Question 1

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred after a business has ceased?

Accepted Answer

A)  Expenses incurred after a business has ceased can remain deductible as long as they relate to the time when the business was operating 
B)  Expenses incurred after a business has ceased cannot be deductible as they cannot be 'incurred' in carrying on a business 
C)  Only some expenses, such as interest on a business loan taken out whilst the business was operating, could remain deductible after a business has ceased 
D)  Expenses incurred after a business has ceased are specifically denied deductibility under Division 26 of ITAA97 
A)  Expenses incurred after a business has ceased can remain deductible as long as they relate to the time when the business was operating 
B)  Expenses incurred after a business has ceased cannot be deductible as they cannot be 'incurred' in carrying on a business 
C)  Only some expenses, such as interest on a business loan taken out whilst the business was operating, could remain deductible after a business has ceased 
D)  Expenses incurred after a business has ceased are specifically denied deductibility under Division 26 of ITAA97 A

Question 2

Top Quality Printers Pty Ltd purchased a new printing machine for $20,000 in May 2020. Is the purchase of this new printing machine deductible under section 8-1 ITAA97?

Accepted Answer

A)  Yes, as it would be an appropriate business expense as the machine will be used in carrying on a business 
B)  Yes but apportionment would apply and so only some of the expense would be deductible under section 8-1 ITAA97 
C)  No as it would be a capital expense 
D)  No as the expense would be private in nature 
A)  Yes, as it would be an appropriate business expense as the machine will be used in carrying on a business 
B)  Yes but apportionment would apply and so only some of the expense would be deductible under section 8-1 ITAA97 
C)  No as it would be a capital expense 
D)  No as the expense would be private in nature C

Question 3

Hari is currently working as a security guard and he works at various venues ensuring that patrons are able to enjoy a safe environment. His employer has advised him to eat more steaks and bread each week to 'beef up' so that he can have a more muscular body to help carry out his security duties even better. Is Hari likely to be able to be able to claim the extra cost of his food he is now required to spend each week because if his employer's direction?

Accepted Answer

A)  The expenses on food would be capital in nature and so no deduction would be allowed 
B)  The essential character of a food expense denies a deduction for food in these circumstances 
C)  The essential character of a food expense allows a deduction for food in these circumstances 
D)  Hari is not entitled to a deduction on food expenses as there is a specific provision in Division 26 that denies a deduction 
A)  The expenses on food would be capital in nature and so no deduction would be allowed 
B)  The essential character of a food expense denies a deduction for food in these circumstances 
C)  The essential character of a food expense allows a deduction for food in these circumstances 
D)  Hari is not entitled to a deduction on food expenses as there is a specific provision in Division 26 that denies a deduction B

Question 4

Don, who is not carrying on a business, contributed $2,500 to a local candidate in the SA elections in the last election campaign, which took place in the 2020 year. Don's friend, Alvin, contributed $3,000 to his local candidate in the same election as he was under the impression that his business would be able to claim the deduction in full. Advise both Don and Alvin as to whether they each can claim a deduction for their political contributions?

Accepted Answer

Section 26-22 ITAA97 denies a deduction

Question 5

Diego is an employee and he recently spent $5,000 on various work related expenses, for which has kept all the relevant receipts and which would all be deductible under section 8-1. However, Diego's employer offered to reimburse Diego for $3,000 of these costs and Diego accepted that generous offer. How much of the expenses incurred by Diego is he permitted to claim under section 8-1 ITAA97?

Accepted Answer

As all the expenses are work related exp

Question 6

The Sombreros ran a small retail shop for a number of years from 2006. In 2012 they took out a loan from Eastpac for the business of $300,000 to help with ongoing costs and for some business renovations that they undertook. This business was later sold in 2016 and there were not sufficient proceeds to pay out in full the $300,000 loan and that $120,000 of this loan has remained. The Sombreros advise you that, for the year ended 30 June 2020, they paid $6,000 in interest on the loan to Eastpac Bank. Can the Sombreros claim any or all of this $6,000 interest payment in the 2020 tax year?

Accepted Answer

Under the former approach, in Amalgamate

Question 7

Larry Stupida was involved in heroin dealing and after being arrested and convicted of his criminal activity and as a tax return was being prepared by the ATO on his behalf, he claimed that he was robbed by one of his 'associates' of an amount of $10,000 during the year ended 30 June 2020. Which one of the following statements is correct regarding Larry Stupida?

