Case 1: Moving Machinery

Requirement 1

Issue: This particular issue is related with the generation of costs incurred out of the moving of machinery under “Section 8-1 of the Income Tax Assessment Act 1997”.

Regulations: Followings are the required legislations:

1. Section 8-1 of the Income Tax Assessment Act 1997
2. British Insulated & Helsby Cables

Application: It is the right of the individual taxpayer to claim for their permissible deduction from their incurred cost under “Section 8-1 of the Income Tax Assessment Act 1997”. In “Section 8-1 of the Income Tax Assessment Act 1997”, it is mentioned that the cost incurred for moving machinery will be applicable for permissible deduction in case the taxpayer uses the machinery for generating taxable income (Tiley & Barbara Abraham 2013). In the present case, the cost to move the machinery to a new site will not be applicable for allowable deduction as this process increased the cost of the machinery.

From the case of British Insulated & Helsby Cables”, the fact is visible that the transportation cost incurred in the shifting of the depreciable asset provided the business with constant extra benefits. In this situation, “Taxation ruling of TD 92/126” describes the fact that the installation of machinery and starting functions of its will be considered for cost when it is done for the revenue generation. In case of the present scenario, the cost involved with the moving of machinery to a new site is capital expenditure and thus is not under allowable deduction (Kenny 2013).       

Conclusion: Thus, based on the above discussion, it can be concluded that as per “Section 8-1 of the Income Tax Assessment Act 1997”, the cost to move the machinery will not be subject to allowable deduction as it is a capital expenditure.

Issue: The issue is related with the revaluation of assets that affects the insurance cover. It needs to be determined that whether the cost to revaluation is applicable for allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.

The relevant regulation is “Section 8-1 of the Income Tax Assessment Act 1997”.

From the provided information about the case, it can be seen that the cost is generated out of the revaluation of the assets and this cost affects the insurance cover. It needs to be mentioned that this cost of revelation of assets will be applicable for allowable deduction as this particular cost of occurred repetitively under “Section 8-1 of the Income Tax Assessment Act 1997” (Martin 2015).  Apart from this fact, it needs to be mentioned that the asset revaluation cost that can affect the insurance cover has direct relation with the fixed assets. It is required for the taxpayer at the time to compute the tax return to determine the deductible nature of the expenditure. More precisely, it needs to be ascertained that whether the revaluation cost of the assets occurred due to the generation of taxable income of it is occurred in order to safeguard the assets. In case of this particular situation, the revaluation cost of the machinery contributed to the temporary benefit of the company and this particular cost is repetitive in nature. For this reason, this revaluation cost of assets will be applicable for permissible deduction under “Section 8-1 of the Income Tax Assessment Act 1997” (Bevacqua 2015).         

Case 2: Revaluation of Assets

Conclusion: 

As per the above discussion, it can be seen that the revaluation cots of the assets is repetitive in nature that occurs frequently. Thus, it can be concluded that this particular cost will be subject to allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.

Issue: This particular case puts emphasis on the fact that whether legal expenses to oppose winding up of business are applicable for permissible deduction or not under “Section 8-1 of the Income Tax Assessment Act 1997”.

Followings are the required legislations:

1. Section 8-1 of the Income Tax Assessment Act 1997
2. FC of T v Snowden and Wilson Pty Ltd (1958) 99 CLR 431)

In “Section 8-1 of the Income Tax Assessment Act 1997”, the fact is described that the cost to winding up of the businesses is considered as business expenditures for the reason of its derivation from business operation and thus, this cost will not be applicable for permissible deduction. In this situation, it is described in “Taxation ruling of ID 2004/367” that the amount of expenses incurred at the time to discharge the business operations legally needs to be considered for permissible deduction (Middleton 2015). This expense will be considered for allowable deduction as it is occurred at the time of revenue generation.

As per the verdict in “FC of T v Snowden and Wilson Pty Ltd (1958)”, it can be said that the expenditure that is not usual for the taxpayer and the taxpayer has not occurred these types of expenditures before will not be applicable for allowable deduction (Pagura 2014).  In the provided case, the legal expenses occurred to oppose the winding up of business would not be subject to allowable deduction even after the meeting of positive limbs. The reason for not considering this cost for allowable deddduction is that this cost form the deep structure of the business. apart from this, this particular legal cost for opposing the winding up of business is capital expenditure.

Conclusion: 

Thus, based on the above discussion, it can be observed that the legal cost to oppose the wind up petition of the business will not be considered for permissible deduction under “Section 8-1 of the Income Tax Assessment Act 1997” as it is a capital expenditure and forms the deep structure of the business.

Issue: The issue is related with the ascertainment of allowable deduction on the legal expense of the solicitor for various purposes under “Section 8-1 of the Income Tax Assessment Act 1997”.

Regulations: The required regulation is “Section 8-1 of the Income Tax Assessment Act 1997”.

Application: As per the provided case study, it can be seen that the legal expenses occurred from the business activities will be subject to allowable deduction as per “Section 8-1 of the Income Tax Assessment Act 1997” (Woellner et al. 2016). For this, the legal expenses must be occurred for the generation of assessable income. In this case, it needs to be mentioned that the legal expenses of the taxpayers that are capital expenditure and are personal as well as domestic in nature will not be applicable for allowable deduction and they are non-exempted income.

