Blue Sky Mining Ltd has for several years provided houses for miners working at one of its remote mining sites in western Queensland. Following an inspection by government workplace health and safety inspectors the company was ordered to demolish the houses which it did in April of the current tax year. It will replace them with other new ones in the next income tax year. The cost of demolishing the houses was $80 000 and the materials were sold for scrap for $2500. In relation to the cost of $80 000 it is likely that,

1. The amount is deductible under s 25-10 ITAA 97 as a repair. 

2. The amount is not deductible under s 8-1 ITAA 97 because it is of a capital nature. 

3. The amount is deductible under s 8-1 ITAA 97. 

4. The amount is deductible under s 8-1 ITAA 97 but will not be allowed because of s 26-45 ITAA 97. 

5. The amount is not deductible under s 8-1 ITAA 97 because it is of a private or domestic nature.

Answer rating: 100% (QA)

The most likely scenario for the deductibility of the demolition cost is The amount is not deductibl... View the full answer