Question 1
The issue concerned here is the deduction of expenditure from income that is taxable in account of loss or any outgoings, which the taxpayer incurred.
- “Section 8-1 of the ITAA 1997”
- “British Insulated & Helsby Cables v. Atherton (1926)”
As per “Section 8-1 of the ITAA 1997” an individual comes under taxation limit is allowed to get deduction for expenditure given condition. Deductibility is applicable when the outgoing amount is accounted as a loss or in form of capital outgoing and in case where the capital nature or the incurred loss or expenditure is of private nature (Bhatti 2015). In the given scenario, the expenditure taken for consideration is for shifting of machines to a new site. This represents outgoing nature of capital. In accordance with “Section 8-1 of the ITAA 1997”, the relocation cost of machines is restricted from being taken as deductible outgoings.
The case of “British Insulated and Helsby Cables Ltd v. Atherton (1926)” shows outgoings occurred during transportation process, entail advantages in favor of assets those are depreciable (Oosthuizen 2013). “taxation ruling of IT 2197” defines cost incurred in times of shifting machines to a new site including its installation cost present capital expenditure there is no deduction of income tax allowed for this kind of cost.
Conclusion
Cost of moving machineries to a new site is not allowed as deduction under Section 8-1 of ITAA 1997 because this is characterized as capital cost.
The issue here is the whether a tax payer can obtain deduction pertaining to asset revaluation under “Section 8-1 of the Income Tax Assessment Act 1997”.
- Section 8-1 of the ITAA 1997
Assets revaluation cost for the effect of insurance coverage claims for tax deductibility as per “Section 8-1 of the ITAA 1997”. It is a cost that a taxpayer in necessarily accountable for carrying business with an objective of producing or generating taxable income (Somers and Eynaud 2015). At first, these outgoings are considered neither capital nor private nor domestic nature. It represents a kind of repetitive cost. The taxpayer accounts cost for generating accessible income. The revaluation cost is connected with operation activities, which are directly connected for generating taxable income. Therefore, it is not accounted for either domestic or capital in nature.
Conclusion
Characteristic of machine revaluation is generally consistent with situation under “Section 8-1 of the ITAA 1997”. Henceforth, the incurred cost here will be come under deductible expenditures.
The issue concerned here is whether the legal expenses that a company incurred opposing a petition for winding up is allowable under “section 8-1 of the ITAA 1997”.
- a) “Sun Newspapers Ltd v F C of T (1938)”
- b) “Section 8-1 of the ITAA 1997”
Question 2
The nature of legal expenditure is an important aspect before making any assertion of deductibility of such expenditure considered under “Section 8-1 of the ITAA 1997”. There is an advantage of legal expenditures given its nature (Barrett and Elsayed 2014). The advantage is that it seeks to gain after the expenditure incurred. The category of legal expenditure generated from normal activities of business and the purpose of the concerned outlay is dedicated towards revenue then this kind of legal expenditure is considered as deductible.
Legal expenditure of capital in nature is not considered under deductibility norms. The instance of “Sun Newspapers Ltd v F C of T (1938)” is one example. Here, the legal expenditure is not deductible as expenditure is incurred for structural purpose rather than being operational (Anuradha 2013). In this case, recorded expenditure is capital in nature and hence is not deductible.
Conclusion
As per rules and applicability of the “Section 8-1 of the ITAA 1997”, legal expenditure having capital in nature is not considered as deductible
The issue considered here is the whether a taxpayer is allowed for deduction in case of legal expenditure made for regular activities of business.
- Herald & Weekly Times v F C of T (1932)
- Section 8-1 of the ITAA 1997
As per legislation Section 8-1 of the Income Tax Assessment Act 1997, spending of business-connected operation of the business with an objective of revenue generation is required to be considered under allowable deduction. Some exceptions are related to the legal expenditure regarding deductibility (Harcup 2014). The area of exceptions is private, domestic and capital. Therefore, legal expenditures having no association in producing taxable income is as not allowed for any deduction. As in the given situation, there are specific cases of legal expenditure of the insurer in relation to accessible income generation. This gives rationale for treated them as allowable deduction in references to section section 8-1 of the Income Tax Assessment Act 1997 (Devos 2012).
Conclusion
It can be concluded from the discussion made above that legal expenditures associated with operation of business and is accounted for generation of taxable income should be regarded as deductible allowances as per reference to section 8-1 of the Income Tax Assessment Act 1997.
The primary issues concerned with ‘Big Bank’ is determination of input tax credit in relation to advertisement expenses taking place to GSTR Act 1999
For the issue concerned the applicable legislations are as follows
- “Goods and Service Tax Ruling of GSTR 2006/3”
- “GST Act 1999”
- “Ronpibon Tin NL v F C of T”
Goods and Service taxation ruling of GSTR 2006/3 is a tax legislation that offers guidelines associated with particular techniques to apply in determination of input tax credit with proper administration charges to the financial suppliers in reference to the latest system of GST Act 1999 (Lee 2012). The legislative division of 11, 15 and 129 of the GST Act indicates inclusion of regulation that is applicable under the said division rule. Additionally, this ruling gives an explanation through provision of reduced input tax credit and under “Division 70” concerning interaction with above-mentioned methods. Every taxable entity is eligible under this ruling division. They are required to be registered under law of taxation for financial suppliers’ acquisition crossing the set threshold limit (Zakaria et al. 2014). The registered taxable units are qualified for input credit tax and decreased input tax.
