Reference no: EM133051531

CLWM4100 Taxation Law - Kaplan Business School

Questions before workshop

Question 1
Do you think tax deductions are useful in the overall tax context? What would happen if no tax deductions were allowed?

Question 2
Jack receives his electricity bill on 20 June 2021. Assume that Jack uses the electricity to power his business 100%. (Why is this important?). The amount of $1,200 is due for payment on 10 July 2021. Jack pays his electricity bill on 2 July 2021.
When is the outgoing incurred?

Would your answer be the same if Jack was paying his car registration for the next 12 months? Why?

Question 3
Discuss whether the following would be deductible under Section 8-1 of the ITAA (1997):
• Internet bill dated 18 June 2021 for $200 where the taxpayer was able to establish a pattern of usage showing that it was used 100% for business.
• Mobile phone bill dated 8 June 2021 for $130. The phone was used for calling family members.
• ASIC fee invoice dated 12 June 2021 for $400 in respect of the registration of a new business name.

Question 4
Compare the deductibility of interest expenses in the following business phases:
1. During preparatory activities before activities could be said to commence
2. During the trading life of the business
3. After a business has ceased and the loan has not been paid out

Questions during workshop

Question 1
Would the following be deductible under section 8-1? Support your arguments by reference to the structure of s8-1 ITAA97.
1) The theft of the day's takings from the business premises of a taxpayer.

2) Day care expenses for the child of an employed solicitor, incurred in the pursuit of her career.
3) The cost of dog food for a cattle dog
4) Insurance premiums:
a.paid for personal disability insurance for loss of income producing capability b.paid for an income protection policy for loss of income
c. paid for fire insurance premiums in respect of business premises.

5) Lease payments on a shop where the business had ceased to trade but the lease did not expire for another 12 months.
6) Travel expenses incurred by a director of a company for the purpose of investigating export potential where:
a. There is no existing overseas market
b. There is a small existing overseas market and the director wishes to expand operations

7) The costs of meals incurred by a lecturer employee who is required to teach after hours.

8) The cost incurred by an employee accountant in buying a suit compliant with the employer's dress code worn to impress clients so they can gain more clients.

Question 2
Discuss whether the following outgoings would be allowed as a tax deduction.
• A police officer washes her police uniform.
• A school teacher wears a $200 pair of sunglasses whilst on playground duty.
• The cost incurred by an employee accountant in buying a suit compliant with the employer's dress code worn to impress clients, so they can gain more clients.

Question 3
Speculative Pty Ltd borrows $400 000 to purchase a block of flats for the purpose of renting them out. However, prior to tenanting the flats Speculative goes into liquidation and the property is sold for the purchase price.
Is Speculative entitled to deductions for interest paid on the loan as no rent was ever received? Would your answer differ if Speculative was in the business of building blocks of flats?

Question 4
Would the following be deductible under section 8-1?
• Legal expenses incurred by a hotel proprietor in opposing an application for a licence to open another hotel in the area.

Questions after workshop

Question 1
Explain why a tax offset is a much more effective way than tax deductions to reduce an overall tax bill

Question 2
Discuss the following comment
The source of the funds rather than the use the funds are put to determine whether the interest paid on a loan is tax deductible. As a result, it is only possible to claim interest deductions on loans from banks as they are in the business of making loans.

Question 3
Explain why the interest paid on a loan to purchase a vacant block of land is not tax deductible and must be included in the cost base, whereas interest on a loan to purchase a rental is deductible and cannot be included in the cost base.

Attachment:- General Deductions.rar