One of your clients, Kelly Clarks is the sole director and sole shareholder of Bicycle Pump Pty Ltd. The company is a cycle wholesaler that imports and sells a range of bicycles to retailers around Australia. The company is registered for the GST and accounts for the GST on the non-cash (accruals) basis. The company was incorporated in Australia in May 2014.

The company had a turnover of $3.8 million in 2021 and is expecting a turnover of approximately $4.4 million for the 2022 financial year. Kelly informs you that on 12 January 2022, the company acquired a new motor vehicle, a 2022 Mercedes-Benz C350 Sedan, which was financed via a chattel mortgage agreement. A copy of the tax invoice for the purchase of the new car is attached below.

Mercedes Sedan C350 78,000.00

Audio sound system 2,422.00

Leather seat protection 948.00

Registration fee 648.00

Compulsory third party (CTP) insurance 412.00

Dealer delivery charges 1,985.00

Stamp duty 2,340.00

Luxury car tax 1,845.00

Total amount payable (drive away price): $ 88,600.00

Payments received:

Esanda Finance - chattel mortgage $ 88,600.00

Balance due: $ 0.00

* Amounts are shown inclusive of GST (where applicable). All amounts shown above totalling $88,600 have been charged to the customer by the motor car dealership. Assume that in this PBL, the CTP insurance of $412.00 shown above is exclusively GST-free. In practice, CTP insurance has a component that is GST-free (the stamp duty component) and a component that is taxable. There is no GST on the registration fee.

Hint: For each of the costs detailed above that make up the total of $88,600, students need to work out which costs would be capitalised (and therefore form part of the cost of the motor vehicle in the Balance Sheet) and which costs would be expensed to the Income Statement.

TASK: Kelly asks you to draft her a letter advising her how much is tax-deductible to the company in relation to this transaction for the year ended 30 June 2022. Please show your calculations.