According to “Section 6-5 and 6-10 (3) of the ITAA 1997” a person is taken to have obtained the sum when it is applied or dealt with in a manner on their behalf or as they direct. “Subsection 6-2 (2) of the ITAA 1997” lay down that a person is assessable for income that are derived directly sources or indirectly sources during the earnings year. The taxation-law ruling of TR 2002/14” provides the situations where the large sum would be treated as prepaid rent.
The “Taxation ruling of TR 2002/14” provides that a lump sum prepaid rent would be held assessable if the intention of the parties represents that the large amount of imbursement as an early payment is for an individual’s use and enjoyment of the residence for the static term period. As evident in the current situation the taxpayer owns a flat and leases to same to a new tenant and received a prepaid lump sum of $15,000 for lease negotiation. As held in the case of “Frezier v Commissioner of Stamp Duties (NSW)” the taxation board stated that amount of prepaid lump sum was in fact the rent. The taxation board held that the prepaid lump sum carried the nature of come home to the taxpayer and the amount was fully assessable during the year of receipt. Referring to the Arthurs Case in the current situation, the receipt of prepaid lump sum of $15,000 by the landlord would be included in his assessable income under section as income under regular impression.
Insurance pay-outs is regarded as the entirely personal items that does not requires to be included in their tax return. However according to Australian taxation office receipts of insurance payments for items that are used in the production of income might have to be included in the taxable return. Given the circumstances that an individual receiving a lump sum insurance payment to cover the assets, then the person is required to apportion the sum of payment between the assets for the taxation purpose. As evident in the current situation the Cheryl owned a warehouse that was demolished by fire and got a sum of $500,000 from the insurance company as the compensation for the loss.
According to the judgement held in “Allied Mills Industries Pty Ltd v FCT (1989)” the commissioner stated that the character of reimbursement incomes is reliant upon the sum that is received. Compensations generally represents a capital item unless in the situation of substitution principle it replaces what was lost. It is worth mentioning that the loss of employment the compensation payment would be considered as the income since it represents the substitute for what was lost. In the current situation of Cheryl, the compensation payment received by the insurance company constitutes a capital receipt as the loss of warehouse by fire is a capital item. Referring to above judgement the payment would be regarded as the capital receiving and would not be included in the taxable proceeds of the taxpayer.
As per ATO an individual can claim a deduction for the expenditure they incur in handling their tax return. The ATO provides that taxpayer can claim an allowable deduction relating to the cost incurred in preparing and lodging their tax return. Evidently it is noticed that Boris incurred an expenditure of $500 for the lodgement of his 2015-16 return. According to “section 8-1 of the ITAA 1997” a person would be allowed to claim an allowable expenditure for the spending sustained in obtaining the calculable income. Boris with respect to the guidelines of ATO will be permitted to claim an permissible deduction for the expenditure sustained in making and lodging the tax return.
The ATO provides that an individual can consider lodging an objection regarding to the conclusions about levy matters. The charge that are incurred in raising the objections is considered as an allowable deduction. Similarly in the case of Boris the spending sustained by the taxpayer would be permissible for deductions under “section 8-1 of the ITAA 1997”.
According to “section 8-1 (2) (b) of the ITAA 1997” states that a person is not allowed to entitlement permissible deduction for spending that are occurred person purpose. These expenditure does not meet the means of the positive limbs, or it is not deductible under the second limb. In the current case study, it is noticed that James worked at the hospital and purchases lunch in the café hospital and incurs an expenditure of $2000.
As held in “Lunney v FCT” the court stated that it is necessary to take accounting of the necessary character of the loss or outgoings that is insufficient for the outgoing as the essential prerequisite in the derivation of the taxable income. In another example the court of law denied the taxpayer deductions for expenses incurred in moving with his family to the new home in another city due to its relocation of job. Similarly, in the case of James the expenditure incurred in by him is private or domestic in nature therefore the meal expenditure of $2000 is not deductible.
According to the ATO to ascertain whether the food or drink delivered to the person represents entertainment. As defined under “section 32-10 of the ITAA 1997” it clearly shows that the purpose of treating food and drink taken in the situations as the business entertainment irrespective of whether the business discussion or business transactions takes place during that time. The current situation of Frances states that he commended a new trade and invited guest at a restaurant to provide food and drink that cost him $5000. The expenditure incurred by James is relevant to the meaning of the term entertainment by way of food and entertainment stated under “paragraph 32-10 (1) of the ITAA 1997”. Therefore, James would be permitted to entitlement of permissible deduction for the business expenditure.
The questions surrounds in ascertaining whether Usman is held as the Australian occupant or non-occupant for the tax year 2016-17. The “taxation ruling of 98/17” is associated with the understanding of ordinary concept of the expression occupant inside the description of inhabitant under “subsection 6 (1) of the ITAA 1936”. The ruling is usually application to maximum of the people that arrives to Australia such as migrants, academics teachings or learning in Australia, peoples on break and workers that enters Australian on a pre-arranged employment contracts. As held in “Miller v Federal Commissioner of Taxation (1946)” the residency status of an individual represents the question of fact and regarded as the main criteria that assists in determining the liability to taxation. The ruling further provides that a person intention or purpose of existence in Australia.
As evident in the current situation of Usman he held the French passport at all the relevant times and from the year 2012 till the 2016 he resided in Australia that permitted him to live and work here. The “taxation ruling of TR 98/17” defines that an individual period of physical presence demonstrates that the individual’s behaviour reflected a period of continuity, routine or habit as the question of fact. As per high court opinion in “Joachim v FCT (2002)” the period of six months is regarded as the considerable time when determining that individual behaviour reflects a continuity of residing in Australia.
