Question

Question 20

1. Giant Holdings Ltd is a large project engineering company. The company has an annual turnover for the year ended 30 June 2020 of $715 million.

   This makes the company a large business taxpayer, as its annual turnover for the year ended 30 June 2020 is more than $10 million and more than the annual turnover of a medium-sized business entity of $500 million.

   On 11 April 2020, the company purchased the following assets for exclusive use in their engineering business:

   Asset	Original Cost	Tax Effective Life
   Black and white laser printer	$92	4 years
   Apple i-pad	$940	2 years
   Motor vehicle	$120,000	8 years

   The company has elected to self-assess the effective life of its depreciating assets for taxation purposes (as outlined above) and therefore does not want to use the Commissioner's effective lives published in Taxation Ruling TR 2019/5.

   Furthermore, the company wishes to allocate eligible depreciating assets into a low value pool.

   Assuming that Giant Holdings Ltd wishes to maximise its depreciation deduction, what amount can the company claim under Division 40 of the ITAA (1997) in relation of the year ended 30 June 2020?

   Note: There are 81 days from 11 April 2020 to 30 June 2020.

   Note: Please note that 2020 is a leap year. Hence, please use 366 days in your calculations.

   	a.	$6,908;
   	b.	$7,671.
   	c.	$3,454;
   	d.	$3,372;

Answer 1

Depreciation for Black and white laser printer =

{Original cost÷ no of life ( in days) }* days used  

={ $92 ÷ (366 days + 365 days * 3 years) } * 81days

= {$92 ÷ 1461 days } * 81days

= $5.10 millions

Depreciation for Apple i-pad =

{Original cost÷ no of life ( in days) }* days used

={$940 ÷ (366 days + 365 days)} * 81days

= {$940 ÷ 731 days } * 81days

= $104.16 millions

Depreciation for Motor Vehicle=

{Original cost÷ no of life ( in days) }* days used

=$1,20,000 ÷ { (366 days * 2 years )+ ( 365 days * 6 years) } ]* 81days

= {$1, 20,000 * 2922 days } * 81days

= $3326.49 millions

Total Depreciation / deduction available to company will be :-

=$ (5.10 + 104.16 +3326.49) millions

=$ 3435.75 millions