Rach's Art Design", is an art gallery that produces, displays, and sells artwork, prints, and pottery. It operates east of Melbourne, Victoria and is not classed as a small business. During the current income year, it acquired a kiln, which is a machine that bakes pottery before the business paints the items with unique designs. The purchase price of the machine was $16,000, and "Rach's Art Design" paid $1,500 for it to be delivered ready for use. "Rach's Art Design" paid for the machine via five instalments.

Question

Advise "Rach's Art Design" of the tax consequences regarding the purchase of the kiln, by answering the following three questions.
a) Examine briefly whether the purchase meets the positive limbs of section 8-1 ITAA 1997. (4 marks)
b) Examine the impact of the most relevant negative limb of section 8-1 ITAA 1997. (6 marks)
c) Analyze whether any other provision may apply, and if so, what claim could be made in the current tax year. (2 marks)

Answer rating: 100% (QA)

a To determine if the purchase of the kiln by Rachs Art Design meets the positive limbs of section 8... View the full answer