QUESTION 1 (Australia tax)

1. (a) For each of the independent events listed below, state what amounts, if any, would be assessable income. Support your conclusion with brief references to case law and/or sections of the ITAA 1936 or ITAA 1997 where appropriate. (i) Stargate Minerals mines lead and zinc in Broken Hill. Very rarely, silver deposits are uncovered during mining and Stargate has a long-standing 25-year contract with Silver Bullet NL to supply them with all silver extracted. Last year silver production consisted of 5% of all ore extracted by Stargate, representing 15% of its total revenue. In the current year Silver Bullet enters into more favourable foreign contracts for silver and pays Stargate $750,000 as compensation for cancelling the remaining term of their contract. (3 marks) (ii) Lump Sum signing-on fee of $40,000 received by a professional basketball player for renewal of a contract with her club. (2 marks) (b) With reference to case law, outline the circumstances that would result in an extraordinary business receipt being classified as assessable income by virtue of section 6-5 of the Income Tax Assessment Act 1997. (5 marks)