In 2015, Talia started a caf specializing in Pacific Island food. After a few years, the caf

In 2015, Talia started a café specializing in Pacific Island food. After a few years, the café was well established and generating income of $100,000 per annum. Talia incurs the following expenses in the tax year ending 31 March 2022.

1. Purchase of new tables and chairs costing $6,000.
2. Internal painting and redecorating of the café premises cost $5,500.
3. Compensation of $5,000 and legal fees of $9,000. In May 2019, Talia received a demand for $5,000 compensation from a customer who said she got food poisoning after eating at Talia’s café. Talia incurred $9,000 in legal fees challenging the claim. However, in December 2019, the courts decided against Talia and instructed her to pay $5,000 in damages to the customer.
4. Talia found her clothes were getting damaged when she worked in the kitchen, as often food was spilled on them. She therefore bought some smart black clothes that she wears only at work. She purchased black clothes as they do not stain as much as lighter colours.

Required

Applying Part D of the Income Tax Act 2007, and any applicable case law, explain if the above expenditures are deductible for tax purposes.

Answer rating: 100% (QA)

Answer The purchase of the tables and chairs is a capital expe... View the full answer