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1. The taxpayer is a large insurance company which offers insurance for a wide range of business and household risks. During the current tax year, they made a lump sum payment of $13,000 to the Victorian Housing Commission to be the preferred home insurance provider for the residents of commission houses providing a discount of 10%. The Housing Commission promoted this insurance provider to the tenants but they were free to purchase insurance from other insurance providers. Consider whether the $13,000 is deductible under s 8-1.
2. Joan purchased an investment property to rent out for residential purposes. Immediately after purchasing the property, she discovered that there was dry rot in the bathroom (it had been there for years) which had to be repaired at a cost of $1,200. Before the first tenants moved in Joan showed the property to her family and her young son smashed a window with his football (cost $400 to replace). Consider the deductibility of these two expenses.
3. Gillian (not a small business entity) has owned and operated a clothing retail store for the past 15 years from the same premises. During the current tax year, she incurred the following expenses for her business (2 marks each):
A new computer purchased on 1 Jan 2016 with and effective life of 3 years. She estimates that the computer is used 10% for private purposes.
$2,000
Business advice on whether she should expand her business and form a company to launch her own clothing label.
$3,000
What is the largest possible deduction for the current tax year?
