Iron Pty Ltd is an Australian metal frame manufacturer that in recent years has suffered

Iron Pty Ltd is an Australian metal frame manufacturer that in recent years has suffered substantial losses in its business. In January 2015 the company engaged the services of On The Ball Pty Ltd to conduct an efficiency study aimed at reorganising Icon’s business, increasing its productivity and reducing its business costs. The study recommended retrenchment of various employees. Icon paid On The Ball Pty Ltd $30,000 for the efficiency study in February 2015.

In March 2015, as a consequence of On the Ball Pty Ltd’s recommendation, several of Icon’s employees were retrenched including the company’s general manager Charles Chen. He was paid a lump sum of $80,000 for agreeing to the termination of his four-year employment contract six months before its completion. Furthermore, as Charles had significant influence over a number of the company’s major clients, the company agreed to pay Charles three annual lump sum payments of $100,000 on condition that he refrain from any employment or from carrying on any business in direct competition with the company within Australia for three years.

In 2015, Icon wanted to manufacture a perfume which was subject to a patent owned by Frankincense Ltd and which was about to expire. Frankincense Ltd applied for a 10-year extension of its patent. Icon incurred $50,000 in legal costs in successfully opposing Frankincense Ltd’s application which meant that the perfume became generally available for manufacture by all perfume manufacturers. Icon began to manufacture and sell the perfume to retailers.

In November 2014, directors and agents of Icon were charged under the Secret Commissions Act with having paid illegal secret commissions to employees of its retail buyers as a means of boosting sales of Icon’s products. The directors and agents were found guilty, given a good behaviour bond and fined. The company paid the fines and legal fees of its directors and agents making the decision out of consideration for its own business interests rather than the personal interests of the directors and agents.

Required

(1) Advise Icon Pty Ltd as to the deductibility of:

(a) the $50,000 in respect of the efficiency study provided by On The Ball Pty Ltd;

(b) the $80,000 paid to Charles Chen for agreeing to the termination of his employment contract;

(c) the three $100,000 annual payments paid to Charles Chen for agreeing not to compete with Icon Pty Ltd for 3 years;

(d) the payment of $50,000 in opposing Frankincense Ltd’s patent extension application; and

(e) the payment of the fines and legal fees in defending its directors and agents

 
You must justify your answers by referring to relevant case law and legislation.