Rick Hastie is a senior executive in the Canberra office of a large company called DxP Ltd (DxP)

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Rick Hastie is a senior executive in the Canberra office of a large company called DxP Ltd (DxP). Rick needs to do his income tax return for the 2021 income year and he has come to you for advice.

He provides the following information about his income and expenditure.

He receives $500,000 per annum in salary from the DxP. In addition to his salary, Rick received an annual performance bonus of $100,000 on 15 June 2021 as he satisfied certain billing targets. Rick's investment portfolio comprises of the following:

Asset	Acquisition Date	Acquisition Price	Notes
Queanbeyan property	24 June2015	$600,000	Property is a vacantwarehouse site.
Shares in BHP	3 March 2018	$50,000	Shares pay dividends

 

Rick works 3.5 days (Monday to Thursday) a week for DxP and spends 1.5 days (Thursday and Friday) a week in his furniture studio at home. Rick incurs the following expenditure during the 2021 income year:

 

He pays $100,000 to a timber merchant for timber and other materials to use in making his furniture.
He receives a $500 speeding fine on the way to Mick's store to deliver furniture.
On 1 May 2021, he buys a laptop to use in the furniture-making activity, costing
$3,600. The Commissioner states that the laptop should last 3 years. Ricks uses the laptop 10% of the time to stream movies and watch sport.

He travels between his office at DxP and home 5 days a week, by bus, at an annual cost of $1,500.
Rick uses the garage to make the furniture and one of the bedrooms in his home as an office to Vadministration relating to the furniture-making activity. He pays $2,500 per month in interest on his home loan and $600 per month in heating and cleaning costs for the home. The garage and the bedroom take up 25% of the space in the house.
Rick employs two students to work in the studio, paying a total of $50,000 in wages

per year.

Rick is thinking about starting a new business buying and selling recycled timber. He asks his accountant to investigate the feasibility of the business before he decides. The accountant's report cost $4,000. Rick decides not to start the business.

Required:

 

Using relevant legislation and case law, explain to Rick whether the amounts in the above-mentioned transactions would or would not be allowable deductions for income tax purposes in the 2021 income year. Show calculations where appropriate. No need to consider the trading stock rules.