These threads usually demonstrate, concisely, the surreal stupidity that is the Australian regulatory system.
The question may be designed to test you on what kinds of operations have to be authorised by an AOC.
The question may be designed to test you on what the obligations of an AOC holder, and pilots conducting operations authorised by that AOC, may be.
Either way, it's certain that neither you, nor the ATO conducting the test nor CASA will have the correct answer to either question. Plenty of strong opinions and folklore, but no correct answers.
I will demonstrate:
Bob owns a Cessna Caravan. He pays you $1,000 per day to fly him and his family around Australia. Do you have to hold a CPL to be PIC of the aircraft while engaged in that operation, and does that operation have to be authorised by an AOC?
Bob's neighbour decides he'd like to take himself and his family on the same round Australia tour, and pay you $1,000 to do be PIC of Bob's aircraft. Do you have to hold a CPL to be PIC of the aircraft while engaged in that operation, and does that operation have to be authorised by an AOC?
Bob also owns a cattle farm and a Cessna 172. He pays you $1,000 a day to muster cattle on Bob's farm, using Bob's Cessna 172. Do you have to hold a CPL to be PIC of the aircraft while engaged in that operation, and does that operation have to be authorised by an AOC?
Bob's neighbour would like to pay you to do some cattle mustering on the neighbour's property in Bob's Cessna 172. Bob's neighbour will pay you $1,000. Do you have to hold a CPL to be PIC of the aircraft while engaged in that operation, and does that operation have to be authorised by an AOC?
Bob also owns a Cessna 185. He charges tourists $1,000 per head for sightseeing flights over Brisbane, and pays you to fly the aircraft. Do you have to hold a CPL to be PIC of the aircraft while engaged in that operation, and does that operation have to be authorised by an AOC? Would your answer be different if the only passengers were Bob and his family? Bob then decides that he will sell tickets only to tourists (other than members of his family) who will jump out half way through the flight, strapped to an expert in tandem parachute jumps. Does that turn the operation into one that does not have to be authorised by an AOC or piloted by CPLs?
The examples of regulatory nonsense could go on for some time but I don't want to break your brain ...
Tip: Just ask the ATO what bull!!!! you need to sprout to get a tick in whatever box this part of the test deals with.