ACFI3004 TAXATION

Assignment Task One - (1,000 words - 15 Marks)

Sinbad is an Australian resident for taxation purposes who has operated a successful commercial fishing business for several years. He owns and operates a large fishing boat, the SS MummCrab, catching squid off the Darwin coast for export to Singapore.

While out fishing earlier this year, Sinbad received a radio distress call from an oil tanker that was floundering in large seas. The tanker’s engine had failed and it was drifting perilously close to the Timor Sea Marine Park. Sinbad immediately sailed to the location and successfully attached a towline to the stricken boat. Through brilliant seamanship he was able to hold the tanker just meters from the reef until help arrived. Unfortunately, after releasing the tanker, Sinbad’s boat (SS MummCrab) was driven on the reef and sunk. Sinbad was rescued from the water and hailed a hero for averting an environmental disaster.

Sinbad’s exploits where acknowledge by a government bravery award and received international media attention. In May 2022 he signed an exclusive deal with an Australian television company for his story and received $76,000 for a series of interviews. In addition, the owner of the oil tanker, Mr Costopoulos, was so grateful to Sinbad he made him a gift of a gold bar worth $100,000. Sinbad also received a sum of $250,000 from his insurance company to cover the cost of his lost boat and an additional sum of $36,300 compensation for his squid catch that went down when the boat sunk.

Required

Sinbad has approached you, in your capacity as his tax adviser, to determine whether any of the above amounts received in relation to the rescue and loss of his boat will be assessable for income tax purposes.