Accepted Answer

A)  He cannot claim any deduction for his 'business losses' as he is involved in a criminal activity 
B)  He can claim a deduction in full for his business losses as they are 'necessarily incurred' in carrying on a business 
C)  He can claim a deduction in full for his business losses as they are 'incidental and relevant' to his income earning activities as a drug dealer 
D)  Larry would need a witness to be able to prove his loss and if he could obtain a witness statement confirming his loss, then he would be entitled to claim a deduction for his loss of $10,000 
A)  He cannot claim any deduction for his 'business losses' as he is involved in a criminal activity 
B)  He can claim a deduction in full for his business losses as they are 'necessarily incurred' in carrying on a business 
C)  He can claim a deduction in full for his business losses as they are 'incidental and relevant' to his income earning activities as a drug dealer 
D)  Larry would need a witness to be able to prove his loss and if he could obtain a witness statement confirming his loss, then he would be entitled to claim a deduction for his loss of $10,000

Question 8

A business taxpayer has incurred an interest expense in respect to a loan for use in that business. Which of the following statements is true?

Accepted Answer

A)  A taxpayer carrying on a business is free to use whichever positive limb of section 8-1 ITAA97 they wish in applying the rules for a deduction but as the second positive limb is much broader in its operation, a taxpayer carrying on a business will nearly always apply the second positive limb 
B)  A taxpayer carrying on a business can only apply the second positive limb of section 8-1 ITAA97 
C)  A taxpayer carrying on a business can only apply the first positive limb of section 8-1 ITAA97 
D)  A taxpayer carrying on a business cannot apply section 8-1 ITAA97 
A)  A taxpayer carrying on a business is free to use whichever positive limb of section 8-1 ITAA97 they wish in applying the rules for a deduction but as the second positive limb is much broader in its operation, a taxpayer carrying on a business will nearly always apply the second positive limb 
B)  A taxpayer carrying on a business can only apply the second positive limb of section 8-1 ITAA97 
C)  A taxpayer carrying on a business can only apply the first positive limb of section 8-1 ITAA97 
D)  A taxpayer carrying on a business cannot apply section 8-1 ITAA97

Question 9

Which of the following expenses are deductible under section 8-1 ITAA97?
· The purchase of a new car for use in a business;
· Membership fees to a local golf club;
· Professional liability insurance paid by a self-employed accountant
· A penalty imposed by the ATO for lodging last year's tax return late

Accepted Answer

Only the professional liability insuranc

Question 10

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred before the business has started?

Accepted Answer

A)  Expenses incurred before a business has commenced are deductible 
B)  Expenses incurred before a business has commenced can be apportioned, under section 8-1, over 5 years 
C)  Only certain expenses incurred before a business has commenced are deductible 
D)  Expenses that are incurred before a business has commenced are not deductible 
A)  Expenses incurred before a business has commenced are deductible 
B)  Expenses incurred before a business has commenced can be apportioned, under section 8-1, over 5 years 
C)  Only certain expenses incurred before a business has commenced are deductible 
D)  Expenses that are incurred before a business has commenced are not deductible

Question 11

Brian leases a computer for his accounting practice but he also uses this computer for private purposes. Brian has estimated that the computer is used 60% for business purposes and 40% for private purposes. If Brian's lease costs amount to $1,400 per annum, how much can Brain claim for his computer lease expenses?

Accepted Answer

Leasing is not a capital cost and a dedu

Question 12

Rina lives in an outer suburb of Perth and she is required to travel by car to work everyday to her employer's premises, which are located in the middle of the Perth CBD. She is adamant that she should be allowed to claim this travel expense as she has to travel by car as there is currently no suitable bus or train link available. Can Rina claim her home to work travel costs?

Accepted Answer

A)  Yes as unless she can get to work, she cannot earn any assessable income 
B)  Home to work travel costs are always deductible but only if all the relevant receipts are kept 
C)  No as home to work travel is a capital expense 
D)  No as home to work travel is a private expense 
A)  Yes as unless she can get to work, she cannot earn any assessable income 
B)  Home to work travel costs are always deductible but only if all the relevant receipts are kept 
C)  No as home to work travel is a capital expense 
D)  No as home to work travel is a private expense

Question 13

Ann Stis is a student studying psychology at university and she is has paid this semester's HELP payments upfront. Ann thinks that she is entitled to claim the course fees for her psychology degree (Bachelor of Arts) as she has paid her HELP fees upfront. Is Ann correct that she can claim her study fees in this situation?

