Issue 1: Incurred cost due to the move to machinery to a new site under Section 8-1 of the Income Tax Assessment Act 1997
Issue: The provided situation is related with the incurred cost due to the move to machinery to a new site as per “Section 8-1 of the Income Tax Assessment Act 1997”.
Regulations: The regulations are provided below:
- Section 8-1 of the Income Tax Assessment Act 1997
- British Insulated & Helsby Cables
Application: Taxpayers have the right to claim their allowable deduction on the incurred cost by them under “Section 8-1 of the Income Tax Assessment Act 1997”. Thus, as per “Section 8-1 of the Income Tax Assessment Act 1997”, the cost to move the machinery to a new site will only be allowed for allowable deduction in case the machinery is used for earning income. In case of the provided scenario, there will not be any allowable deduction on the cost to move the machinery as moving of the machinery end up in increasing the value of the asset (Barkoczy 2016).
As per the verdict in the case of “British Insulated & Helsby Cables”, the incurred cost helps to understand the fact that it provides the business with an advantage from the moving of the depreciable asset. “Taxation ruling of TD 92/126” states the fact that the installation of the machinery and the starting of its operation are the parts of revenue. Thus, it can be said that the moving cost of the machinery to a new site is capital expenditure and thus, it will not be subject to allowable deduction (Coleman and Sadiq 2013).
Conclusion:
According to the above discussion, it can be concluded that the cost related to the moving of machinery to a new site is capital expenditure. For this reason, this particular cost will not be subject to allowable deduction.
Issue: The issue is related with the revaluation of asset that can affect the insurance cover. The concern is to determine the allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.
Regulations: The regulation is “Section 8-1 of the Income Tax Assessment Act 1997”.
Application: From the provided situation, it can be seen that the cost has arise due to the revaluation of assets and this cost can affect the insurance cover. As per “Section 8-1 of the Income Tax Assessment Act 1997”, this particular cost will be subject to permissible deduction sue to the fact this type of cost of repetitive in nature (Moore and Corrigan 2013). Moreover, the revaluation of assets cost that can affect the insurance cover is directly connected to the fixed assets. Most importantly, it is necessary to determine the nature of deduction at the time of the computation of tax returns. It needs to be determined that whether the cost is occurred at the time of generating the assessable income or simply it has occurred for safeguarding the assets. In case of the particular scenario, it can be seen that the cost has occurred due to the revaluation of the assets. Thus, it can be seen that the incurred cost for asset revaluation causes temporary benefit for the company. Apart from this, the revelation of asset is repetitive in nature. All these reasons together make the revaluation cost eligible for allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997” (Kenny, Blissenden and Villios 2017).
Issue 2: Revaluation of asset that can affect the insurance cover under Section 8-1 of the Income Tax Assessment Act 1997
Conclusion:
The above discussion denotes the fact the incurred cost due to the revaluation of assets is repetitive in nature. In addition, the cost is incurred for the generation of assessable income. Thus, it can be concluded that this revaluation cost will be subject to allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.
Issue: The present case deals with the legal expenses of a company in order to oppose the petition of winding up as per “Section 8-1 of the Income Tax Assessment Act 1997”.
Regulations: The required regulations are provided below:
- Section 8-1 of the Income Tax Assessment Act 1997
- FC of T v Snowden and Wilson Pty Ltd (1958) 99 CLR 431)
Application: In respect to the present scenario, it needs to be mentioned that cost related with the winding up of business is occurred from the business operation of the company and for this reason; it is regarded as capital expenditure. For this particular reason, this cost will not be subject to allowable deduction under “Section 8-1 of the Income Tax Assessment Act 1997”. “Taxation ruling of ID 2004/367” states the fact that the expenses related with the discharging of business operations is subject to permissible deduction, as the main motive behind the occurrence of these expenses is the production of revenue (Robin 2017).
The verdict in the case “FC of T v Snowden and Wilson Pty Ltd (1958)” states that the unusual expenses that the taxpayers did not require to incur previously will not be allowed for permissible deduction. In spite of the meeting of positive limbs, the legal expenditure to oppose the winding up petition will not be subject to allowable deduction. The main reason is that this expense helps to form the deep structure of the companies. Apart from this, this expense is capital in nature (Milton 2013).
Conclusion:
According to the above-discussion, it can be concluded that the cost to oppose the petition of winding up is capital expenditure and it forms the deep structure of the company. This expenses is related with the business operations of the companies. Thus, this expense will not be considered as allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.
Issue: The issue is related with the legal expenses for the payment of solicitor for various purposes. This case also includes the determination of allowable deduction under “Section 8-1 of the Income Tax Assessment Act 1997”.
Regulations: The required legislation is “Section 8-1 of the Income Tax Assessment Act 1997”.
Issue 3: Legal expenses of a company in order to oppose the petition of winding up under Section 8-1 of the Income Tax Assessment Act 1997
Application: As per the above case, the occurrence of the legal expenses from the business operations of the companies is subject to allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”. Apart from this, the legal expenses need to be related with the generating of business income. In case of this case study, it needs to be mentioned that all the legal expenses are capital, personal and domestic in nature and thus, these legal expenditures will not be subject to allowable deduction (Morgan, Mortimer and Pinto 2013).
