Question

Week 4 John owns a convenience shop called City Conv. The following events occurred for John during 20192020 financial year.

(i) John incurred legal expenses as he was sued for false advertising.

(ii) John purchased new fridge to the shop - $800. In addition, his builder added more space to the shop front. This cost him $22,000.

(iii) John ordered 1000 new T-shirts with printed City Conv’s logos for marketing purposes. These costs him $1,500.

(iv) John received a City of Sydney fine for putting his sales item for display outside his shop without a permit. He required to apply for a permit to use the footpath.

Required: With reference to relevant legislation and case law advise John on the assessability and/or deductibility of above events. (10 marks, maximum 300 words)

Answer 1

Legal Expenses for False Advertising

As per Tax law , legal expenses paid for false advertising is not deductible because john has done false advertising which is a legal case.

Frdge Purchased & Addition to Building

The John has puchased fridge of 800$ & also made addition to shop of 22,000$ which is in the nature of capital expenditure so as per tax law it is allwed as a deduction by way of depreciation only.

New T Shirts Purchased for Marketing Purpose

The new 1000 T shirts of 1,500$ is allowed as an advertisement expenses because it is purchased for marketing of shop by john.

Fine Received by putting sales item display without Permit

It is Taxable because has not taken the permission to use the footpath so City of Syndey Fine is taxable as income.