Question

Debbie's DeLoreans is a business taxpayer in Victoria that specialises in the sale of antique DeLorean cars. During the 2019/20 income year, Debbie incurred various expenses which she hopes to claim as business deductions. Required: Analyse whether the following outgoings are allowable deductions (You must refer to law. Theory only) 1. Debbie runs her business from home (her main residence). Her garage, which takes up 20% of the total floor area, has been converted into a workshop and sales yard and used exclusively for business purposes. Debbie spent $5,000 on rent, home loan interest, council rates and home insurance. She also spent $5,000 on various running expenses such as heating, air conditioning, electricity, phone and internet. (2 marks) 2. Debbie spent $500 on grease remover, steel cap boots and sandwiches for lunch. (4 marks) 3. Finally, she spent $5,000 on legal fees, incurred to defend her business in court after calling her main business competitor a "crook and fraudster" in a recent edition of Classic Cars Magazine. (4 marks)

Answer 1

Point No.1-

Debbie running business from home, As per Law :

• if the expense is for a mix of business and private use, you can only claim the portion that is used for your business

Description	Amount
Rate,Home Loan Interest,Council rates & Home Insurance	$5,000
Heating, Air conditioning, Electricity, Phone and Internet	$5,000
Total	$10,000
Area Used for Business Purpose is 20% of Total Floor Area, Allowable deduction is 20 % only	$2,000

Point No.2

Description	Amount
Grease Remover, Steel cap boots & Sandwiches for Lunch	$500
Total	$500
In above Case, Grease Remover & Steel Cap boots must be buy for business Purpose, because for Private purpose this thing is not usable, so as per law Grease Remover & Steel Cap boots expenses fully allowed for deduction, and in case Sandwiches, As per law taxpayer can get 50% deductions on Meals & Entertainment, in this case bifuracation of expenses not provided, so we can assume equal amount spend on each expenses i.e. 166.67 $, so she can get Total deduction of $ 416.67 (166.67+166.67+83.33)	$417

Point No.3

Description	Amount
Legal Fess	$5,000
Total	$5,000
As per Law,Legal fees are tax-deductible if the fees are incurred for business matters. In Debbie's Case Fees paid for defend her business in Court. So she can get 100% Deduction in this Case.	$5,000

So she can get Total Deduction of $ 7417.