Income Tax Assessment: Deductibility Of Expenses

FBT payable by Webster Pty Ltd

Based on the given context, the main question is whether the fee charged by the public relations firm as advisory charges need to be held under reductions as per “Income Tax Assessment Act 1936” and “Income Tax Assessment Act 1997”.

1. “Income Tax Assessment Act 1936 (ITAA 1936)”
2. “Income Tax Assessment Act 1997 (ITAA 1997)”

The fees of $90,000 was paid in order to obtain an advice on the present case of Optimus Two Pty Ltd. Based on the rulings of “section 8-1 of the ITAA 1997”, it has been discerned that investment advice needs to be held deductible as the expenditure incurred is incidental nature (Deutsch, R.L., 2014).

As per the case of “F C of T v. Cooper 91 ATC 4396” it has been clearly discerned that the test of deductibility would be having essential characteristics of an expenditure for the purpose of gaining an accessible income (Ato.gov.au. 2017).

Conclusion

Based on the depiction made from the above case it can be clearly stated that as per “TD 95/60” of “ITAA 1997” the fee charged by the public relations firm as advisory charges needs to be considered for deductions.

In the given case the main issues to remind whether the advertising charges in the newspaper should be considered for deductions based on “Income Tax Assessment Act 1936” and “Income Tax Assessment Act 1997”.

1. “ITAA 1936”
2. “ITAA 1997”

The advertisement publishing cost of $93,000 is not seen to be repeatable in Nature. Based on the rulings under “Division 42 of the ITAA 1997” the outlay of the cost which are not capital in nature cannot be considered for income deductions. (Sharkey, N., 2015).

As per the acknowledgement made by Dixon J in “Sun Newspapers Ltd v FC of T (1938) 61 CLR 337”, the good will have established in the widespread advertising campaign which was not intended to maintained or repeatable in nature. In this case the expenditure of advertising should be regarded as ordinary outgoing expenditure for business (Law.ato.gov.au. 2017).

Conclusion

Based on the application of “Division 42 of the ITAA 1997” it can be discerned that advertisement publishing cost should not be considered for permissible deductions.

The important issues to discern whether the cost for hearing of the legal firm should be taken for consideration under income tax deduction as per the application of “ITAA 1997” and “ITAA 1936”

1. “ITAA 1936”
2. “ITAA 1997”

The different types of depictions made in “Income Tax Assessment Act 1997”, based on the given case shows that an exempt need to be from the income tax based on “section 83?240 or 305?65”. It has been further discerned that at the firm representing Optimus Two Pty Ltd. was associated to be assisting in the legal hearing process the amount of $77,000 needs to be exempted from income tax assessment (Ato.gov.au. 2017).

Fees paid to public relations firm

The relevant execution of this has been further seen to be discussed in “paragraph (17A)(f)” which relates to the section of other exemptions made by the taxable incomes. Henceforth, the amount of $77,000 is considered to be deductible in nature.

Conclusion

Based on the depictions made from in “Income Tax Assessment Act 1997” and “section 83?240 or 305?65” it can be discerned that the legal representation charge by regulatory authorities needs to be considered for the deductions under income tax.

The main question here is to discuss whether the lump sum for the compensation payments which are as a sign of good faith and not acknowledgeable liability needs to be considerable for income tax deductions as per rulings under “Income Tax Assessment Act 1936” and “Income Tax Assessment Act 1997”.

1. “ITAA 1936”
2. “ITAA 1997”

The “section 8-1 of the ITAA 1997” seen to account for the allowable deductions for carrying on a business activity. However, no deductions are to be allowed when outgoing for losses are of capital, domestic or private in nature. In the given case many clients of Optimus Two Pty Ltd. seem to suffer losses due to poor selling practices. In addition to this, the amount needs to be considered as an assessable income and not a part of such activity which is producing liability.

The application of the case “Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949)”, showed that in order for the expenditure to be a liable for deduction, the various types of outgoing gain or producing of assessable income needs to be incidental and relevant in nature (Ato.gov.au. 2017).

Conclusion

Based on the depictions made from “section 8-1 of the ITAA 1997”, it can be a certain that the compensation payments which are as a sign of good faith and not acknowledgeable liability cannot be held considerable for income tax deductions as per rulings under “Income Tax Assessment Act 1997”.

The main question is to discern whether the fine charged as a hearing for both Laurie and Julian for being suspended for five years needs to be considered for deductions under “Income Tax Assessment Act 1936” and “Income Tax Assessment Act 1997”.

1. “ITAA 1936”
2. “ITAA 1997”

Based on the application of rulings “under 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)” it has been discerned that an individual is not entitled for deduction for fines imposed by the regulatory authorities. Henceforth, it has been ascertained that fine of $100,000 cannot be considered for deductions for income tax.

As seen in the case of “Herald and Weekly Times Gavan Duffy CJ and Dixon J at CLR 120” the penalty imposed was disallowed for deduction as the publishers they held liable for deducting money paid either on or before the judgement being made for the legal costs (Ato.gov.au. 2017).

Conclusion

Based on the application of rulings under “8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)”, the penalty imposed by regulatory authorities cannot be held for deduction for the income tax assessment.

2.

The total FBT amount payable by Webster Pty Ltd, using the statutory formula method will be $ 4,660.00.

The total FBT amount payable by Webster Pty Ltd, using the Operating Cost Formula Method will be $ 4,170.00. The rational follow our amount is due to the consideration of only the portion of private use of the vehicle by the taxpayer (Ato.gov.au. 2017).

References

Ato.gov.au. (2017). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?DocID=SAV/FBTGEMP/00008&PiT=99991231235958/ [Accessed 24 Sep. 2017].

Ato.gov.au. (2017). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?DocID=TXD/TD9560/NAT/ATO/00001&PiT=99991231235958#LawTimeLine [Accessed 24 Sep. 2017].

Ato.gov.au. (2017). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?DocID=PAC/19360027/44&PiT=99991231235958 [Accessed 24 Sep. 2017].

Ato.gov.au. (2017). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?docid=AID/AID2003616/00001 [Accessed 24 Sep. 2017].

Ato.gov.au. (2017). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?Mode=type&TOC=%2205%3ACases%3AAdministrative%20Appeals%20Tribunal%3A1969%3ACase%20A80%20-%20(23%20December%201969.)%3A%230101%23Judgment%20by%20F.%20E.%20Dubout%20(Chairman)%26c%3B%22&DOCID=%22JUD%2F69ATC432%2F00001%22 [Accessed 24 Sep. 2017].

Deutsch, R.L., 2014. Australian Tax Handbook 2006.

Law.ato.gov.au. (2017). TR 2001/6 – Income tax: deductibility of commercial website expenditure (Current for 25 July 2001 to 4 August 2009). [online] Available at: https://law.ato.gov.au/atolaw/view.htm?locid=%27TXR/TR20016/NAT/ATO%27&PiT=20010804000001 [Accessed 24 Sep. 2017].

Sharkey, N., 2015. Coming to Australia: Cross border and Australian income tax complexities with a focus on dual residence and DTAs and those from China, Singapore and Hong Kong-part 2. Brief, 42(11), p.41.

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