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problem: NML Limited is a public gold mining company which is exploring for gold in the Ballarat and the Bendigo area.

Geoff is the managing director and he looks for your advice as to the deductibility of the given expenditures which were incurred prior to 30 June 2013:

1) The purchase of gold tenements for $259,035 that give the company the right to prospect for gold in that region for three years.

2) The payment of legal fees to settle an argument with an ex-employee who stole confidential information from the company. This cost the company $8,569

3) The company was fined by $25,000 by the Environmental Protection Authority for polluting rivers in the 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.

4) As an outcome of this, the company sponsored the local football club with $5,000 to try and restore its good name in the Bendigo

5) The company as well paid a lump sum of $55,000 to a contract drilling company. This payment was for next 11-months of services and was paid on 12 May 2013.

The figures above are all exclusive of GST.

REQUIRED:

Please make a statement for each loss/outgoing to Geoff advising him whether the above expenditures are deductible or not for the year ended 30 June 2013. In each statement, you require recognizing the issue and then referring to relevant legislation and/or case law, and apply them in the given factual context. You as well require making a logical conclusion for each expenditure.

Taxation, Accounting

  • Category:- Taxation
  • Reference No.:- M99716

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