Warren is a manager employed by Upbeat Pty Limited under a seven-year contract. His employment package consists of the following:

1. the annual salary of $100,000 payable monthly;

(ii) reimbursement of all medical expenses for himself and his family upon production of receipts;

(iii) a loan at an interest rate 7.5% below market rates to assist in the purchase of his home – the loan is provided by a bank that is a client of Upbeat Pty Limited who is prepared to offer a home mortgage at 7.5% below market rates to employees of Upbeat Pty Limited provided the latter goes guarantor;

(iv) an all-expenses-paid surfing holiday to Bali for himself and his family each year (if he wishes it).

At Easter 2009 Upbeat Pty Limited provides a “Bunny” hamper to Warren. As he is a more senior employee the hamper includes 7 bottles of imported Mexican wine.

During the relevant year of income Warren successfully completes a postgraduate university qualification in stockbroking and is awarded a university prize of $ 21,000 for the best research paper submitted by a student. He has been claiming the payment of his university fees as a deductible expense.

At the end of the relevant year of income, which is Warren’s first year under his contract, Upbeat Pty Limited decides that reimbursing medical bills is potentially too expensive, so it pays him a lump sum of $12,000 to vary his contract and to obtain a release of this obligation.

Required

Draft a letter of advice that addressed the taxation issues for Upbeat Pty Limited and Warren for them of these payments, receipts and entitlements.