Question 1 For tax purpose, in what circumstances are individuals and companies treated as residents of Australia? Explain based on the the Income Tax Assessment Act 1936 (Cth) and relevant case law.

Question 2 Referring to relevant statutory provisions and common law, discuss whether the following amounts would be as an allowable deduction against assessable income.

a) Provision of doubtful debts of $4,200 for a detective agency.

b) Speeding fines of $ 700 paid by an owner to a driver.

c) An amount of $1,000 paid to a solicitor for preparing a partnership deed.

d) Travel cost of a business executive to attend a trade fair in Munich paid by the employer.

Newspapers purchased by an accountant who advises clients on financial and investment matters.

Question 3

A. RK Co purchased a machine on 1st November 2020 at the cost of $110,000 (inclusive of GST) and exclusively used it to manufacture for the Co's production. The machine's effective life is ten years.

B. Andy purchased a Toyota car and use it 100% for business purpose on 1st October 2020 at the cost of $74,000 (inclusive GST), estimated to have a useful life of twelve years.

Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the car discussed above, using both prime cost and diminishing value methods.