Issue: The main issue is to determine that whether the cost to move machinery to a new site will be treated as allowable deduction or not as per Section 8-1 of the IITA 1997.
Legislation: In this issue, the necessary legislations are shown below:
Application: The cost that is related with the moving of the machinery to a new site is capital in nature and as per the act of 8-1 of the Income Tax Assessment Act 1997; there is not any allowable deduction on this cost (Taylor and Richardson 2012). In this regard, it needs to be mentioned that capital expenditure is the kind of expenditure that the business organizations incur for acquisition and maintenance of fixed assets such as land, building, machinery, equipment and others. As per the purpose of depreciation, to move the machinery to a new site has incurred the cost of the particular asset. The cost related with the moving of the machinery to a new site is taken place from the small changes and under the section of section 8-1 of the Income Tax Assessment Act 1997; it needs to be allowed as allowable deduction. The main reason to consider the cost of moving the machinery for allowable deduction is that the cost is a major part of the operating expenses of the businesses and it has occurred out of the day-to-day activity of the business (Taylor and Richardson 2013).
According to the given verdict in the case of British Insulated & Helsby Cables, the transportation cost of the contributed to the increase in benefit of the business by proving a shift to the depreciable assets. According to the Taxation Ruling of TD 93/126 on machinery installation and the commencement of the function of the machinery, the cost related to the moving of the machinery needs to be treated as revenue. Thus, in the provided situation, the cost to move the machinbary to a new site is capital expenditure and needs to be treated as non-permissible deduction (Lignier and Evans 2012).
Conclusion:
Thus, based on the above discussion, it can be concluded that the cost to move the machinery to a new site is capital in nature and the cost will not be considered for allowable deduction as per section 8-1 of the Income Tax Assessment Act 1997.
Issue: The major issue in this case is to determine whether the asset revaluation to affect the insurance cover would be considered as permissible deduction as per section 8-1 of the Income Tax Assessment Act 1997.
Legislation: The major legislation in this case is section 8-1 of the Income Tax Assessment Act 1997.
Application: According to the provided situation, it can be found that the expenditure is related with the fixed assets. Thus, in the process to determine the amount of deduction, it is also crucial to determine that whether the specific expenditure has occurred out of the assets revaluation (Zakaria et al. 2014). It needs to be acquired for to increase the capacity of revenue production or to protect the assets. In case the latter results in temporary character and the expenditures are repetitive, then it needs to be treated as permissible deduction under section 8-1 of the Income Tax Assessment Act 1997 (Sawyer 2013). As per the observation of the provided situation, the revaluation cost of the asset to affect cover of insurance needs to be treated as allowable deduction as per Section 8-1 as they are repetitive in nature.
Conclusion:
As per the above discussion, it can be concluded that the insurance cover cost needs to be considered as allowable deduction for the repetitive nature of the cost under section 8-1 of the Income Tax Assessment Act 1997.
Issue: In the provided situation, the main issue is to determine whether the legal expenses occurred by a company in order to oppose the petition of winding up would be considered as deduction under section 8-1 of the Income Tax Assessment Act 1997.
Legislation: The relevant legislation for this case is shown below:
Application: According to section 8-1 of the Income Tax Assessment Act 1997, cost incurred by the companies at the time of winding up process of business are considered as expenses related with business operations and they are not allowed for permissible deduction. As per Taxation ruling of ID 2004/367, legal costs will be allowed for deduction in case the cost is incurred to carry out the business operations that help the individuals in the production of taxable proceeds (Lee 2012).
As per the case of FC of T v Snowden and Wilson Pty Ltd (1958), the unusual business expenses that do not need any earlier action of the taxpayer is not qualified under the deductible expenditure (Douglas et al. 2014). In this case, the amount of legal expenditure against the petition for winding up of the business will not be considered for deduction as they nature of these expenses are capital and all these expenses have occurred out of the business operation (Cane and Atiyah 2013).
Conclusion:
As per the above discussion, it can be consumed that the cost occurred in order to oppose the petition of wwinding up of the business would be considered as non-permissible deduction according to Section 8-1 of the Income Tax Assessment Act 1997.
Issue: The main issue in this case is to determine whether the occurred legal expenditures for the service of the solicitors related to various business operations of the client would be considered as allowable deduction under Section 8-1 of the Income Tax Assessment Act 1997.
Legislation: The main legislation in this case is Section 8-1 of the Income Tax Assessment Act 1997.
Application: According to the regulation of Section 8-1 of the Income Tax Assessment Act 1997, the business expenses that are occurred related to the business operations in order to produce revenues need to be considered for allowable deduction (Saad 2014). However, in this regard, exceptions can be seen related to various legal expenditures and the nature of these expenses is capital, domestic and private. Thus, it can be said that the legal expenditures incurred by an individual may not be considered as allowable deduction in case there is not any association of these expenses with the generation of taxable incomes (Devos 2012). As per the provided situation, it can be observed that the specific legal expenditure insured by the taxpayer for number of matters have association for the production of chargeable income; and for this reason, they need to be treated as allowable deduction as per section 8-1 of the Income Tax Assessment Act 1997 (Oats 2012).
Conclusion:
Thus, based on the above discussion, it can be concluded that all the legal expenses having relation with the business operations and have been occurred in order to generate taxable income need to be considered as allowable deduction as per section 8-1 of the Income Tax Assessment Act 1997.
