Please chose ONE (1) of the following cases and prepare an analysis: • Federal Commissioner of Taxation v Stone 2005 ATC XXXXXXXXXX • Federal Commissioner of Taxation v Whitfords Beach Pty Ltd...

Assessment 3: Topic: Client Evaluation/ Key Audit Risks
Research – extent and application
Case Summary
In the famous case law of The Federal Commissioner of Taxation V Stone (2005), it was decided by the Court that the elite athlete, Joanna Stone who was a Javelin thrower was incurring financial rewards and are therefore liable to pay tax as income from sports is a business which generated income. But, as per Stone the government grants and the prize money which she received from winnings various sporting events cannot be considered as income as it was not earned for the purpose of making profits. But, the commissioner raised this issued and stated that prize money or grants received by the government received by any taxpayer are income as per the ordinary conception. Also, it may be so that Stone’s primary motive may not be to earn profits but the sponsorships acceptance and the financial rewards which she received due to sporting success was sufficient proof of the fact that she used her talent to generate money in the form of income. It was the decision of the learned justice Hill J who was too confused before declaring Stone as a taxpayer for the income she generated by employing her talent. This case law assists in understanding the meaning of income from the economic and     accounting concept point of view.
Joanna Stone & sporting receipts
Joanna Stone is a famous Australian Javelin thrower and athletic from 1987 to 2000. She represented Australia in various big and small sporting events including the 2000 Sydney Olympic. She was an employer cum officer of the Queensland Police force and was earning a salary of $39832 from the police service. Due to serious injuries from javelin throwing she retired from the sports profession but was engaged with the duty as a police officer of the Queensland Police force. It was during her years as a sporting athlete and javelin thrower she received various government grants, prize money from winning and participating in various sporting and javelin throwing events, appearance fees and sponsorship fees. Most of these were received by her pre-1999 and during that time these incomes were not considered as a part of the taxable income. She also took part in various sporting events in Australia from which she received sporting receipts to the amount of $136448. Of these amounts $93429     was the prize money, $27900 was the government grants out of which $5400 was grants received from Queensland Academy of Sports - QAS and $22500 from participating in other events, the sponsorship money was to the amount of $12419 and the appearance money for getting herself involved in various sporting programs and meet she received $2700. She was an elite athlete and was a role model for many upcoming sports players in Australia. Hence, as a role model she received $1600 from the Oceania Amateur Athletics Association and $1000 from the Little Athletics. The commissioner of the ATO or Australian Tax Office treated all these receipts of the amounts as taxable income. Ms. Stone objected on this and rejected the claims of the commissioner by stating that except her income as a police officer of Queensland Police Force, all other income which she generated from utilizing her talent in sports was not income rather prize money which was not received with the intent to make profit but was with the intent to win medals for her country Australia. The commissioner rejected her claim and filed suit against her. But, the commissioner agreed that Ms Stone will receive a deduction of $19739 from the income she received generated from the sporting receipts. In order to clarify whether the receipts by the professional sports persons are treated as income or is not a part of taxable income the case was dragged to the federal court.
Justice Hill J’s – Decision
Hill J was the justice of the federal court of law and his decision in the first instance was that since Joanna Stone was generating income by utilizing her talent in the form of a business as a professional athlete such receipts generated from such business amounted to taxable income in the ordinary course of tax concepts. Justice Hill J was also decided to research and analyse on the receipts of Joanna Stone sporting activities was not a business. He wanted to come to a conclusion whether sporting activity receipts were a case of income from other sources. Joanna Stone accepted that on the fact that the receipts from sponsorship were a form of income due to the services she have delivered on behalf of the sponsorship companies and constituted...