Rata made surfboards, sailboards and carbon fibreglass for yachts including for the American Cup sailing boats and had commenced his business in 2012. In the year ended 31 March 2017, Rata employed Dave to assist in the workshop and paid Dave an annual gross salary of $58,000 from which Rata deducted the PAYE of $7,500 and paid it to IRD as required.

Rata operated his business from two sites a small factory in Albany and his home in Glenfield. He used his home for both storage of stock (50sqm) and for office space (20sqm). The house total area measured 250sqm. His household expenses for the 2017 tax year were electricity, rates and insurance of $12,600. The telephone expenses for the 2017 tax year were $7,000 including business tolls of $1,500; and private tolls of $2,000.

The factory in Albany was a leased property and Rata had entered into a 7-year lease back in December 2012 for an annual rent of $12,000 payable monthly in advance. He had also paid a $2,000 bond to the landlord, which would be refunded at the end of the lease. In May 2016, Rata purchased a new pair of protective overalls and safety boots for $350. He also bought himself a team NZ shirt for $200 to show his support for the NZ syndicate.

One grateful client gives Rata a special book on the history of the Americas Cup valued at $120.

In June 2016, Rata is told that one client who owes him $4,000 had left the country with many other debts owing and therefore Rata believes that he will not get paid this money.

In July 2016, Rata flies with his partner Deborah to America to meet with one of the Americas cup yachting syndicates over special foils they wish him to design for the yacht. His flight costs NZ$1,600. Accommodation for himself and his partner in a double room is NZ$700 and he incurs food expenses of NZ$500 for both of them. He is there for a total of 4 days on business and they spend one day sightseeing at Disneyland. Unfortunately for Rata, before leaving NZ he failed to update his car registration and while parked at the Auckland International Airport, he receives a fine of $200 for having no vehicle registration.

On 5 August 2016, Rata purchased a new computer, scanner and printer for $1,400 for doing his business accounts. He borrowed $5,000 from the bank to purchase the computer. He negotiates to repay the loan by $200 for principal, plus $180 interest per month from 1 September 2016.

In September 2016, Ratas house was broken into and several valuable surfboards were stolen from his stock. The surfboards had a cost of $2,000 and a retail value of $5,000. He was insured and received an insurance payment of $4,000 in October 2016. In order to increase the security of his house, in November 2016, Rata installed a burglar alarm system around the whole house for $850. He also repaired the broken window, which had allowed the burglar access, at a cost of $160. Rata also uses this opportunity to fix all the door locks around the house and believes his time is worth $300. The locks themselves cost $150.

Rata put on a party at his house for the staff, clients and a few friends in November 2016 to celebrate the launching of the new company. The bill for food and drink came to $1,300.

At the end of December 2016, Rata sold all the assets of the business for $200,000. In the same month, he also paid the landlord $1,900 to exit the lease for the factory at the end of December 2016.

In January 2017, Rata paid his lawyer $5,400 for legal expenses relating to the sale. During the period of his self-employment, Rata paid Motor vehicle costs of $6,300. His vehicle had a book value as at 1 April 2016 of $18,000 (Cost $25,000 less accumulated depreciation of $7,000). He kept a log for the required 3 months, which showed business use of 72%.

Depreciation rates as follows:

Computer: SL 30%, DV 40%

Vehicle: SL 21%, DV 30%

Required:

Provide a brief note on each item mentioned in the question describing its treatment for tax purposes for the 2016-2017 tax year. Show any calculations