Reference no: EM132731413

Mohamad bought his home in 2010 and commenced operating a business from his home. He has a large office which occupies 15% of the house. Mohammad does not own any other property. Mohammad estimates that 15% of his electricity and gas heating was used for the business in 2018-2019.

During each of the 2017-2018 and 2018-2019 financial years Mohammad had the following expenses in respect of the house:

Gas heating?????$ 750
Electricity?????$ 5,000
Rates and taxes????$ 3,000
Mortgage repayments
Interest?????$10,000
Capital repayments????$ 4,000

• On 1 July 2018 one of Mohammad's corporate clients unexpectedly made an offer to purchase the business for a good price. Included in the offer was ongoing employment for Mohammad and a workspace in the Adelaide office. Mohammad accepted the offer and immediately commenced his new role as an employee.

• While he worked in the Adelaide office most days, Mohammad continued to work from his home office two days each week. He estimates that 7% of his electricity and gas heating was running while he worked in his home office whilst undergoing his new employment.

Required:

Problem a) Advise Mohammad what expenses he can claim for the 2017-2018 financial year

• For 2017-2018
• He can claim for rates and taxes $3000 is deductible as you can claim a deduction for additional running expenses you incur when you work from home as it is incurred during carrying in the business under section s8-1.
• Interest expenses of $10,000 is deductible under s8-1 of ITAA 1997 as it has suffiecient connection to the production of asseible income or gain than .

Problem b) Advise Mohammad what expenses he can claim for the 2018-2019 financial year (7 marks

Problem c) Assume that instead of selling his business Mohammad sold his house on 1 July 2019, making a capital gain of $100,000. Would all of that gain be assessable? Why or why not?