Question

Sami receives rental income in relation to a house he owns in an inner suburb of Sydney.
The house is fully furnished,and Sami has had the same tenant for several years.
Sami also receives income from his business as an event organiser. He specialises in
organising parties to celebrate family occasions such as engagements, birthdays,
wedding anniversaries, and retirements.
Events organising requires a lot of planning andmany of Sami’s clients prefer to meet
with Sami in his Sydney CBD office, rather than remotely via the internet. Sami would like
to make his clients feel comfortable in an informal setting,so he decides to replace the
large reception table in his office with a smaller wooden coffee table. On 3 August he
sees the perfect table on sale for $295 and decides to purchase two –one for his office
and one for the rental property. Sami estimates that each of the coffee tables would have
an effective life of 3 years.
It is now time for income tax returns to be lodged.
Required A:
Advise Sami what amount, if any, he can claim for the purchase of the coffee tables. (12
marks)
Click or tap here to enter text.
Explain what methods could be used to calculate the claim.
Click or tap here to enter text.
In your response give reasons and refer to sections of legislation and cases, where
relevant

Answer 1

Claim w.r.t purchase of coffee table for business purpose can be made by treating it as a business expense and reducing taxable income.

however claim cannot be made for the coffee table purchased for the rental property for tax saving purpose.

most commonly used method of calculating the claim is by applying depreciation :

simple method: dividing the cost by useful life of the table and charging it to profit and loss account on yearly basis

accumulated drepreciation : applying a percentage in terms of reducing balance method.