Warwick operates his own business in Brisbane as a sole practitioner lawyer. He has four employees. Warwick’s business had the following expenses during the current income tax year:

• A large bookcase to store law reports containing decided cases costing $3600 and paid for on 1 November of the current tax year. Its effective life is 10 years.

• Travelling costs of $400 paid in May of the current tax year to a prospective employee to attend an employment interview. The prospective employee flew from Sydney to Brisbane and Warwick reimbursed the interviewee the costs of the travel.

• Wages of $200 000 for the four employees.

• Speeding fine of $210 incurred by one of Warwick’s employees on their way to visiting a client

• Reimbursement of HECS/HELP fees of $2300 for one of his employees. Warwick is liable to pay Fringe Benefits Tax on the reimbursed HECS/HELP fees.

In relation to Warwick’s business, which of the following statements is not correct?

Select one:

1. Warwick is able to claim a deduction in respect of the HECS/HELP fees.

2. Warwick is entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 in respect of the travelling costs paid for the prospective employee.

3. Warwick is not entitled to claim a deduction for the bookcase under section 8-1 of the Income Tax Assessment Act 1997 for the current year ended 30 June.

4. Warwick is entitled to claim a deduction for the speeding fine under section 8-1 of the Income Tax Assessment Act 1997 as it was in the course of carrying on his business.

5. Warwick is entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 in respect of the employee wages.

Answer rating: 100% (QA)

Answer Option 4 Warwick is entitled to claim a deduction for the speeding fine under section 81 of ... View the full answer