Advertising expenditure and GST
The problem that has been stated bringing the issue of the cost that a taxpayer has incurred by involving in the process of the moving the machine to the new site.
- “Section 8-1 of the ITAA 1997”
- “British Insulated & Helsby Cables”
- “Taxation ruling of TD 92/126”
An important explanation that has been provided under the section 8 (1) of the ITAA 1997 is that a person will be able to claim some expenditure as the business deductions if those expense have occurred in gaining business income (Saad 2014). According to the “Section 8-1 of the ITAA” expense involved in moving, the machine represents an additional increase in the cost of the asset. The analysis from the present situation clearly defines that the taxpayer has incurred a spending that is related to the moving of machine to a new place and thereby these cost will not be permitted under the context of section 8 (1) of the ITAA 1997 as the deductions (Hickman 2015). The reason behind such non-allowable entitlements is because it results an increase in the cost of the asset.
An important consideration has been put down by the federal court in the case of “British Insulated & Helsby Cables” where the cost of transporting the fixed asset represents an advantage for the business by simply placing the asset of depreciable nature to the new place (Manning, Sciacca and Alford 2016).
As noted in the “Taxation ruling of TD 92/126”setting up of the machine and beginning the business purposes where the cost incurred is viewed as the part of the revenue. Therefore, as the result of the above defined expenditure the cost that has occurred in moving the machine to the new site is not possible for considering it be as allowable deductions.
Conclusion:
As because the cost that has occurred in the above stated explanation is having the nature of the capital so it is not possible for considering the cost as the allowable deductions.
Taking the note of the problem statement that has been stated the issue here is of determining in nature of deductibility of the expenditure that has taken place in revaluing the asset as deductions that are allowable under section 8 (1) of the ITAA 1997.
- “Section 8-1 of ITAA 1997”
Taking note of the present issue it can be asserted that the cost that has risen from revaluation of assets for insurance cover will be entitlement for allowable deductions. As denoted in “Section 8-1 of the ITAA 1997”, the expense will be treated for allowable entitlement purpose because the outlay carries the features of repetitive in nature (Cao et al. 2015). In the meantime, the outlay incurred in revaluation of asset is in a straight line related to the fixed asset. For a taxpayer at the time of understanding the nature of the expense that will be taken as deductions for income tax purpose. Henceforth, it is necessary to understand the expenditure that has taken place for revaluing the asset is putting forward the nature of the revenue or it is merely a business expense that has occurred to protect the fixed asset. The taxpayer here has the spending, which is not having a permanent character of advantage to the business, comprises of rotating business expense (Ismer 2016). So as a consequence under the section 8 (1) of the ITAA 1997 the cost should be considered for business deductions.
Foreign tax offset
Conclusion:
The study that has been conducted above is relevant in determining the nature of deductions that a taxpayer will consider. So it can be evidently inferred that the cost here will be considered for business deductions.
The problem that has been put forward here is dealing with the spending that has been incurred by the taxpayer with the objective of opposing the business wind up petition. The study explains that whether such kind of expense can be or cannot be allowed for deductions.
- “FC of T v Snowden and Wilson Pty Ltd (1958)”
- “Section 8-1 of the ITAA 1997”
The problem that has been defined in the above stated issue puts forward an explanation that winding up of business will not be considered as deductions because it is a capital cost and section (1) of the ITAA does not provides the permission of deducting such expense. It should also be noted that Taxation Ruling of ID 2004/367 provides an explanation that any spending that is related to the production of revenue will be acceptable for deductions (Burkhauser, Hahn, and Wilkins 2015). The primary reason for considering the expense to be deductible is because the cost is incurred by the taxpayer in producing the assessable income.
As laid down in the judgement of “FC of T v Snowden and Wilson Pty Ltd (1958)”, spending originating in the normal course of the business or in no kind of previous situations the individual taxpayer was compulsorily required to occur then such kind of disbursement is not permitted from being held as acceptable deductions.
