TAXATION LAW HAND IN # 2
NML Ltd is a public gold mining company that is exploring for gold in the Ballarat and the Bendigo region.
Geoff is the managing director and he seeks your advice as to the deductibility of the following expenses which were incurred prior to 30 June 2016:
1. The payment of rent for a staff member when he is staying in Bendigo. He normally lives in Melbourne. The cost was $195 per week for 12 weeks.
2. The purchase of gold tenements for $259,035 which gives the company the right to prospect for gold in that area for three years.
3. The payment of legal fees to settle a dispute with an ex-employee who stole confidential information from the company. This cost the company $8,569
4. The company was fined by $25,000 by the Environmental Protection Authority for polluting the rivers in Bendigo and for not rehabilitating the land after exploration. In addition to this, the company paid $12,000 in legal fees in defending the action in court.
5. As a result of this,the company sponsored the local football club with $5,000 to try and restore its good name in Bendigo.
6. The company also paid a lump sum of $55,000 to a contract drilling company. This payment was for the next 11 months of services and was paid on 12 May2016.
The above figures are all exclusive of GST. Advise Geoff of the income tax consequences of each of the above items for NML Ltd, where appropriate provide
relevant case law, ATO rulings and section references to support your answer.