The commissioner held that physical existence and the purpose would accord for maximum times. Once an individual has recognized a home at the specific residence even voluntary an individual does not stop to be an Australian occupant just because the person is actually absent. The ruling provides that whether the individual has reserved the steadiness of connotation with the place, along with the intent of coming back to the home and the expression that place remains home. Similarly, in the in progress state of Usman he has been present in Australia from 2012 until the end of 2016-17. Usman existence in Australian reveals that a considerable time has elapsed which demonstrates his behaviour has demonstrated the period of continuity.
Correspondingly, an individual that enters to Australia that intends to live for the span of six months’ time but later extend their stay for more than six months or beyond the would be held as the Australian occupant from the time they arrived in Australia. Similarly, in the case of Usman his existence in Australia reflected a presence of habitual and character of routine during the entire period of stay in Australia. Therefore, for the assessment year of 2016-17 with respect to “subsection 6 (1) of the ITAA 1936” he would be regarded as Australian resident for taxation purpose.
Usman would be regarded as the Australian occupant relating to tax purpose for 2016-17.
The in progress issue is based on determining CGT consequences for Norman who acquires a main residence and ascertaining whether Norman would be subjected to main residence exemption.
“Section 118-192 of the ITAA 1997” defines the singular rule in working out the capital gains or loss for house that is used as main dwelling for generating income. While “Subdivision 118 B” allows a person to gain half main dwelling exception if the house is used partly for creating earnings during the ownership of taxpayer.
Exemptions is allowed to persons which helps in cutting the capital gains tax or losses. Usually capital gains from the pre-CGT assets namely those assets that are attained before 20 September shall be subjected to exception from CGT. However, there are other CGT assets that are not subjected to CGT includes;
For an individual taxpayer to meet the requirements for exemption it is essential that the taxpayer has the main residence. However, on noticing that the tax payer has two or more dwellings it is necessary for the taxpayer to ascertain which the main dwelling is for the taxpayer along with the entitlement of the exception. Whether a dwelling qualifies as the main dwelling of the taxpayer is regarded as the matter of question and fact. Evidently Norman being the hairdresser purchase his main residences for $700,000 and incurs cost on stamp duty of $70,000. The taxpayer additionally made enhancement on the asset by spending additional $100,000 to improve the possessions.
Denoting from the preceding paragraph explanation, it is necessary to institute a degree of habitation to qualify for the main residence exception and reduce the CGT. According to the view of commissioner, there are no direct direction provided in the legislation on the main exception issue. Conversely, according to “section 118-150” provides that a property qualifies for the main dwelling exemption if the possessions is acquired and then repaired or renovated prior to being engaged might provide some indication.
Accordingly in the existing state of affairs of Normal he incurred an spending of $100,000 to make his main house suitable for the business of hairdressing. As per ATO an individual shall be allowed to gain exemption from the CGT. However an individual does not gets the full main residence exemption if any part of the dwelling is used for generating income. Similarly in the case of Norman out of six room he used two rooms for his hairdressing business. Therefore, Normal under such situation under “Subdivision 118 B” would be eligible for part exception from capital gains tax since he used a part of his dwelling for producing income.
To conclude with, with respect to “Subdivision 118 B” Norman dwelling qualifies for the part main dwelling exemption from CGT.
The current issue is based on determining whether Avon would be permitted for permissible deductions for the spending incurred on scientific R & D for the taxpayer 2016-17. The “taxation ruling of 92/2” evidently lay down that expenses incurred in scientific R & D would be regarded as the allowable deduction under “subsection 73 (A) of the ITAA 1997. The scientific R & D activities enables the trade to attain superiority in the business. As evident in the current situation of Avon it is noticed that Avon Pty Ltd entered into an agreement of $500,000 for a one year contract with the registered research service provider to undertake the activities of research and development.
Considering the current situation of Avon an assistance can be made by affirming that under “section 73A of ITAA 1997” allows an organization to bring its claim for deductions in tax relating to expenses incurred on scientific research and development which may not be permissible under any additional provision. A noteworthy consideration has been laid down under “section 73A of ITAA, 1936” that an organization is allowed to claim an allowable deductions for scientific R & D only if the expenditure is occurred in generating assessable income. If an organization is found to have incurred scientific R & D that is directed in the direction of deriving taxable income then an organization is denied deductions this ruling. Furthermore “subsection 1 of the section 73A of the ITAA 1936” provides that an organization would be only allowed to claim an allowable deduction for expenditure on research and development if the expenses is incurred or payments made to the approved research institutes.
As understood from the analysis the payment made by Avon Pty Ltd to Central Queensland University which is an approved provider for research and development is assumed to be related to the business activities of taxpayer. Therefore, Avon Pty ltd would be able to gain an allowable deductions from the assessable income for the research and development expenditure incurred.
Under “section 73A of ITAA, 1936” of the “taxation ruling of TR 92/2” an organization is also provided with the tax incentive relating to the expenditure occurred on scientific research and development from the approved institute. However, “Section 73A of the ITAA 1997” provides that to avail the tax incentive an organization is required to meet the obligatory requirements for deductions.
As evident in the current situation of Avon Pty Ltd, the scientific R & D undertaken by the company from the appropriate research and development central qualifies the for allowable deductions under “Section 73A of the ITAA 1997”. Furthermore, Avon Pty Ltd would be also be able to obtain the benefit of tax incentive from its assessable income since the expenditure of $500,000 is directly related to growing the operative efficiency of the organization and are associated with scientific research and development.
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