Ellie runs a labour hire firm in which she provides suitably qualified staff to

Question

Ellie runs a labour hire firm in which she provides suitably qualified staff to businesses involved in the hospitality industry including hotels, motels and restaurants. She has three full-time staff. She incurred the following expenses in the current tax year ended 30 June in relation to her business: Reimbursements of $7000 paid to her staff to cover actual travel/accommodation expenses but not food and drink incurred by her staff in carrying out their duties during the year. Food and drink costs of $5200 paid to restaurants to entertain prospective clients of the business. Food, drink and accommodation costs of $1700 incurred by Ellie to attend a work related conference in Brisbane. The $1700 incurred consisted of $400 in food costs, $500 for the cost of accommodation and $800 for the cost of the conference. Ellie had to spend two nights in Brisbane to attend the conference. Based on these expenses what amount can she claim as a tax deduction for the current tax year ended 30 June? Select one: 1. $8 700. 2. $1 700. 3. $7 000. 4. $12 600. 5. $13 900.

Explanation / Answer

Answer: 7,000 + 5,200 + 1,700 = 13,900

* 7,000 paid to staff for actual travel/accommodation expenses are deductible while calculating tax as this is an employee benefit providing by the firm, hence this is a business expense.

* 5,200 paid to the restaurant is also deductible as this is a business expense because it is used entertain prospective clients, you can take it as business development cost.

* Ellie is attending a business-related conference, so all expenses incurred during that even of food or drinks, all are available for deduction.

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