2. Issue: The main issue in this case regarding Big Bank is to determine the input tax credit related with the advertisement expenditure that is taken place related to GSTR Act 1999.
Legislation: The major legislations in these case are shown below:
Application: The tax regulations of Goods and Service taxation ruling of GSTR 2006/3 provides the specific guidelines related with some specific methods to implement for the determination of input tax credit along with the administration change for the financial suppliers under the new system of GST Act 1999. This also includes the regulations related to actual application under the ruling division of 11, 15 and 129 of the GST Act. All the taxable entities are eligible for the application of this particular ruling that are registered for under the taxation laws and are needed to be registered under the taxation law for the acquisition of financial supplies that crosses the threshold limit for the financial acquisition. These taxable entities are qualified for the credit of input tax and reduced input tax (Jangra and Narwal 2014).
As per the provided situation of Big Bank, it can be observed that Big Bank Limited has an expense worth $ 1,650,000, as GST was the part of advertisement expenses for the previous year. In accordance with the present situation of Big Bank Limited, it can be observed that the taxation regulations of Goods and Service taxation ruling of GSTR 2006/3 is applicable for the business operations of the company as the company is eligible input tax credit and lowered input tax credit (Evans, Lignier and Tran-Nam 2013). This particular ruling states that GST needs to be paid in order to make taxable supplies in case a business organization is registered or able for registration. The GST legislation states that it is necessary for the taxable entities to claim input tax credit for GST for the acquisition of import for the entity. In this case, it needs to be mentioned that in case a taxable individual is making financial supplies and crosses the amount of threshold acquisition, the entity will not be able to recover all the charged GST. However, the business organization is able to recover the part of such GST.
According to the verdict of the case of Ronpibon Tin NL v. FC of T, in the analysis of the GST legislation, there is a need for the application of the principles of ‘extent’ and ‘to the extent’. In this regard, the methods for apportion adoption needs to be appropriate and practical based on the circumstances of the business organizations. According to the paragraph 11-5 and 15-5, in order to make an acquisition as a credible acquisition, the entity needs to be creditable either entirely or partly (Harrison and Keating 2014).
As per another requirement of paragraph 11-5 and 15-5 (a), the acquisition needs to be entirely for credibility purpose for the qualification of an acquisition as credible acquisition. In case it has been seen that the acquisition is partially credible, it is important to mention the level of credibility purpose. The ruling of Subsection 15-25 states that in case an import is for the purpose of partly credible, it will not be considered as fully credible. According to the section of section 11-15 or 15-10, in case an entity makes the supplies in order to claim input tax credit, the acquisition will be qualified as fully credible. In case of Big Bank Limited, it is crucial to mention the fact that the advertisement related expenditures incurred by Big Bank Limited is for the purpose of credible acquisition. Thus, based on the ruling of GSTR ruling of 2006/3, it can be observed that Big Bank Limited has already crossed the limit of financial acquisition threshold. For this reason, the amount of invoice issued to Big Bank Limited will be fully entitled for input tax credit for the supplied made related to GST (James, Sawyer and Wallschutzky 2015).
Conclusion:
Based on the above discussion, it can be concluded that Big Bank Limited will be fully eligible for the claiming of input tax credit related to GSTR 2006/13. In this situation, it needs to be mentioned that Big Bank Limited will be eligible to claim input tax credit for the specific amount that the company incurred on the expenditures for the advertisement campaign of the company and it has been done for the purpose of credible acquisition.
3.
References
Cane, P. and Atiyah, P.S., 2013. Atiyah’s accidents, compensation and the law. Cambridge University Press.
Devos, K., 2012. The impact of tax professionals upon the compliance behaviour of Australian individual taxpayers. Revenue Law Journal, 22(1), p.31.
Douglas, H., Bartlett, F., Luker, T. and Hunter, R. eds., 2014. Australian feminist judgments: Righting and rewriting law. Bloomsbury Publishing.
Evans, C., Lignier, P. and Tran-Nam, B., 2013. Tax compliance costs for the small and medium enterprise business sector: Recent evidence from Australia. Tax Administration Research Centre University of EXETER Discussion Paper, pp.003-13.
Harrison, J. and Keating, M., 2014. The deductibility of Sarbanes-Oxley costs incurred by Australasian companies. Accounting Research Journal, 27(1), pp.52-70.
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.
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.
Jangra, A. and Narwal, K.P., 2014. Application of CGE Models in GST: A Literature Review. International Journal of Economic Practices and Theories, 4(6), pp.970-978.
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 England. In the Proceedings of 2012 Academy of Financial Services Annual Conference at San Antonio, USA E (Vol. 4).
Lignier, P. and Evans, C., 2012. The rise and rise of tax compliance costs for the small business sector in Australia.
Oats, L. ed., 2012. Taxation: A fieldwork research handbook. Routledge.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Sawyer, A., 2013. Rewriting Tax Legislation-Can Polishing Silver Really Turn It into Gold. J. Austl. Tax’n, 15, p.1.
Taylor, G. and Richardson, G., 2012. International corporate tax avoidance practices: evidence from Australian firms. The International Journal of Accounting, 47(4), pp.469-496.
Taylor, G. and Richardson, G., 2013. The determinants of thinly capitalized tax avoidance structures: Evidence from Australian firms. Journal of International Accounting, Auditing and Taxation, 22(1), pp.12-25.
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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