Accepted Answer

A)  No, Ann is incorrect as a deduction is not allowable for HELP payments 
B)  No, Ann is incorrect as HELP fees are only deductible if paid for certain course and a Bachelor of Arts is not one of those courses 
C)  Yes, as Ann has paid the HELP fees upfront she is entitled to a deduction under section 8-1 ITAA97 
D)  Yes, Ann is correct as only the payment of some HELP fees for some courses are allowable as a deduction and fees for a Bachelor of Arts course fall within this category 
A)  No, Ann is incorrect as a deduction is not allowable for HELP payments 
B)  No, Ann is incorrect as HELP fees are only deductible if paid for certain course and a Bachelor of Arts is not one of those courses 
C)  Yes, as Ann has paid the HELP fees upfront she is entitled to a deduction under section 8-1 ITAA97 
D)  Yes, Ann is correct as only the payment of some HELP fees for some courses are allowable as a deduction and fees for a Bachelor of Arts course fall within this category

Question 14

What is the current tax treatment under section 8-1 ITAA97 of an expense involving the purchase of goodwill in relation to a business?

Accepted Answer

A)  Deductible as it is 'necessarily incurred' in carrying on a business 
B)  Deductible as it is 'incurred' in gaining income 
C)  Not deductible as a goodwill expense is capital in nature 
D)  Not deductible as a goodwill expense is private in nature 
A)  Deductible as it is 'necessarily incurred' in carrying on a business 
B)  Deductible as it is 'incurred' in gaining income 
C)  Not deductible as a goodwill expense is capital in nature 
D)  Not deductible as a goodwill expense is private in nature

Question 15

Helen likes to have her husband, Louis, accompany her on her work trips interstate. In the 2020 tax year, Helen incurred $14000 in expenses relating to Louis' air fares for him to accompany her at various work conferences and meetings. In light of these facts, which one of the following statements would be true?

Accepted Answer

A)  Helen can claim a portion of the expenses for Louis as she can argue that it is incidental and relevant for Louis to accompany her 
B)  Helen cannot claim any expenses for Louis 
C)  Helen can claim the expenses in full as she can argue that the expenses were 'necessarily incurred' 
D)  Helen can claim the expenses in full as she can argue that the expenses had the essential character of a work expense as she cannot travel interstate without Louis by her side 
A)  Helen can claim a portion of the expenses for Louis as she can argue that it is incidental and relevant for Louis to accompany her 
B)  Helen cannot claim any expenses for Louis 
C)  Helen can claim the expenses in full as she can argue that the expenses were 'necessarily incurred' 
D)  Helen can claim the expenses in full as she can argue that the expenses had the essential character of a work expense as she cannot travel interstate without Louis by her side

Question 16

A financial planner takes out a prospective new client to lunch. Is the financial planner allowed to claim the costs of the lunch (for both himself and his client) under section 8-1?

Accepted Answer

A)  No as the costs of the lunch would be seen to be private and so not deductible 
B)  No as the costs of the lunch would be an entertainment cost and entertainment costs are not deductible 
C)  Yes as the costs of the lunch are for a business purpose 
D)  Yes but only the client's lunch costs 
A)  No as the costs of the lunch would be seen to be private and so not deductible 
B)  No as the costs of the lunch would be an entertainment cost and entertainment costs are not deductible 
C)  Yes as the costs of the lunch are for a business purpose 
D)  Yes but only the client's lunch costs

Question 17

Which of the following statements is true?

Accepted Answer

A)  A taxpayer is free to choose whether a deduction is a general or a specific deduction 
B)  If a deduction is both a general and a specific deduction then the most appropriate provision will be relied upon and that will usually be the specific deduction provision 
C)  If an expense is only partly for work or business purposes then the whole amount of the expense can be claimed as a deduction 
D)  If an expense is of a capital nature then it is fully deductible under s8-1 
A)  A taxpayer is free to choose whether a deduction is a general or a specific deduction 
B)  If a deduction is both a general and a specific deduction then the most appropriate provision will be relied upon and that will usually be the specific deduction provision 
C)  If an expense is only partly for work or business purposes then the whole amount of the expense can be claimed as a deduction 
D)  If an expense is of a capital nature then it is fully deductible under s8-1

Question 18

The meaning of the term 'necessarily incurred' most closely means what?

Accepted Answer

A)  required by legal necessity 
B)  whatever the Commissioner thinks is best for the business 
C)  No more than clearly appropriate or adapted for 
D)  only expenses that a business is forced to make are deductible 
A)  required by legal necessity 
B)  whatever the Commissioner thinks is best for the business 
C)  No more than clearly appropriate or adapted for 
D)  only expenses that a business is forced to make are deductible

Question 19

A former taxation officer incurred and claimed legal expenses to defend against allegations of misconduct under thePublic Services Act 1922. Are these legal expenses allowable to claim as a deduction under section 8-1 ITAA97?