The legal expense in the present context that is incurred by the taxpayer for the purpose of opposing the winding petition would not be entitlement for admissible deductions. In spite of the cost qualifying under the positive limbs, it will not be entitlement for deductions because they form part of deep business structure. Incurrence of legal cost for opposing the petition will not be treated as admissible deductions for the reason that it owns the features of capital (Lang 2014).
Conclusion:
The discussion that has been presented in the above defined explanation it can be arguably bought forward that the expenses is non-admissible in the nature of deductions. The solitary reason regarding its omission is that the cost is regarded as capital under “Section 8-1 of the ITAA 1997”.
The statement give rise to the problem that is involved in the determination of the spending occurred for the legal spending on solicitor and whether such kind of spending can be permitted under “Section 8-1 of the ITAA 1997” for deductions.
- “Section 8-1 of the ITAA 1997”
Partnership expenses
In regard to the above stated issue any form of legal expenditure produced from the trade activities shall be regarded as admissible deductions. It is worth mentioning that in order to qualify the legal expenditure as deductible it must be related to the revenue producing activity. One of the very noteworthy considerations that has been put forward under the section 8 (1) of the ITAA 1997 is that the section does not allows the deductions of the expenses that is related to capital spending or private spending. If the expenses is incurred in deriving, non-exempted then also the expenses is not considered for deductions (Braithwaite 2017). The expense that has taken place for the taxpayer in this context for taking the service of the solicitor is considered for deductions. The objective for taking account the spending as the deductions is that the expenses is related to the process of gaining business revenue of the taxpayer.
Conclusion:
Under the section “Section 8-1 of the ITAA 1997” an evidence has been put forward that the business expense incurred in producing revenue must be inferred as the business deductions at the time of determining tax liability. The reason behind considering the legal expenditure as the allowable deductions is because it is incurred for revenue generating activity.
The case study of Big Bank here is presenting the issue that is directly related to the making of the claim for the purpose of input tax credit since the bank in this context has made GST related supplies.
- “Ronpibon Tin NL v FC of T”
- “Goods and Service Taxation Ruling of GSTR 2006/3”
- “GST Act 1999”
The issue that has been defined above is evidently related to the determination of the GST supplies so that the Big Bank can put forward the claim of input tax credit for the spending in the nature of advertisement made by it. It is noteworthy to denote that Chapter 2 of the GST Act 1999 provides vital considerations where a commercial unit will be permitted to claim input tax credit for the expenses that is occurred by the organization in the normal course of the business functions (Bankman et al. 2017). However, to claim the input tax credit the expenditure must be inclusive of the GST amount. The circumstantial evidence that has been noted in the case study is that Big Bank provided the customers with the service that spread over more than fifty branches across the country. Big Bank bought forward the programme of insurance and home content in the market besides providing the facilities of loans and deposits to the customers. The “Taxation Ruling of GSTR 2006/3” lay down the rules that are related to the process of calculating the input tax credit in respect of the above stated ruling (Markle 2016).
A noteworthy explanation that can inferred is that division 13-15 and 129 of the GST Act 1999 provides the overview of the creditable acquisition and the solicitation of the ruling (Cao et al. 2015). The taxation ruling of GSTR 2006/3 is applied on the organizations that exceeds the financial acquisition limit and are inside the purview of acquiring an input tax credit or the lower input tax credit.
The conclusive evidence that has been provided in the study of Big Bank Ltd, is that the bank has as the part of business incurred an advertisement expense that additionally comprises of the amount of the GST. it can be asserted that the GST ruling of “GSTR 2006/3”will be applied in this case (Hopkins 2016). The principal motive for putting on the GST ruling of “GSTR 2006/3” is for the reason that Big Bank efficaciously succeeds the conditions of applying for input tax credit. Taking in the account of the principles that has been laid down under the GST ruling of “GSTR 2006/3” that provides an important explanation (Taylor and Richardson 2014). The ruling defines that if a profitable commercial company is listed under the “GST Act 1999” or it is essentially required to obtain the registration, consequently it is inferred that the commercial entity will be under compulsion to make imbursement for GST relating to aggregate of pecuniary supplies made.
