Taxation Law: Depreciation, Deductions, Legal Expenses, and Donations

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
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1TAXATION LAW
Table of Contents
Answer to question 2:.................................................................................................................2
Answer to 1:...........................................................................................................................2
Answer to 2:...........................................................................................................................3
Answer to 3:...........................................................................................................................4
Answer to 4:...........................................................................................................................5
Answer to 5:...........................................................................................................................6
References:.................................................................................................................................8

2TAXATION LAW
Answer to question 2:
Answer to 1:
According to the “section 40-25 of the ITAA 1997” decline in value of the
depreciating asset begins from the time when the company employs the asset first time or has
fixed the asset as ready for use. Under “section 40-65 of the ITAA 1997”, an entity can chose
to compute the decline in value of the depreciating asset by using either the diminishing
method under “section 40-72” or by using the prime cost process under “section 40-75 of
the ITAA 1997”1. With respect to “section 40-25 (2) of the ITAA 1997” the taxpayers are
required to reduce their deduction up to a portion of the assets decline in value that are
attributable to the asset usage for an objective other than the assessable objective.
The company here purchased Mercedes Benz motor vehicle and used the car 72% for
work purpose. To ascertain the depreciating amount of car the diminishing value and prime
cost method has been considered.
Prime Cost Method:
Formula: Asset Cost x Days Held / 365 x 100% / Effective Life
1 Barkoczy, Stephen, Australian Tax Casebook 2018 14E Ebook (OUPANZ, 2018)