Question

A taxpayer purchased land at a cost of $520,000 and constructed new legal offices costing $1,300,000.

He paid this construction expenditure on 9 November 2019 and commenced using the building from that date.

What amount can the taxpayer claim as a tax deduction (to the nearest $1) in the year ended 30 June 2020 under Div 43 ITAA97?

Select one:

a. $1.82m

b. $1.3m

c. $20,867

d. $19,233

Answer 1

Land cost	520000
Construction cost	1300000
Tax deduction to be claimed
Division 43 of the ITAA 1997 provides for deducting capital expenditure incurred in construction of building and other capital works
Construction expenditure does not include land
Different deduction rates apply based on date of construction, type of work and manner of use
It is either 2.5% or 4%
Here our construction fass under other commmercial construction whose rate is 2.5%
NO of days put to use in a year
From	09-11-2019
To	30-06-2020
Days	234
Total amount of deduction for the year	=1300000*2.5%
	32500
For no of days put to use	=32500/365*234
	20867

Ans C 20867