Your client is a medium-sized manufacturing company and has provided you with its accounting records for the financial year ending 30 June 2020.

The following amounts listed below from (a) – (f) are included in the accounting records. How would you treat them for tax purposes?

1. (a) The provision for long service leave for the employees is $35,000. The actual amount paid during the year was $20,000 for the year ended 30 June 2020.

2. (b) The Insurance premium on the plant and equipment is $30,000, which was paid on 1 March 2020 for the next 12 months.

3. (c) As at 30 June 2020, there was an outstanding electricity account for $2,000 and a telephone account for $5,000 which are both still to be paid.

4. (d) A maintenance contract on the factory equipment for 12 months is $12,000. The payment was made on 1 October 2019.

5.  (e) The sum of $200,000 was paid on 1 August 2019 to the Managing Director as compensation for the early termination of her employment contract. The employment contract had one year to go. It would have ended on 30 July 2020.

6.  (f) There is interest expense of $70,000 on a loan which has three years to run that was originally used to purchase a computer repair business. The business ceased to operate on 30 June 2020.

How would your answers to (a) and (f) change if your client is a small-sized company?

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