MJ Limited purchased a machinery for $50,000 for its operations on 1 October 2015 and have been using it for income producing activities. In the current financial year (2019-2020), the machinery broke down and it was replaced with another machinery with the cost of $70,000 which could improve(?) the production, a feature that was not available in previous machinery.

Explain in detail using relevant tax laws and cases whether this amount of $70,000 is deductible for MJ limited.

Answer rating: 100% (QA)

The replacement of machinery for 70000 by MJ Limited would generally be considered a capital expense and as such it would not be immediately deductibl... View the full answer