Question 8 (5 Marks)  Smith & Co

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Question 8 (5 Marks) 

Smith & Co. Pty. Ltd. recently purchased a new factory. The factory was very run down having been non-operational for several years. Smith & Co spent $150,000 to recondition the factory and bring it up to operational condition. 

Several months later one of the machines breaks down due to a fault with a small part in the computer system that controls the machine, Smith & Co orders a replacement part from Germany and hires specialist technicians to install it at a cost of $25,000. 

Smith & Co also spends $10,000 to replace one of the factory doors with a wider door to allow for better access for the company's trucks. The previous door was in good working order. 

Are any of the above expenses allowable as a Specific Deduction under Section 25-10 ITAA97

Question 9 (5 Marks)

Felicity is a retired CEO. She hires Cassandra, a high-priced city solicitor, to advise on the tax implications of some investments she is considering. 

Cassandra advises Felicity about the application of a new investment tax that the government is considering implementing and the income tax consequences in respect of her potential investments. 

She also advises Felicity to establish a trust to invest her money in order to minimise the Income Tax payable on the investment. 

Felicity is invoiced the following amounts:

1.    Advise on the application of the potential investment tax $2,500;

2.    Advise on Income Tax consequences of the investment $1,500;

3.    Advise to establish trust; $3,000;

4.    Establish trust documents and execute $5,000.