Stella is a full-time tax accountant at Hound Accounting Pty Ltd, situated in Ballarat, Victoria. Since she was 12 years old, Stella has been a keen runner. Firstly, competing weekly at Little Athletics, then Stella began entering competitions. Stella now competes nationally and internationally. Most recently competing at the Commonwealth Games in the Gold Coast, in April 2018. During the year, Stella has earned $85,300 from her running events. This has been mostly in the form of prize money; however, a component is from sponsorships and appearances leading up to the games. Stella used her annual leave to attend the games and returned to work immediately after their conclusion–returning to a multitude of emails from clients and meetings filling her calendar.
Her friend, Mia, who Stella met at Little Athletics also is a keen runner. Mia, however, has not been competing to the same extent as Stella, although Mia did earn $5,000 in prize money in February after competing in a regional event.
Mia in fact is a keen gardener. Although she is employed as a teacher at the local primary school, on weekends she has been nurturing avocado, fig and walnut trees she planted on a 7- acre piece of land she owns 15 minutes out of Ballarat. Although the trees have yet to produce, she saw a potential market for local produce. This arose after Mia undertook some research into organic farming methods arising from a conversation with the local nursery owner, who also caters for the organic market. Mia then acquired enough saplings to fill most of the land. Mia is currently looking into potential stalls at Sunday markets, environmentally friendly options for packaging and has set up a Facebook page labelled asMia’s Hobby Farm Organics.
Two years ago, on the remaining 2-acres of land, Mia began constructing her house. The construction was completed in August 2017 and Mia moved in in September 2017.
Her previous house was sold for $360,000 in 2017, with the contract being signed in June 2017 and settlement occurring in October 2017. Her prior home was a Victorian era weatherboard situated on a 5-acre block overlooking the Yarrowee River, which she had purchased 10 years ago for $145,000, on 1 July 2007. Mia had lived in the house since 1 July 2010. It had remained unoccupied in the years beforehand whilst Mia undertook renovations. In total, Mia spent $45,000 on renovations.
Stella helped Mia clean up her old house before selling it, including making several trips to the tip and Salvation Army removing rubbish and unwanted goods. Mia found an antique mirror that she had acquired from an antiques fair five years ago for $600. Given it did not suit the look of her new house, she offered it to Stella as a thank you gift for the assistance. It is now worth $1,500. After Mia had moved into her new house, Stella gave Mia a house warming gift. It was a piece of artwork valued at $550. Stella had originally purchased the piece for $300 at a local gallery event earlier that year. The artwork had been hanging in her lounge room. Once Mia moved in, she set up a separate room to organize her organic goods and equipment.
Advise Stella and Mia on the taxation issues arising from the above fact situation. Reference should be made to appropriate legislation, case law and rulings.