Question 1

Steel Pty Ltd, an Australian public company, has provided you with the following information for the 2019-20 tax year, so that you can advise the company accountant of its entitlement to any deductions. The company uses accrual accounting for income recognition.
Estimated bad debts, $5000
Provision for doubtful debts, $1,000
Debts written off during the year, $4,000
One years advertising paid on 1 January 2020 to a magazine $20,000.
The total allowable deduction for Steel Pty Ltd based on these four transactions is

Accepted Answer

The total allowable deduction is $14,000. This is calculated as follows:Bad debts expense = Estimated bad debts - Provision for doubtful debts = $5,000 - $1,000 = $4,000Advertising expense = $20,000 / 2 = $10,000Total allowable deduction = $4,000 + $10,000 = $14,000

Question 2

On 1 July 2019 Max Gawn borrowed $50,000 from an International Bank for use in his business. Max incurred legal and accounting expenses of $2,000 in arranging the ten-year loan.
Which of the following statements is correct with regards to the Max's potential for an allowable deduction with regards to the costs of borrowing?

Accepted Answer

B

Question 3

Rosemary Peters is a sales representative for a curtain manufacturer. As part of her employment duties she leased a vehicle to travel to her customer's homes. Rosemary kept a log book which indicated that she travelled a total of 30,000 kilometres during the year the 2019-20 tax, of which 22,000 were for visiting her customers.
During the year Rosemary incurred the following expenses in relation to her vehicle:
Registration and Insurance $1,500
Petrol $4,500
Servicing the vehicle $900
Lease expenses $15,000
Parking fines $200
Based on the above information, Rosemary's entitlement to a tax deduction for her car expenses for the 2019-20 tax year (rounded to nearest dollar) is;

Accepted Answer

D

Question 4

Paul Jones owns a rental property and incurred the following expenses in the 2019-20 tax year. Which of the items can he claim as a deduction under s25-10?
1 - Repainting the property before the first tenant moved in $6,000
2 - Replacing a valve in the hot water system after a tenant has left the property $300
3 - Replacing the tiled roof after owning the property for three years as a result of storm damage $8,000
4 - Putting in a new concrete driveway to the property after owning the property for 12 months $10000

Accepted Answer

The answer of Paul Jones owns a rental property and...

Question 5

Susan Ross paid the following amounts to her registered tax agent.
How much can she deduct under ITAA97 s25-5?
1 - Lodgement of her own income tax return $900
2 - Obtaining FBT advice $400
3 - Income tax advice on creating a partnership with her husband $1,000
4 - Objecting to the ATO regarding an expense that they disallowed in her income tax return $700

Accepted Answer

Under ITAA97 s25-5, expenses incurred in managing or complying with tax obligations, such as the lodgement of an income tax return (Item 1) and objecting to the ATO regarding a disallowed expense (Item 4), are deductible.

Question 6

Adrian Brown is a carer who is required to visit various clients at their homes. As part of his employment duties he purchased a vehicle to travel to his various client homes. Adrian did not keep a log book but he kept a diary which showed that he travelled a total of 6,300 kilometres in travel between client homes that related to visiting clients at their various homes during the 2019-20 year of tax. He is not claiming any travel from his home to the first client or from the last client to his home.
During the year Adrian incurred the following expenses (before any adjustment for work use) in relation to his vehicle:
Registration and Insurance $1,400
Petrol $2,500
Servicing the vehicle $600
Interest on the car loan $5,000
Depreciation on the vehicle $6,000
Adrian estimates that his overall work-travel would have been 60% if he had kept a log book. Based on the above information, Adrian's entitlement to a tax deduction for his car expenses for the 2019-20 tax year (rounded to nearest dollar) is;

Accepted Answer

The answer of Adrian Brown is a carer who is...

Question 7

BGL Pty Ltd recently replaced the engine in one of its boats, used for charter boat tours, with a much larger (1/3^rd larger) more fuel efficient engine. Is this cost likely to be deductible as a repair expense under section 25-10 ITAA97?

Accepted Answer

The replacement of the engine with a much larger and more fuel-efficient engine would likely be considered an improvement rather than a repair, making the costs non-deductible under section 25-10 of the ITAA97.

Question 8

Neil owns a rental property and during the year ended 30 June 2020 he spent $1,500 fixing up holes in the walls after the previous tenants damaged some of the walls in the rental property. Which of the following statements is most correct?

Accepted Answer

The costs for fixing up holes in the walls after tenant damage would be considered repairs, which are typically deductible under s25-10 of the Income Tax Assessment Act 1997 (ITAA97) as they are expenses incurred in maintaining the property to generate income. While they could also potentially be deductible under the general deduction provisions of s8-1 ITAA97, when a specific provision (like s25-10 for repairs) applies, it is the specific provision that is used for the deduction.

