Howard runs 'Look out Steve!', which is a business located in Sydney, New South Wales. A number
Question:
Howard runs 'Look out Steve!', which is a business located in Sydney, New South Wales. A number of assets are recorded in its asset register and it also uses the low-value pool. The opening pool balance is $8,754.
During the current tax year, Howard acquired a number of low-cost assets with a purchase price totaling $44,000. Howard also incurred $1,500 in delivery costs related to those purchases. Most of these assets are used 100% for business use, except for one acquired for $800. This particular asset is used 15% for private purposes. Three assets from the pool were also disposed of, which Howard received $4000 in proceeds for the sale.
At the beginning of the year, Howard also allocated 12 items to the low-value pool. These items had an opening adjustable value of less than $1000 each. The total opening adjustable value of these items totaled $8,900. Howard also acquired and had installed a security system package on the 20th July of the current tax year, which includes a monitor ($400), system and storage drive ($800) and cameras ($900) for a total of $2,100. Howard was charged $50 for installation of the cameras. The package has an effective life of 3 years.
REQUIRED:
Advice Howard of the tax consequences arising for the above fact situation by answering the following three questions:
1. Explain, with reference to relevant sources of tax law, wheter the secuirty system package can be added to the low-value pool and, if not, calculate the decline in value Howard can claim for this asset.
2. Determine the movement in, and calculate the closing balance for, the low-value pool
3. Calculate the total decline in value Howard can claim
In doing so, assuming the following:
- The business is not a small business entity
- The business is not entitled to the immediate asset write-off or temporary full expensing;
- The legislated threshold for the low-value pool is $1000
- The business opts for the diminishing value approach to the decline in value of assets.
You are required to present a complete analysis, explain the treatment of all items and/or elements in this questions.
Expert Answer:
1 Explain with reference to relevant sources of tax law whe ter the sec u irty system package can be added to the low value pool and if not calculate ... View the full answer
