Deductibility/ Non deductibility of Taxable income

TAXATION

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
QUESTION 1..................................................................................................................................1
Deductibility/ Non deductibility of Taxable income...................................................................1
QUESTION 2..................................................................................................................................3
Tax liability of Tom for the year 2019-20...................................................................................3
REFERENCES................................................................................................................................7

QUESTION 1
Deductibility/ Non deductibility of Taxable income
In this question Francis is experienced working businessman in hospitality industry for
number of years. Commercial kitchen in restaurant were in poor condition. He is planning to
replace whole commercial kitchen which will be costing $23000. Cost of the repairing and
kitchen appliances will be $4900, however some parts are not available in market anymore as
appliances are obsolete and old. Francis decides of replacing commercial kitchen with new
modern appliances as there are new appliance in market having better features and the durability.
Since Francis is running restaurant business and kitchen in the restaurant is considered as
part of the commercial properties that is used for producing assessable income. There are
provisions regarding the amount and nature of expenses that could be claimed under the
deductions (Aquilina, 2019). For claiming the deduction it is essential to identify the nature of
transaction that whether it is a deductible regular expense of capital expenditure. Replacing
whole commercial kitchen will be classified as capital work expenditure.
Tax payer can claim deduction for the capital expenditures incurred for producing assessable
income such as building and structural improvements are written off as capital expenditures. Any
individual could claim deduction for building, extensions or the improvements, alteration to
building including leasehold improvements and such other. if it is not possible to reliably
determine the cost of construction, estimate from independent qualified person. Australian
taxation office allows the publicans and hoteliers & publicans for claiming capital allowances for
wear and tear over the time of building and depreciation of plant and equipments over time.
There are many publican that lose significant amount of money and many dollars for the tax
deductions as not effectively accounting for removal and disposal of the building & assets when
the properties are upgraded
People are claiming deductions over the renovation of properties and commercial premises.
In the hospitality industry kitchen is considered as the part of income producing unit. The assets
used in kitchen are capital assets therefore the tax deductions are available to the businessman in
the form of depreciation (McGregor-Lowndes and Hannah, 2017). Australian taxation office
provides for owners of the income producing properties for claiming deductions of natural wear
and tear which occurs to the building or commercial premises. Depreciation on structure of
building through capital work deductions.
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