Question 9

Eve saw her accountant for advice in March 2020 and paid him $300 for that advice and she then saw her accountant again in May 2020 and paid him $400 for assistance in preparing and lodging her 2019 tax return. Which of the following statements is correct?

Accepted Answer

Eve can claim the total $700 for tax-related expenses in her 2020 tax return because both the $300 for advice and the $400 for assistance in preparing and lodging her 2019 tax return are considered deductible tax-related expenses.

Question 10

Ken purchased 10 tickets for $100 in the RSL lottery recently. Can Ken claim any or all of the $100 paid to the RSL under Division 30 ITAA97?

Accepted Answer

No deduction is claimable under Division 30 ITAA97 for lottery tickets purchased from charities like the RSL because the purchaser receives a material benefit (the chance to win a prize) in return for their payment, which does not qualify as a gift or donation under the tax law.

Question 11

Lina has spent $340 on clothing recently and she has kept all her receipts and she wants to know if any of this expense is an allowable deduction. The clothing represents a non-compulsory uniform but one which the employer has not as yet registered the design on theRegister of Approved Occupational Clothing. Which one of the following statements is correct regarding Lina's entitlement to claim a deduction for this clothing purchase?

Accepted Answer

No deduction is allowable for this clothing purchase because for a non-compulsory uniform to be deductible, the employer must have the design registered on the Register of Approved Occupational Clothing, which has not been done in this case.

Question 12

In the 2020 tax year, Andrew derived $60,000 in assessable income but had deductions of $90,000. If Andrew also derived $20,000 of exempt income, what would Andrew's tax loss be for the 2020 tax year?

Accepted Answer

The answer of In the 2020 tax year, Andrew derived...

Question 13

Hari started up a new business this year selling old vinyl records. For the year ended 30 June 2020, Hari advises that his total sales were $18,000 and his expenses were $25,000. Hari rents a small shop in an outer suburb of Adelaide and the market value of that shop was $400,000. What is Hari's taxable income for the year ended 30 June 2020?

Accepted Answer

Hari's taxable income is $0 because his expenses ($25,000) exceed his sales ($18,000). The deferred non-commercial loss is $7,000, which is the amount of the loss that cannot be claimed as a deduction against other income in the current year.

Question 14

Michael is a lawyer for a large national law firm. His employer requires him to wear expensive latest style business suits to work. Michael would not normally purchase such expensive suits and he does not wear them privately. Which of the following statements is true?

Accepted Answer

No deduction is allowable for Michael's clothing purchases of expensive suits because the IRS does not allow deductions for clothing that can be worn outside of work, even if an employer requires it and it is not worn outside of work.

Question 15

Which one of the following statements is true?

Accepted Answer

Travel between two different work places is generally deductible if you are traveling for work-related purposes. This is because the travel is seen as a necessary expense incurred in the course of performing one's job duties. However, commuting from home to work (or vice versa) is typically considered a personal expense and is not deductible.

Question 16

Doris is an employee and of recent times she has been required to work from home. Which type of expenses can Doris claim (as long as she keeps appropriate records)?

Accepted Answer

A portion of home running expenses like electricity, gas, and costs related to depreciable assets can often be claimed when working from home, provided appropriate records are kept. Expenses directly related to the work portion of the home are typically claimable, unlike most home occupancy expenses (like council rates, water rates, home insurance, and mortgage interest) which are generally not claimable by employees working from home.

Question 17

Tina is employed as a junior accountant and she wants to progress in the accounting firm she works for and so she has undertaken the first year of her Bachelor of Commerce degree. He employer has encouraged her to study and supports her with some paid time off for her revision and exams. The study is likely to lead to a promotion. During the year ended 30 June 2020, Tina has spent $3,000 on course fees (not HELP) and $400 on textbooks. What amount can Tina claim for her self-education expenses in the year ended 30 June 2020?

Accepted Answer

The answer of Tina is employed as a junior accountant...

Question 18

Tom is a junior barrister and during the tax year 2020 he has spent $2,000 on his barrister's gowns. Tom has also spent $1,000 on two suits that he wears when he sees clients. What amount of clothing expenditure is Tom likely to be able to claim for the year ended 30 June 2020?

Accepted Answer

Tom is likely to be able to claim $2,000 for his barrister's gowns as they are specific to his profession and required for his work. The suits, however, are not specific to his profession and are considered general clothing, so their cost is not deductible.

Question 19

Ron is a farmer and the year ended 30 June 2020 has been a bad one for his farm as he made a loss of $80,000 (on sales of $60,000). During the year Ron also worked part-time at a clothing store in the town to help supplement his income. Ron was paid $30,000 in gross wages for that part-time work. What would Ron's taxable income be for the year ended 30 June 2020?