Question 3
Given the situation of Big Bank, it is obtained that Big Bank Limited incurs an expense of $1,650,000, as Goods and Service Tax was the component of advertisement expenditure for the preceding year. The tax legislation Goods and Service taxation ruling of GSTR 2006/3, is applicable for Big Bank Limited and the company is eligible for input tax credit and can reduce the same (O’Connell, Martin and Chia 2013). The specific state of ruling of GST is necessary to be paid with an objective of taxable supplies for situation where the concerned organization is already registered or is eligible for registration. The GST regulation suggests that the taxable organization should claim for input tax credit for GST for acquirement of import for the concerned organization or entity. One thing that need special attention is the fact that when a taxable entity makes financial supplies and exceeds the limit for threshold acquisition then that particular individual or organization cannot recover all GST charged. The individual or organization is only able to recover some part of GST charged on them (Tiley and Loutzenhiser, 2012).
In current scenario, given the context of Big Bank Limited, the concerned company is recorded under GST. The GST is payable for the company on company’s supplies that is taxable and incurred by the company. As legislated in GST Big Bank Limited is therefore accompanied for claiming input tax credit on the amount of GST charged accounting for advertising expenses for the concerned enterprises. In accordance to “para 11-5 (a) and 15-5 (a)” of the “Goods and Service Tax Ruling of GSTR 2006/3” Considering an acquisition to be credible acquisition it is necessary for the entity to be creditable entirely and if not fully then at east it should be partly creditable (James, Sawyer and Wallschutzky 2015).
‘Extents’ and ‘to be extents’ principles should be applied in analyzing legislation of GST for the case of Ronpibon Tin NL v. FC of T. In connection to this, it is necessary for the method of apportion adoption to be practical and appropriate depending on specific circumstances of business firms. It is evident in the given scenario that financial supplies made by Big Bank limited have passed the threshold limit of financial acquirement. This indicates that the concerned company is able only to partly recover the imposed GST on it (Tang 2016). GSTR ruling of “Section 11-5 and 15-10” indicates that acquisition that Big Bank Limited incurred should be considered for as eligible for input tax credit for the financial supplies that Big Bank Ltd undertaken.
Question 4
The entire story of Big Bank Limited is concerned with the interrelation of advertising expenditure and rules and regulation pertaining to Goods and Services tax. Now a days advertising becomes one of the important expenses for almost every enterprises. Advertising helps to spread information among the customers and establishes a good relation between the enterprise and its customers. The legislation of Goods and Service tax and ongoing changes needs to be well understood by the enterprise before claiming for input tax credit. The validation of these claims depend number of aspects as re discussed in light of appropriate tax legislation.
In the context as given for Big Bank Ltd, expense for advertisement was associated with the purpose of acquisition that is creditable. The Financial acquisition of Big Bank Ltd has exceeded the amount of set threshold. When expenses exceed the threshold limit, then enterprises are eligible for input tax credit (Millar 2014). As the threshold limit is exceeds by the expenditure of advertising then as per “Goods and Service Tax Ruling of GSTR 2006/3”, Big Bank it allowed to claim input tax credit for financial supplies incurred by the enterprise.
Conclusion:
In the above discussion, the prospect of the claim for input tax credit and advertising expenditure of Big Bank Ltd is analyzed. As the expenditure exceeds threshold limit, Big Bank Ltd is eligible to claim for input tax credit in reference to “GSTR 2006/3” on the amount of GST that is imposed on the advertisement expenditure made by it.
References
Anuradha, N., 2013. What constitutes income in the context of section 4 income tax act 1967 and judicial interpretations (Doctoral dissertation, Universiti Utara Malaysia).
Barrett, J. and Elsayed, A., 2014. Deductibility of employer contributions to employee remuneration trusts-where are we at?. Governance Directions, 66(5), p.307.
Bhatti, M., 2015. Taxation treatment of Islamic finance products in Australia. Deakin L. Rev., 20, p.263.
Devos, K., 2012. The impact of tax professionals upon the compliance behaviour of Australian individual taxpayers. Revenue Law Journal, 22(1), p.31.
Harcup, T., 2014. A dictionary of journalism. OUP Oxford.
James, S., Sawyer, A. and Wallschutzky, I., 2015. Tax simplification: A review of initiatives in Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1), p.280.
Lee, N., 2012. What is Financial Literacy, and Does Financial Literacy Education Achieve Its Objectives? Evidence from Banks, Government Agencies and Financial Literacy Educators in
Millar, R., 2014. VAT/GST in a Global Digital Economy: Looking Ahead-Potential Solutions and the Framework to Make Them Work.
O’Connell, A., Martin, F. and Chia, J., 2013. Law, policy and politics in Australia’s recent not-for-profit sector reforms. Austl. Tax F., 28, p.289.
Oosthuizen, R., 2013. A framework for the income tax deductibility of intellectual property expenditure incurred by South African taxpayers. The International Business & Economics Research Journal (Online), 12(3), p.373.
Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO’s proposed treatment of unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.
Tang, C., 2016. Australian GST update—2015. World Journal of VAT/GST Law, 5(1), pp.32-41.
Tiley, J. and Loutzenhiser, G., 2012. Revenue Law: Introduction to UK tax law; Income tax; Capital gains tax; Inheritance tax. Bloomsbury Publishing.
Zakaria, A., Edwards, D.J., Holt, G.D. and Ramachandran, V., 2014. A Review of Property, Plant and Equipment Asset Revaluation Decision Making in Indonesia: Development of a Conceptual Model. Mindanao Journal of Science and Technology, 12(1), pp.1-1.
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