Stuart is a self employed architect and during the school holidays each year he has his 14 year old son come into his offices to empty the rubbish bins and do some general tidying. For this work the son was paid $20,000. The ATO has recently reviewed Stuart's business claims and determined that the reasonable amount for Stuart's son's services should only have been $2,000. Based on these facts, which of the following statements is true?

Question

Quizplus · Accepted Answer

The correct answer is C because section 26-35 of the Income Tax Assessment Act 1997 (ITAA97) specifically deals with excessive payments to associates. In this case, the payment to Stuart's son is considered excessive (beyond the reasonable amount of $2,000 for the work performed), and therefore, the excessive part ($18,000) is not deductible. Only the reasonable part of the payment ($2,000) can be claimed as a deduction.

Stuart Is a Self Employed Architect and During the School