Accepted Answer

A)  No, as the legal expenses would be seen to be private in nature 
B)  No, as the legal expenses would be denied a deduction due to section 26-5 ITAA97 
C)  Yes as the legal expenses would satisfy the essential character test 
D)  Yes as the legal expenses would satisfy the occasion of the expense test 
A)  No, as the legal expenses would be seen to be private in nature 
B)  No, as the legal expenses would be denied a deduction due to section 26-5 ITAA97 
C)  Yes as the legal expenses would satisfy the essential character test 
D)  Yes as the legal expenses would satisfy the occasion of the expense test

Question 20

Sam is an accountant and has paid his annual membership fees of $850 with CPA Australia. Is the payment of this $850 fee likely to be incidental and relevant to Sam's work as an accountant?

Accepted Answer

A)  No, the payment of such fees would not be incidental and relevant 
B)  Yes the payment of such fees would be incidental and relevant 
C)  Only part of the membership fee will be deductible 
D)  No amount of the fees would be deductible as it would be an expense that is capital in nature 
A)  No, the payment of such fees would not be incidental and relevant 
B)  Yes the payment of such fees would be incidental and relevant 
C)  Only part of the membership fee will be deductible 
D)  No amount of the fees would be deductible as it would be an expense that is capital in nature

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred after a business has ceased?

Top Quality Printers Pty Ltd purchased a new printing machine for $20,000 in May 2020. Is the purchase of this new printing machine deductible under section 8-1 ITAA97?

A business taxpayer has incurred an interest expense in respect to a loan for use in that business. Which of the following statements is true?

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred before the business has started?

What is the current tax treatment under section 8-1 ITAA97 of an expense involving the purchase of goodwill in relation to a business?

A financial planner takes out a prospective new client to lunch. Is the financial planner allowed to claim the costs of the lunch (for both himself and his client) under section 8-1?

Which of the following statements is true?

The meaning of the term 'necessarily incurred' most closely means what?

A former taxation officer incurred and claimed legal expenses to defend against allegations of misconduct under thePublic Services Act 1922. Are these legal expenses allowable to claim as a deduction under section 8-1 ITAA97?

Sam is an accountant and has paid his annual membership fees of $850 with CPA Australia. Is the payment of this $850 fee likely to be incidental and relevant to Sam's work as an accountant?

The Australian Taxation System and the Tax Formula

Residency and Source of Income

Assessable Incomeincome Tax

Capital Gains Tax

Fringe Benefits Tax

Specific Deductions Andapplications Ofdeductibility

Capital Allowances

Tax Accounting and Trading Stock

Taxation of Individuals

Taxation of Companies

Taxation of Partnerships, Joint Ventures, Trusts and Superannuation

Goods and Services Tax

Ethics, Tax Avoidance and Evasion

Filters

Exam 6: General Deductions

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred after a business has ceased?

Top Quality Printers Pty Ltd purchased a new printing machine for $20,000 in May 2020. Is the purchase of this new printing machine deductible under section 8-1 ITAA97?

A business taxpayer has incurred an interest expense in respect to a loan for use in that business. Which of the following statements is true?

Which one of the following statements best describes the treatment under section 8-1 ITAA97 of expenses incurred before the business has started?

What is the current tax treatment under section 8-1 ITAA97 of an expense involving the purchase of goodwill in relation to a business?

A financial planner takes out a prospective new client to lunch. Is the financial planner allowed to claim the costs of the lunch (for both himself and his client) under section 8-1?

Which of the following statements is true?

The meaning of the term 'necessarily incurred' most closely means what?

A former taxation officer incurred and claimed legal expenses to defend against allegations of misconduct under thePublic Services Act 1922. Are these legal expenses allowable to claim as a deduction under section 8-1 ITAA97?

Sam is an accountant and has paid his annual membership fees of $850 with CPA Australia. Is the payment of this $850 fee likely to be incidental and relevant to Sam's work as an accountant?

The Australian Taxation System and the Tax Formula

Residency and Source of Income

Assessable Incomeincome Tax

Capital Gains Tax

Fringe Benefits Tax

Specific Deductions Andapplications Ofdeductibility

Capital Allowances

Tax Accounting and Trading Stock

Taxation of Individuals

Taxation of Companies

Taxation of Partnerships, Joint Ventures, Trusts and Superannuation

Goods and Services Tax

Ethics, Tax Avoidance and Evasion

Filters