Business Laws - Sample Assignment PDF

Running Head: BUSINESS LAW
Business Law
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Name of the University:
Author Note

1BUSINESS LAW
Answer 1
Provisions in relation to deductions are provided under the provisions of SECT 8-1 of the
INCOME TAX ASSESSMENT ACT 1997. It has been stated by the section that an expense or
loss which has been generated for the purpose getting the assessable income is deductible. In the
case of Herald and Weekly Times Ltd v FCT the court held that the legal fees which had been
incurred in relation to defending a claim for defamation by a newspaper company are deductible.
This is because the defamation was related to a publication used to gain assessable income. Thus
in the present case the legal expenses incurred by Paper co for defending the criminal claim
which was related to the way in which they get their assessable income is will also be deductible
Answer 2
1. As per section 110-25(4) of the ITAA any cost of maintaining or repairing a property is
the third element of cost base. thus the repair of the pipeline would be cost base even if
the property is rented out.
2. 110-25(3) of the ITAA 97 makes it the second element of cost base as the fees paid to the
auctioneer in the given situation is an incidental expense.
3. Under the provisions of s. 110-55(1) this would not be a cost base as there is a loss in the
given situation and element 3 which is the cost of ownership is not included in the
reduced cost base.
4. The Cost of acquiring in the given situation would be $400 000 as per the market value
and under 110-25(2) it would be a cost base.

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Answer 3
The total proceeds is 640000 as along with the sale price of 600000 Claude received a boat worth
$40000 and as per section 116.20(1) The capital proceeds are Money received and market value
of any form of property which is received against the sale. Here Claude chooses flat 50%
deduction rather than indexation. The following is the capital gain which she has got.
Proceeds $ $
CGT Event A1 section 116-30
(Sale)
600000
Boat Received 40000
Net Capital Proceeds 640000
Cost Base section 110-25
first element (purchase
price)
300000
second element (Legal
cost)
12000
Net Cost Base 312000
Capital Gain (Net Capital Proceeds -Net
Cost Base)
328000
Less 50% as property purchased before
21/9/1999
164000
Total Capital 164000

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Gain
Answer 4
Under section 40-25 of ITAA 97 a deduction can be claimed against the value of declining assets
which are used for producing an assessable income. The Diminishing value depreciation method
has been used to calculate the depreciation in this case under section 40-70.
Diminishing value depreciation section 40-70
Particulars Amount ($)
Base value of projector $ 8,000.00
Total depreciation
(8000)*(61/365)*(200%/6)
$ 445.66
Total use of asset for private purpose
(10%)
$ 44.57
Total deductible depreciation $ 401.10
Prime cost depreciation section 40-75
Particulars Amount ($)
Cost of projector $ 8,000.00
Total depreciation
(8000)*(61/365)*(100%/6)
$222.83

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Total use of asset for private purpose
(10%)
$ 22.28
Total deductible depreciation $200.55
Thus the maximum value of deductible depreciation is $ 401.10 under Diminishing value
depreciation
Answer 5
1. Cost of a golf club membership incurred by an accountant who likes to take clients to
play golf each Friday would not be a deductible expense as it not in the course of gaining
the assessable income under Section 8-1
2. in this case the travel expenses would be deductible as the expenses had been gained in
course of business satisfying the first limb of the section Section 8-1 and not triggering
any negative limb.
3. In the given situation the expenses would not be deductible under the provisions of 26-10
ITAA97 untill the payment is actually not made as also discussed in Nilsen Development
Laboratories P/L v FCT (1981) 144 CLR 616
4. Borrowing expenses will be deductible under s 8-1.
Answer 6
Under section s. 116-20 the capital proceeds includes the amount which has received in relation
to the sale of capital asset or which is entitled to be received. Further it has been stated through
the provisions of S116-30 of the ITAA 97 that only when no money is received the market value

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of the property is considered capital proceeds. Under s.110-25 acquisition cost is the cost base.
The following is the net capital gain of Lucy
Particulars Amount Amount
capital proceeds $
600,000.00
cost base
element 1 (Acquisition cost not market
value)
$
450,000.00
element 2 (expenses for advertising house) $
3,000.00
Total Cost Base $
453,000.00
Net Capital gain $
147,000.00
Answer 7
In the given situation it can be stated that the lump sum payment of $50 000 to the Victorian
Government made by the taxpayer would be deductible. This is because the expenses satisfy the
first limb of section 8-1 of the ITAA 97 as it is in course if gaining the assessable Income and
also it does not fall within any of the negative limb of the section. The expenses have been
purely incurred in this case for business purpose. These expenses cannot be considered to be that

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of a capital nature as they have been made only for two years. Here the government provided
discount to the users of the services and thus it will help for gaining the business income.
Answer 8
1. In the given situation CGT event C1 has taken place under section s 104-20(1). Here any
compensation which has been received is will be treated as the capital proceeds under s
116 – 20(1). Thus in the given situation where the factory owned was destroyed by fire
and the tax payer received $500 000 as insurance the capital proceed will be $500 000.
Thus when the capital proceeds are deducted by the cost of base of $200 000 there would
be a capital gain of $300000. There would be no 50% discount or indexation as the
property had been purchased after 21 sep 1999
2. Yes in the given situation the $120 000 would be treated as a capital gain as similar facts
had been discussed in the case of In Hepples v FCT (1991) 22 ATR 465
Answer 9
Under section 8.1 only expenses which have been incurred in the course of attaining the
assessable income are to be deducted, any expenses which is incurred for private use are not
deducted, where the expenses are not for both private and work use they are apportioned. In the
given situation the internet cost which is borne for business use of $1000 will be deducted. The
interest on mortgage of $4 000 will be only deducted by 10% as only 10% house is used for
office use. In addition the fees paid to the accountant will be deductible as they are used to gain
the business income.
Answer 10

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PARTICULARS AMOUN
T
AMOUN
T
Capital Proceeds for
house
$
700,000.0
0
cost base
Element 1 (Acquisition) $
500,000.0
0
Capital gain $
200,000.0
0
capital proceeds for
shares
$
25,000.00
cost base
element 1 (Acquisition) $
50,000.00
Capital loss $
25,000.00