From the above discussion, it can be seen that the legal expenses of the individuals that are not connected with the generation of income will not be subject to permissible deduction. In case of the provided case study, it can be seen that all the legal expenditures of the taxpayer are occurred for the purpose of business and for the generation of assessable income. Thus, it can be said that these legal expenditures fall under the purview of business. All these above reasons make the legal expenditure eligible for permissible deduction under “Section 8-1 of the Income Tax Assessment Act 1997”.
Conclusion:
From the above discussion, it can be concluded that the legal expenses incurred for the payment of the solicitor needs to be considered as business expenses. Thus, under “Section 8-1 of the Income Tax Assessment Act 1997”, all these legal expenses are eligible for allowable deduction for taxation laws (Kenny 2013).
Issue: In the present case, the issue is associated with the determination of input tax credit for the advertisement expenses of Big Bank Limited under the “GST Act 1999”.
Regulations: The regulations in this case are provided below:
- Goods and Service taxation ruling of GSTR 2006/3
- Ronpibon Tin NL v. FC of T
- GST Act 1999
- paragraphs 11-5 and 15-5
- subsection 15-25
Application: It is mentioned in the second chapter of the “Goods and Service Act 1999” that the business organizations will be eligible for the purpose of input tax credit on the business expenses that are incurred for the ordinary course of businesses given the situation that all these expenditures are inclusive of GST. As per the provided case study, it can be seen that Big Bank Limited is a provider of financial services and has more than 50 branches all over the world. Apart from loans and deposits, Big Bank has introduced the policy of insurance and home content. In relation to the “Goods and Service Taxation Ruling of GSTR 2006/3”, there are guidelines for the computation of input tax credit for the companies (Krever 2013).
Issue 4: Legal expenses for the payment of solicitor for various purposes under Section 8-1 of the Income Tax Assessment Act 1997
“Division 11-15 and 129 of the GST Act 1999” contains the definition of creditable purpose and original implementation (Morgan, Mortimer and Pinto 2013). This particular ruling is applicable for the registered business entities and for the entireties that are eligible for registration for the objective to acquire the financial suppliers that have already exceed the limit for financial acquisition for the reason of input tax credit or the lower input tax credit.
The particular case study is related with the issue of Big Bank Limited regarding the generation of advertisement expenses and this expense is inclusive of GST. For this reason, the GST regulation of “GSTR 2006/3” is applicable in the context of Big Bank Limited. The eligibility of Big Bank for input tax credit is the main reason behind this. The ruling of “GSTR 2006/3” that in case a company is registered or the company is about to be registered, the companies are eligible for the payment of GST on the financial supplies they have made (Woellner 2013). The GST scheme provides the individual taxpayers or the companies eligible for the claiming of input tax credit related to the GST inclusive financial supplies from the import of those units. In case a business organization makes financial supplies and crosses the preset limit for financial supplies, then the taxpayer or the firm will not be eligible to claim input tax credit for GST. However, there is a chance for the recovery of some part of such claim.
As refer to the verdict made in the case of “Ronpibon Tin NL v FC of T”, the import concepts of ‘extent’ and ‘to the extent’ are applied for the recognition of the rulings of GST. As per this particular ruling, the methods or techniques for the computation of GST need to be reasonable and fair concerned with the particular business organizations. According to “para 11-5 and 15-5”, for making the acquisition qualify for the purpose of credibility, it is required to become the creditable acquisition complete or partial complete (Anderson, Dickfos and Brown 2016).
In addition, as per the ruling of “Para 11-5 and 15-5”, one of the major requirements for making the financial acquisition eligible for creditable purpose, it is needed for the acquisition to be entirely credible. In the cases, it is found that the acquisition is partial for the purpose of creditable acquisition; it is required for them to mention the degree of creditable purpose. As per the description under “Section 11-5 and 15-10”, an acquisition will be considered as creditable in case the financial supplies includes the amount of acquisition for the purpose of input tax credit for claiming. In case of Big Bank, it is notable that the advertisement expenditures is related with creditable supplies. By applying the ruling of “GSTR ruling of 2000/3” in the existing case of Big Bank, this fact can be established that Big Bank has crossed the limit of financial acquisition threshold and this aspect makes Big Bank eligible for the claiming of input tax credit related to the made GST supplies (James 2016).
Conclusion:
From the above discussion, it can be seen that advertisement expenses made by Big Bank is for the purpose of acquisition of creditable supplies. Thus, based on the above discussing, it can be concluded that as per “GSTR ruling of 2000/3”, Big Bank Limited will be eligible for the claiming of input tax credit on the amount spent on advertisement expenditures.
Answer to Question 4References
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Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Coleman, C. and Sadiq, K. (n.d.). 2013 Principles of taxation law.
Coleman, C. and Sadiq, K. (n.d.). Principles of taxation law 2013.
James, K., 2016. The Australian Taxation Office perspective on work-related travel expense deductions for academics. International Journal of Critical Accounting, 8(5-6), pp.345-362.
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Krever, R. 2013. Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
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Moore, A. and Corrigan, A. (n.d.). 2013 Taxbook.
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Morgan, A., Mortimer, C. and Pinto, D. 2013. A practical introduction to Australian taxation law. North Ryde [N.S.W.]: CCH Australia.
ROBIN, H., 2017. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.
The taxpayers’ guide 2013 & 2014. 2013. Milton, Qld.: Wrightbooks.
Woellner, R. 2013. Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. (n.d.). Australian taxation law 2014.
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