explain the GST implications of the transactions relating to the alpaca keeping activity to Megan arising in the $2023$ financial year, and whether a GST liability or an input tax credit will arise $($including the amount$).$ Assume that all entities are registered for GST$.$ All amounts are GST$-$inclusive $($where applicable$).$ Do not calculate the net amount for the purpose of the section $17-5$ of the GST Act. Do not consider the GST consequences of Megan's building activity or the dividends