1. a. Following Cyclone Ita in April 2014, the Marlin Cove Resort at Trinity Beach in Cairns is badly flooded. This causes substantial damage to the paved driveway into the resort. The driveway links the reception area with the main road, driveways into each unit and the resort carpark. About 50% of the bricks have been dislodged. The resort is advised that this is likely to be a common occurrence so it decides to replace the paved driveway with a concrete driveway. This is notwithstanding that the concrete will be more susceptible to algae growth and will need to be cleaned more often. It would have cost $50,000 to replace the pavement whereas the new concrete driveway will cost $80,000.

Can the resort claim a tax deduction for all or any part of the cost of the concrete driveway? (3 marks)

If the driveway is not fixed but rather the resort is sold can the new owner claim a tax deduction for installing the concrete driveway? (1 mark)

2. b. Brenda purchased a hairdressing business taking out a loan from Big Bank. The loan was for a I 0 year period. After 3 years she sold the hairdressing business at a loss and some of the loan remained outstanding. Can she claim a tax deduction for the interest payable on the loan since the business was sold? What if the proceeds from the sale were used to fund a holiday? (3 marks)
3. c. Redneck is a solicitor in a sole practice in Cairns. He employs a secretary but has no other staff. He returns his income on a cash basis. While studying for a Masters Degree in Taxation he decides that he wants to move to an accruals method of accounting for his assessable income. Why do you think he wants to do this? Can he? (3 marks)
4. d. Following Cyclone Ita in April 2014, the Marlin Cove Resort at Trinity Beach in Cairns is badly flooded. This causes substantial damage to the paved driveway into the resort. The driveway links the reception area with the main road, driveways into each unit and the resort carpark. About 50% of the bricks have been dislodged. The resort is advised that this is likely to be a common occurrence so it decides to replace the paved driveway with a concrete driveway. This is notwithstanding that the concrete will be more susceptible to algae growth and will need to be cleaned more often. It would have cost $50,000 to replace the pavement whereas the new concrete driveway will cost $80,000.

5. 
   

   e. Can the resort claim a tax deduction for all or any part of the cost of the concrete driveway? (3 marks)

   
   

   If the driveway is not fixed but rather the resort is sold can the new owner claim a tax deduction for installing the concrete driveway? (1 mark)

6. f. Brenda purchased a hairdressing business taking out a loan from Big Bank. The loan was for a I 0 year period. After 3 years she sold the hairdressing business at a loss and some of the loan remained outstanding. Can she claim a tax deduction for the interest payable on the loan since the business was sold? What if the proceeds from the sale were used to fund a holiday? (3 marks)
7. g.Redneck is a solicitor in a sole practice in Cairns. He employs a secretary but has no other staff. He returns his income on a cash basis. While studying for a Masters Degree in Taxation he decides that he wants to move to an accruals method of accounting for his assessable income. Why do you think he wants to do this? Can he? (3 marks)

Answer rating: 100% (QA)

a The resort can claim a tax deduction for all or part of the cost of the concrete driveway because it is a business expense The new owner can also cl... View the full answer