Janmoor Ltd is a manufacturer of high-level pressure and temperature gauges in Epping. Due to rising costs and increasing competition in 2019 it examined the possibility of relocating its operations to a regional area. As a result, it incurred expenses of $60,000 in examining a new factory site in Geelong.

After a thorough examination of the benefits it decided to move to Geelong in May 2020. The total costs of relocating the business to the new factory were $1,475,000.

These costs were:

• Staff relocation: $450,000
• Relocation of trading stock: $125,000
• Relocation of plant and equipment: $750,000
• Decommissioning cost of plant: $150,000.

In moving to the new premises Janmoor also incurred the following costs:

1) Painting of the exterior of the building, and new signsthe cost of the painting was $18,700 and the cost of the new signs was $2,750

2) Replacement of the vinyl flooring in the reception area on 15 June 2020it cost $2,400 and has an estimated life of 10 years

3) Advertising in the local press to advise of the relocation of the business

4) Enlarging and sealing the car park: $23,500the work was completed on 30 May 2020

5) Upgrading the air-conditioning system: $40,000this was installed on 1 June 2020

6) Costs of cleaning up the old factory site in Epping: $ 30,000

7) Installation and commissioning of plant: $145,000.

Required

Advise Janmoor of the deductions it may claim in respect of the above expenditure for the year ending 30 June 2020.

Topics covered in this question

Allowable deductions, Repairs, Capital works and Capital allowances

Solution (issues to address)

• Repairss 25-10 (initial repairs, improvement)
• Capital allowancesDiv 40
• Deductionss 40-25
• Depreciating assetss40-30
• Deductions and choice of methodss 40-60, 40-70 and 40-75
• Effective lifes 40-95
• Cost of depreciating assetss 40-175 and 40-180
• Advertising deductionss 8-1 or s 40-880
• Car park division ss 43-70 and 43-140
• Environment deductionss 40-775