Billie Bob Billington is considering purchasing a second warehouse on a separate piece of land in New South Wales (NSW), costing a total of $880 000, for the purpose of storing his goods, which form part of his stock in trade in his retail business.

Alternatively, Billie is considering adding 3 extra, large, rooms on to his house, and using those rooms to store the goods for his retail business. His house is also locatedin NSW, and is currently valued at $2 500 000.

Required:

Advise Billie Bob Billington on the advantages and disadvantages of the two proposals that are currently under consideration, by critically taking into account any tax implications that are associated with the different proposals.

Note: You are required to set out your reasons for your answers in the above question, including brief references to any relevant legislation, case law, and tax rulings.