Steven is a hairdresser who has his salon at his home, how would you adjust his business income to reflect more realistically his actual cash income?
a. Add back depreciation included in the home office expense
b. Subtract depreciation and home office expense
c. Subtract annual debt service on the mortgage
d. Add back debt service on the mortgage
e. Make no adjustments to business income
Please advise ?
Thanks
Sounds like an assignment question.
i wouls say a) as depreciation is a non-cash deduction
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the response Terry.
Could the answer be d) as a portion of the mortgage payment would be included as a business expense as he is using a portion of his house as a home office ?
hi Joseph
I don't think so as that doesn't include depreciation. He would be crazy to claim part of his mortgage for the office as he would lose the CGT free status on his home (on that portion claimed) – which would end up costing much more than the few dollars saved in interest.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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