Required: For the transaction below, consider the impact of the $300 000 franchise fee as far as its deductibility is concerned, and also discuss whether there are current/future CGT consequences (4 marks).

Sarah runs a burger shop. She wishes to increase business so pays a franchise fee of $300 000, which allows her burger shop to be part of the “Starving Burgers” franchise. This $300 000 is paid as a lump-sum and allows her to run the franchise for 10 years.

Question 2: 

Required: Consider what amounts are deductible for Kate’s business (4 marks).
Kate ran a small clothing importing business (as a sole trader) that often sold goods on credit to retail stores. It accounted for sales on an accrual basis. During the tax year, Kate wrote off the following amounts in the accounting records of the business:
• $10 000 owed to the business by one retail store located in Collingwood. This was owed due to the Collingwood business having acquired $10 000 of goods from Kate’s business The Collingwood store had gone into liquidation, and it was estimated that creditors such as Kate would receive 60 cents in the dollar owed to them.
• $15 000 owed to the business by the owner of another clothing business located in Armadale. Kate’s business had lent money to the owner of this business as a favour to the owner, due to the store’s owner needing money to pay for her (the owner's) daughter’s wedding.