Question 2 Expenses (10 marks)

a) Explain briefly whether and to what extent the following are allowable deductions. You are to cite the relevant case laws/authority where applicable.

i) Interest on a property loan to purchase a residential property by a chartered accountant. He is employed by a large firm in Sydney but often has to take work home for completion. 2 marks

ii) Re-painting the interior and exterior of the factory building at a cost of $52,000. Taxpayer has used the building for its business for several years. 2 marks

iii) Taxpayer, a non small business, has incurred $48,000 on consultancy fees to change its business structure on 1 Oct 2019. What is the deductible expense for current year? 2 marks

b) s8-1 of the 1997 Income Tax Assessment Act infers that a taxpayer is not entitled to deduct a loss or outgoing to the extent it is private or domestic. Outline how the precedent in Frisch v FCT impacted the judicial tests applied to determine whether a loss or outgoing is private or domestic by virtue of s8-1 ITAA97.