Posted: April 15th, 2015

Taxation Law Hypothetical Assessment

Taxation Law Hypothetical Assessment

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Hypothetical Assessment

Zac Smith commenced a digital printing service business in 2009. The printing service includes printing brochures, flyers, business cards, magazines and invitations. Zac runs his business from a warehouse he owns in Moorooka.

Zac seeks your advice as to whether he might be able to claim any tax deductions for the following expenses for the year ended 30 June 2015:

Note that all answers are to be supported with reference to the appropriate law and may be further supported with reference to paragraphs in relevant tax rulings.

Question1
Even though the bitumen floor in the warehouse was fine when Zac purchased the property back in 2009, the floor had deteriorated with use over the years and was in need of repair. Despite the cost of installation and maintenance of a concrete floor being more than that of a bitumen floor, Zac decided to have the bitumen floor in the warehouse replaced with a new concrete floor as he preferred the appearance of concrete. Hence on 6 September 2014 Zac had the warehouse floor replaced with a new concrete floor at a cost of $5,000.

REPLACEMENT OF THE WAREHOUSE FLOOR

Question2
As his printing business had grown over the years, Zac ordered and paid for an additional commercial printing press on 2 March 2015 at a cost of $84,000. The wide web flexographic press was delivered on 20 March 2015.  Zac was also charged $300 for transportation, $200 for transit insurance and $500 for installation. When the technician attempted to install the machine on 23 March 2015, she found that a part was missing, which had to be ordered from overseas. The new part arrived on 17 April 2015. The technician installed the missing part and programmed the press ready for use on 21 April 2015.

PURCHASE OF THE NEW COMMERCIAL PRINTING PRESS

Question3
To help fund the cost of the new press Zac took out a business loan of $50,000 on 1 March 2015 for 3 years. Zac knows that the interest payable on the loan is tax deductible, but he is not sure as to whether he can claim a tax deduction for the $1,200 in legal fees, loan charges and stamp duty he paid in relation to the loan.

BUSINESS LOAN COSTS

IRAC METHOOD

Issue:

Law:

Application: