CMP Ltd is a big mining company that only mines coal. Recently the coal price has fallen substantially. As a result, CMP together with another big mining company agree to each pay a third large mining company $40m so that this third company will cut its mining production by 30% for the next 3 years. CMP is doing this so that the lower supply will increase the price of coal. CMP obtained permission from the relevant government authority to do this. CMP's accountants are unsure if the $40 million is capital or not.

Required: Advise CMP regarding the deductibility of the $40 million.

Lara works as an employee real estate agent for a large real estate business. One day she drove from the office to a client's house, but on the way there got into a minor accident with another car that was driven by a retiree. The police found that Lara was using her mobile phone at the time of the accident, which was against the law. She subsequently had to pay a government fine of $1,000, as well as $3,000 for the damage to the retiree's car (insurance would not cover her). Her accountant is unsure whether the expenditure for the $3,000 of damage has a sufficient nexus with her income-earning activities.                                                                                                                                Required: Advise Lara as to the deductibility of the $1,000 fine.
The $3,000 amount is payable to the retiree.