Question

John owns a convenience shop called City Conv. The following events occurred for John during 2019- 2020 financial year.

(i) John incurred legal expenses as he was sued for false advertising.

(ii) John purchased new fridge to the shop - $800. In addition, his builder added more space to the

shop front. This cost him $22,000.

(iii) John ordered 1000 new T-shirts with printed City Conv’s logos for marketing purposes. These costs

him $1,500.

(iv) John received a City of Sydney fine for putting his sales item for display outside his shop without

a permit. He required to apply for a permit to use the footpath.

Required:

With reference to relevant legislation and case law advise John on the assessability and/or deductibility of above events.

please provide solution according to australian legislation.with relevent case law

Answer 1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

Assesability and deductability of mentioned cases according to Australia Tax laws for FY 2019-20:

John paid legal expenses for the false advertisement he made i.e because of the ignorance he made. This is not permitted as expenditure for deduction while calculating tax, as this is because of non complying of Concerened penalty of Law or Rules.

For the refrigerator that John has purchased, the refreigerator satisfies the fixed assets defintiion criteria. The depreciation rate should be applied at the rate prescribed by the income tax of Australia on 800$.

For the space added infront of the office. After the addition the value of the shop is increased to 22,000$. The same cost should be added to the existing shop value. The total amount should be amounted as Written down value.

For the expenditure incurred for purchasing of 1,000 T-Shirts costing 1,500 $ would be allowed as expenditure for deduction Because advertisemnt expenditure considered to be normal course of business.

City of Sydney fine expenditue would not be considered for deducting while calculating Tax as it is penalty for doing against Concerned penalty Law or Rules.