Elizabeth runs a bed-and-breakfast business from her own home. She advertises on online websites and finds that she has guests to stay for 50% of the year. She has incurred the following costs in the year ended 31 March 2020 and has sought your advice on whether she can claim any of these costs as tax deductions.

2. Advertising expenses of $2,500. Elizabeth advertises in a range of websites, but only one (Beds R Us) is successful. She spent $1,000 advertising with Beds R Us and $1,500 with other websites that provided no business.
4. Elizabeth has enrolled in an introductory accounting course, in order that she can do her own account preparation in the future. The cost of this course is $5,000 and will start in June 2020.Elizabeth is currently on a waiting list for the course, but she is hopeful that she will be offered a place.
6. Elizabeth usually makes sure that she receives payment in advance of guests arriving.However, she received two last minute bookings where people did not have time to pay before arriving and then left without settling their accounts. Elizabeth has tried to contact these people to pay their outstanding account, but without success. The total amount unpaid is $500.
8. Elizabeth incurred a fine of $200 because she breached health and safety regulations by not having sufficient smoke alarms at the property.

Required:

Advise Elizabeth on whether these expenses will be allowable as tax deductions under sections DA 1(1)(a) or DA 1(1)(b) of the Income Tax Act 2007.

Note - you are only expected to discuss the General Permission in your answer.

Answer rating: 100% (QA)

Under the General Permission provisions of the Income Tax Act 2007 Elizabeth may be able to claim certain expenses as tax deductions if they are incur... View the full answer