Question

Question 5 Unsaved Discuss briefly, citing sections, whether the following are deductible (1 mark each). I. The cost of a golf club membership incurred by an accountant who likes to take clients to play golf each Friday II. The travel costs incurred by the taxpayer with the identical facts to those in FCT v. Collings (1976). III. An amount of $5 000 held in a savings account by the taxpayer as he anticipates having to pay long service leave for a staff member in the next financial year. IV. Borrowing expenses incurred by the taxpayer in relation to a business loan to finance the purchase of a new factory.

Answer 1

I. The cost of a golf club membership incurred by an accountant who likes to take clients to play golf each Friday

No. IRS in Publication 463(Travel, Entertainment, gift and car expenses) is very specific regarding deducting club dues and membership fees. Any club for recreation or for pleasure, is not deductible expense.

II. The travel costs incurred by the taxpayer with the identical facts to those in FCT v. Collings (1976).

No: Expenses incurred to perform official duty or carrying out employment responsibilities are not personal expenses, hence it doesnt satisfy the positive limb of section 8-1(1). Hence not tax deductible.

III. An amount of $5 000 held in a savings account by the taxpayer as he anticipates having to pay long service leave for a staff member in the next financial year.

No:

Any deposit in savings account is treated as personal deposit all interest and deposit amount will be taxable. Refer to Topic No. 307.

IV. Borrowing expenses incurred by the taxpayer in relation to a business loan to finance the purchase of a new factory.

Yes: Borrowing cost is incurred for improvement in business hence it will be deductible. You can deduct the interest cost on debts related to your trade or business.