Taxation Law: Allowable Deductions and Prohibitions

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question A:................................................................................................................2
Answer to question B:................................................................................................................2
Answer to question C:................................................................................................................3
Answer to question D:................................................................................................................4
Answer to question E:................................................................................................................4
Answer to question 2:.................................................................................................................4
Answer to question A:................................................................................................................4
Answer to question B:................................................................................................................4
Answer to question C:................................................................................................................5
Answer to question D:................................................................................................................5
Answer to question E:................................................................................................................5
Reference List:...........................................................................................................................6

2TAXATION LAW
Answer to question 1:
Answer to question A:
As stated under the “section 25-10 of the ITAA 1997” a person can claim allowable
deductions for the expenses that are occurred relating to repairs on the premises or any form
of depreciating assets that is held by them for producing income. Repairs that are performed
just after acquiring the property is regarded as initial repair. It means that the property was
not in better conditions when purchase or was not suitable for using in income generating
activities as they way intended. The court of law in “W Thomas and Co Pty Ltd v FCT
(1965)” held that the cost that is incurred by the taxpayer for the purpose of repairing and
repainting the building in the year when it was bought were held as capital expenses which
was not allowed for deductions(Woellner et al., 2016). Similarly in case of Bhavraj the
expenses occurred in repainting the building is regarded as initial repair and the expenses
occurred is capital expense which is non-allowable deductions.
Answer to question B:
As stated in “division 40-25 (1) of the ITAA 1997” a taxpayer is allowed to claim
deductions relating to the amount which is equal to the “decline in value” of the depreciating
asset held by the taxpayer throughout the year (Barkoczy, 2016). Similarly in the situation of
Bhavraj a new system of oven was installed that costs $10,000. Bhavraj also incurred
additional expenditure of $1,000 in relation to transportation and further $1000 for
installation purpose. Based on the rules of simpler rules of depreciation for small entity a
taxpayer is permitted to immediately write off the entire cost of asset during the year in which
it was bought given the cost of the asset is lower than $20,000. The cost of assets also
comprises of the cost of transportation and the installation costs. As evident in the situation of
Bhavraj the cost that is incurred in the purchase of new oven can be depreciated by using the