Accepted Answer

Ron's taxable income would be a ($50,000) loss because his part-time wages of $30,000 would offset part of his $80,000 loss from farming, resulting in a net loss of $50,000. There would be no deferred non-commercial loss because all income and losses have been accounted for in this calculation.

Question 20

Travis had assessable income of $40,000 and deductions of $65,000 and he also derived $10,000 in exempt income in the year ended 30 June 2020. If in the deductions of $65,000, there was a donation of $5,000, what would Travis's tax loss be for the 2020 tax year?

Accepted Answer

The answer of Travis had assessable income of $40,000 and...

Quiz 7: Specific Deductions Andapplications Ofdeductibility

BGL Pty Ltd recently replaced the engine in one of its boats, used for charter boat tours, with a much larger (1/3^rd larger) more fuel efficient engine. Is this cost likely to be deductible as a repair expense under section 25-10 ITAA97?

Neil owns a rental property and during the year ended 30 June 2020 he spent $1,500 fixing up holes in the walls after the previous tenants damaged some of the walls in the rental property. Which of the following statements is most correct?

Eve saw her accountant for advice in March 2020 and paid him $300 for that advice and she then saw her accountant again in May 2020 and paid him $400 for assistance in preparing and lodging her 2019 tax return. Which of the following statements is correct?

Ken purchased 10 tickets for $100 in the RSL lottery recently. Can Ken claim any or all of the $100 paid to the RSL under Division 30 ITAA97?

In the 2020 tax year, Andrew derived $60,000 in assessable income but had deductions of $90,000. If Andrew also derived $20,000 of exempt income, what would Andrew's tax loss be for the 2020 tax year?

Michael is a lawyer for a large national law firm. His employer requires him to wear expensive latest style business suits to work. Michael would not normally purchase such expensive suits and he does not wear them privately. Which of the following statements is true?

Which one of the following statements is true?

Doris is an employee and of recent times she has been required to work from home. Which type of expenses can Doris claim (as long as she keeps appropriate records) ?

Tom is a junior barrister and during the tax year 2020 he has spent $2,000 on his barrister's gowns. Tom has also spent $1,000 on two suits that he wears when he sees clients. What amount of clothing expenditure is Tom likely to be able to claim for the year ended 30 June 2020?

Travis had assessable income of $40,000 and deductions of $65,000 and he also derived $10,000 in exempt income in the year ended 30 June 2020. If in the deductions of $65,000, there was a donation of $5,000, what would Travis's tax loss be for the 2020 tax year?

Quiz 7: Specific Deductions Andapplications Ofdeductibility

BGL Pty Ltd recently replaced the engine in one of its boats, used for charter boat tours, with a much larger (1/3rd larger) more fuel efficient engine. Is this cost likely to be deductible as a repair expense under section 25-10 ITAA97?

Neil owns a rental property and during the year ended 30 June 2020 he spent $1,500 fixing up holes in the walls after the previous tenants damaged some of the walls in the rental property. Which of the following statements is most correct?

Eve saw her accountant for advice in March 2020 and paid him $300 for that advice and she then saw her accountant again in May 2020 and paid him $400 for assistance in preparing and lodging her 2019 tax return. Which of the following statements is correct?

Ken purchased 10 tickets for $100 in the RSL lottery recently. Can Ken claim any or all of the $100 paid to the RSL under Division 30 ITAA97?

In the 2020 tax year, Andrew derived $60,000 in assessable income but had deductions of $90,000. If Andrew also derived $20,000 of exempt income, what would Andrew's tax loss be for the 2020 tax year?

Michael is a lawyer for a large national law firm. His employer requires him to wear expensive latest style business suits to work. Michael would not normally purchase such expensive suits and he does not wear them privately. Which of the following statements is true?

Which one of the following statements is true?

Doris is an employee and of recent times she has been required to work from home. Which type of expenses can Doris claim (as long as she keeps appropriate records) ?

Tom is a junior barrister and during the tax year 2020 he has spent $2,000 on his barrister's gowns. Tom has also spent $1,000 on two suits that he wears when he sees clients. What amount of clothing expenditure is Tom likely to be able to claim for the year ended 30 June 2020?

Travis had assessable income of $40,000 and deductions of $65,000 and he also derived $10,000 in exempt income in the year ended 30 June 2020. If in the deductions of $65,000, there was a donation of $5,000, what would Travis's tax loss be for the 2020 tax year?

BGL Pty Ltd recently replaced the engine in one of its boats, used for charter boat tours, with a much larger (1/3^rd larger) more fuel efficient engine. Is this cost likely to be deductible as a repair expense under section 25-10 ITAA97?