The GST ruling of “GSTR 2006/3”states thatthe commercial entity can claim for the input tax credit relating to the financial supplies made by it, which includes the sum of GST (Miller and Oats 2016). If the situation is defining that on a certain occasion an organization surpasses the commercial attainment limit consequently the assessable unit shall under no circumstances will be able to put forward the claim the all-inclusive magnitude of input tax credit. Still, it can be under the entitlement of making the claim of a percentage of those input tax credit.
Indicating the ruling that has been evidently concluded in the case of “Ronpibon Tin NL v FC of T”, authoritative characteristics of “GSTR 2006/3” is employed in arriving at the decisive principle of “extent” and “to the extent” GST supplies made (Vann 2016). Conferring this rule, the reckoning of GST should be performed in such a manner that there is no shortcoming in fair and reasonable allocation of input tax credit for a profit-making entity (Woellner et al. 2016). Signifying the instructions that has been inferred under the “para 11-5 and 15-5” of the “GSTR 2006/3” where a profit-making unit makes a profitable attainment and meet the requirements for creditable the determination then it becomes an important aspect of determining that the creditable attainment is made one or the other wholly or partially creditable.
There other significant requirements in respect of the “para 11-5 and 15-5” of the GST ruling of “GSTR 2006/3” that qualifies an acquisition for creditable purpose which states that the acquisition should be wholly creditable (King 2016). Conversely, on discovering the acquisition to be partly eligible for creditable purpose then it is necessary to ascertain the degree of creditable purpose.
Conferring the explanation that has been given under “Section 11-5 and 15-10” of the “GSTR 2006/3” a financial acquisition will be taken account as creditable purpose on satisfying the fact that the monetary supplies made by the profitable unit take account of the summation of input tax credit that can be asked for (Robin 2017). A conclusive evidence has been presented from the contemporary background of the Big Bank Ltd. The analysis performed can be bought forward by stating that the business supplies that is made in the present study is accompanying the creditable supplies. On performing the thorough analysis of the case study of Big Bank Ltd the bank has outdone the inception boundary of the fiscal attainment. As the consequences of the analysis, it can be bought forward that Big Bank Ltd will be able to claim input tax credit for the summation of GST supplies made (Russell 2016).
Conclusion:
As the explanation that has been made above for the case study of Big Bank a conclusive evidence can be stated that ruling of the GST Act 1999 will be applied for Big Bank. The most important reason for applying the act of GST is that the bank after satisfying the criteria of the act is successfully eligible for claiming input tax credit on the advertisement spending.
References
Bankman, J., Shaviro, D.N., Stark, K.J. and Kleinbard, E.D., 2017. Federal Income Taxation. Wolters Kluwer Law & Business.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2), pp.181-205.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and Wende, S., 2015. Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP, 1.
Hickman, K., 2015. Exploring the How of Tax Legislation. Jotwell: J. Things We Like, p.305.
Hopkins, B.R., 2016. The Law of Tax-Exempt Organizations+ Website, 2016 Supplement. John Wiley & Sons.
Ismer, R., 2016. Judicial Review of Tax Laws: The Coherence Requirement (Folgerichtigkeitsgebot). In Rational Lawmaking under Review (pp. 209-232). Springer International Publishing.
King, A., 2016. Mid market focus: The new attribution tax regime for MITs: Part 2. Taxation in Australia, 51(1), p.12.
Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.
Manning, R., Sciacca, R. and Alford, A., 2016. Tax Inversions: A Preliminary Review of Company Financial Data. Bates White, January, 12.
Markle, K., 2016. A Comparison of the Tax?Motivated Income Shifting of Multinationals in Territorial and Worldwide Countries. Contemporary Accounting Research, 33(1), pp.7-43.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Taylor, G. and Richardson, G., 2014. Incentives for corporate tax planning and reporting: Empirical evidence from Australia. Journal of Contemporary Accounting & Economics, 10(1), pp.1-15.
Vann, R.J., 2016. Hybrid Entities in Australia: Resource Capital Fund III LP Case.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.
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