Comptech Ltd is a manufacturer of optical equipment. In September 2019, Ed Thompson the Chief Research Officer, attended a conference in Switzerland that focused on optical developments for the 21st century. The cost of the trip was $12,000. Upon returning to Australia, Thompson suggested that Comptech should diversify its business into lens operations to cope with the recent technological changes and develop high speed laser machinery to sell to its clients. As a result, in January 2020, Thompson spent three months in the USA learning about new developments in this area. The cost of this trip was $20,000. After Thompsons return from the USA in March 2020, Comptech entered into a franchising agreement with Film Optics limited, where Comptech secured the rights to distribute their range of optic equipment throughout Australia and New Zealand. The Franchise agreement was to last for 5 years and cost Comptech $100,000 per year. In May 2020 there was a disagreement over the terms of the franchise agreement with Film Optics Ltd. As a result, Comptech took court action to prevent Film Optics Ltd distributing Comptech’s products in Australia. The cost of the court action was $75,000. On the 2 June 2020, Comptech also incurred $1,000 in debt collection fees to recover $5,000 in outstanding debts, of a recently acquired optical manufacturing business. The balance of a further $3,000 of debts remaining was written off as bad. Finally, 12 months insurance of $4,500 on their business premises was also paid in full on the 22 June 2020.

Required: Advise Comtech of what deductions (if any) it may be able to claim in respect of the above expenses for the 2019-20 tax year. Refer to relevant legislation and case law to support your arguments for and against before arriving at your conclusions

Answer rating: 100% (QA)

Comptech Ltd can claim a deduction for the cost of the trip to S View the full answer