Reference no: EM133051534

CLWM4100 Taxation Law - Kaplan Business School

Workshop 7 - Specific Deductions

Question 1
Refer to the link below. Bad debts s 25-35
In your own words, describe a bad debt for taxation purposes. Provide your own example.

Question 2
What is a loss for taxation purposes according to Division 36 of the ITAA (1997)?

Question 3
What is a depreciating asset? How is the purchase of a depreciating asset dealt with under the tax law?
What tax deductions are associated with depreciating assets? What are 2 key factors in determining the tax deduction available?

Question 4
What is trading stock? How is trading stock dealt with for tax purposes?

Questions during workshop

Question 1
Jack purchased business premises on October 5, 2020. Jack incurred the following expenses:

On October 8, 2020, Jack replaced 20 roof tiles at a cost of $800. Jack used steel roof tiles to replace the old clay roof tiles.
On December 24, 2020, Jacks replaced the petrol engine in his Mazda 3 with a new Turbo Diesel engine (fuel efficient and more power).
On January 24, 2021, Jack paid a gardener for a day's work at his business premises
$400. The gardener mowed the lawn and pruned the hedges.

On March 2, 2021, a bad storm damaged the carpets in the main office. The entire carpet was replaced at a cost of $8,700.
How much of these expenses can be claimed under Section 25-10 ITAA 97?

Question 2
Jane purchased a rental property on 1 September 2020 for $500,000. Tennant's occupied the house at the time of purchase. Jane provides you with the following information:
Jane took out a $400,000 loan with the NAB on 1 September 2020 for 25 years to fund the purchase. Interest paid for the financial year ending 30 June 2021 totalled $14,560.
Loan establishment fees of $5,200 were charged by the bank on 1 September 2020. What is the total deduction for the 2021 financial year? Please quote relevant sections.

Question 3
The following data relates to Gandalf Greyteeth, a resident taxpayer:

	2019/2020	2020/2021	2021/2022
Assessable income	$70,000	$65,000	$90,000
Net exempt income	$ 4,000	$2,000	$2,000
Deductions *	$83,000	$60,000	$89,000
Personal Superannuation contributions	$ 2,000	$2,000	$2,000
Gifts	-	$400	$800

*Note Deductions represents all deductions except superannuation, gifts and losses of previous years,

For each tax year, determine Gandalf's taxable income and any losses that may be carried forward.

Question 4
A machine used in a manufacturing business has an estimated effective life of 5 years was purchased on 1 January 2020 for $25,000 and sold on 21 March 2021 for
$12,500.
• Prepare the depreciation schedules for both the prime cost AND diminishing value methods.
• Calculate the assessable or deductible balancing adjustment.

Question 5
Lincoln is an Australian resident for the full year aged 30. He conducts a business as a sole trader as a video game designer and retailer. During the 2020/21 year he had trading stock purchases of $275 000.

The value of the opening stock on 1/7/20 was $72 200, and the closing stock on 30/6/21 was $92 300.

Calculate Lincoln's trading stock deduction.

Questions after workshop

Question 1
When does a repair turn into an improvement? What are the tax implications of an improvement?

Question 2
What is meant by "trading stock on hand"?

Question 3
Felicity is an accountant with Young and Ernst, a large firm of chartered accountants. For the year ended 30 June 2018, she has undertaken the following duties as part of her employment.

Trip 1 Felicity picks up the mail 5 days a week on the way to work.

Trip 2 Once at work, Felicity will travel to a client once a week to perform reconciliations on their MYOB file.

Trip 3 Young and Ernst have premises in the Sydney CBD and Parramatta. Felicity will travel between each office 2 times a week for training and other work-related duties.

Trip 4 Felicity carries a laptop to work 2 days per week. Felicity believes that the laptop is old and bulky and wishes to claim this journey.
Required:

Advise Felicity as to the deductibility of each item/trip above.

Attachment:- Specific Deductions.rar