Question 5a

For each of the following items of expenditure or loss:

• calculate and state the amount that is deductible (if any)
• provide relevant statutory references to support your answer
• briefly describe your answer.

Assume that the company is a New Zealand resident (not a qualifying company or a look-through company) and has a 31 March balance date. The amounts are exclusive of GST unless stated otherwise.

A company did the following.

i. Borrowed $345,000 from the bank to fund the payment of a dividend to its shareholders. In the year ended 31 March 2023, the amount of interest incurred on the loan was $28,675.

ii. Spent $37,850 on legal fees relating to:

• recovery of customer debts ($12,426)
• settling a dispute with a supplier ($8,245)
• documenting debenture as security in relation to loan facilities from the bank ($4,720)
• purchasing a new warehouse ($12,459).

iii. Made compulsory employer contributions totalling $13,500 (gross) to the Chief Executives KiwiSaver scheme during the year. ESCT of $5,265 was deducted from the contributions.

iv. Paid provisional tax of $76,895, FBT of $15,350, PAYE of $256,467, and RWT on interest of $3,164.

v. Spent the following amounts on entertainment.

• Staff went out for a meal at a restaurant to celebrate the signing of a major contract ($1,868).
• Food consumed by three employees while travelling on business in Australia ($4,620).
• Light refreshments served at social functions held on the companys premises ($1,026).
• Hire of a corporate box at Sky Stadium to entertain staff, customers, and suppliers ($18,600).