In December 2011, Air Con Ltd, a manufacturer of air conditioners, was taken to court by one of its competitors, Cool Air Ltd, under the Trade Practices Act 1974 (Cth). Cool Air alleged that Air Con sought to enter into exclusive agreements with several retailers that they would only stock Air Con’s products.
While Air Con incurred $120,000 in legal costs in defending the action, the case was settled out of court. The terms of the agreement on 15 January 2012 provided that Air Con would pay Cool Air $400,000 immediately and an amount equal to 2% of profits over the next two years. For 2011/2012 the profit was estimated to be $560,000 and the year after $620,000.
Advise Air Con on the deductibility of this expenditure.
George Wallace is a self-employed management consultant. Keen to improve his knowledge of Australian tax law, Wallace enrolls as a single subject student in the unit Taxation 101 at a local university. It cost him $1,500 to undertake the course. The prescribed textbooks were the CCH Australian Master Tax Guide, CCH Australian Income Tax Legislation, and Australian Taxation Study Manual, which he purchased as a package for $350. In addition, Wallace subscribed to The Australian Taxpayers’ Association at a cost of $240 pa. Because Wallace submits his own tax return each year, and occasionally includes taxation matters in the management reports he writes as a consultant
what deductions (if any) could Wallace claim regarding these expenses?
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