Case 3: Legal Expenses

Thus, from the above analysis, it can be seen that the legal expenses occurred by the taxpayer that do not fall under the purview of the business activities would not be applicable for permissible deduction. In case of the provided case study, it can be seen that the legal expenses of the solicitors for various purpose are associated with the business activities and the generation of taxable income will be treated as permissible deduction under “Section 8-1 of the Income Tax Assessment Act 1997” (Barkoczy 2016).     

Conclusion: From the above discussion, it can be concluded that the legal expenses of solicitor for various purpose are related with the business operations of the company and thus, these expenses will be allowable for permissible deduction as per “Section 8-1 of the Income Tax Assessment Act 1997”.

Issue: The issue is related with the determination of input tax credit of Big Bank Limited related with the advertisement expenses under “GST Act 1999”.

Followings are the required legislations:

1. Goods and Service taxation ruling of GSTR 2006/3
2. Ronpibon Tin NL v. FC of T
3. GST Act 1999
4. paragraphs 11-5 and 15-5
5. subsection 15-25

Application: In the ruling of “Goods and Service Act 1999”, it is stated that the business organizations are eligible to claim their input tax credit on the expenses generated out of the ordinary course of business, but the expenses need to be inclusive of GST. As per the provided case study, Big Bank Limited provides various financial services and the company has more 50 branches countrywide. Along with providing loans and deposits, Big Bank also provides the services of insurance and home content. All the regulations and guidelines related to the procedures and implementation of input tax credit of the companies are described in “Goods and Service Taxation Ruling of GSTR 2006/3” (Campbell 2016).

The ruling of “Division 11-15 and 129 of the GST Act 1999” includes the extent of creditable purpose and original implementation (Braithwaite 2017). This ruling is applicable for taxable entities. In addition, this ruling is applicable for the business entities that are registered under income tax or about to be registered for the acquisition of financial supplies that have already crossed the limit of financial acquisition and they are within the range of input tax credit or lower input tax credit.

The provided case study includes the case of Big Bank Limited that has an advertisement expenses inclusive of GST. For this reason, the GST ruling of “GSTR 2006/3” can be applied in the case of Big Bank. This is because of the eligibility of Big Bank for claiming input tax credit. As per the ruling of “GSTR 2006/3”, in case an organization is registered for taxation and is eligible for the registration, then the organization needs to pay the amount of GST on the financial supplies they made (Davis et al. 2015). Thus, it can be said that the GST ruling provides the taxable entities the right to bring forward the claim for input tax credit related with the financial supplies and that is inclusive of GST. In case, the business organizations make financial supplies and the amount of financial supplies crosses the limit for prescribed financial supplies, then these business organizations will not be able to bring forward their claims for input tax credit under GST ruling. However, they are able to recover some part of the input tax claim.

Case 4: Advertisement Expenses

The verdict in the case of “Ronpibon Tin NL v FC of T” contains the aspects of ‘extent’ and ‘to the extent’ that can be applied in the ruling of GST (Burkhauser, Hahn and Wilkins 2015). This particular ruling provides the taxpayers with the fair and reasonable methods for the computation of GST for the firms. The ruling under “Para 11-5 and 15-5” states that the creditable acquisition need to be partly or fully for the qualification of these acquisitions as creditable purpose. Other kinds of regulations can be seen to make an acquisition for creditable purpose under the ruling of “Para 11-5 and 15-5”. It needs to be mentioned that the financial acquisition needs to be entirely creditable (Daley and Coates 2015). As per this rule, for the partial creditable purpose acquisitions, it is needed for them to mention the degree of partial acquisition. In addition, in case an acquisition is found to be partial creditable purpose, they must be considered as entirely creditable. “Section 11-5 and 15-10” states that the financial acquisition needs to be considered as creditable acquisition in case the amount of financial supplies includes the amount of input tax credit. In case of Big Bank Limited, the advertisement expenses of the company are related with creditable purpose. As per “GSTR ruling of 2000/3”, Big Bank has crossed the limit of financial acquisition and thus, the company is eligible for input tax credit under GST act (Cao et al. 2015).   

Conclusion: Thus, based on the above discussion, it can be said that Big Bank is eligible for the claiming of input tax credit on the advertisement expenses under “GSTR ruling of 2000/3”.

References

Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.

Bevacqua, John, 2015. ATO accountability and taxpayer fairness: An assessment of the proposal to split the Australian taxation office. University of New South Wales Law Journal, The, 38(3), pp.995–1014.

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.

Campbell, T.D., 2016. The legal theory of ethical positivism. Routledge.

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.

Daley, J. and Coates, B., 2015. Property taxes. Grattan Institute.

Davis, A.K., Guenther, D.A., Krull, L.K. and Williams, B.M., 2015. Do socially responsible firms pay more taxes?. The Accounting Review, 91(1), pp.47-68.

Kenny, P., 2013. Australian tax 2013 10th ed.]., Chatswood, N.S.W.: LexisNexis Butterworths.

Martin, F., 2015. Has the Charities Act 2013 changed the common law concept of charitable “public benefit” and, if so, how? Australian Tax Forum, 30(1), pp.65–87.

Middleton, T., 2015. Banning, disqualification and licensing powers: ACCC, APRA, ASIC and the ATO – regulatory overlap, penalty privilege and law reform. Company and Securities Law Journal, 33(8), pp.555–580.

Pagura, Ingrid, 2014. Law report: Recent changes to the law. Journal of the Australian Traditional-Medicine Society, 20(3), pp.210–211.

Tiley, J. & Barbara Abraham, 2013. Studies in the History of Tax Law, Volume 6, Oxford: Hart Publishing Limited.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.