Discuss About The Hybrid Entities Australia Resource Capital.
As defined under “Section 6-5 and 6-10 (3) of the ITAA 1997” an individual is considered to have received an accounting when it is dealt in a way or in their behalf. According to “Subsection 6-2 (2) of the ITAA 1997” it provides that a person would be considered for assessment relating to income generated directly or indirectly from every sources all through the income year[1]. According to “taxation ruling of TR 2002/14” explains where a lump sum is held as prepaid rent.
According to “taxation ruling of TR 2002/14” an individual receiving a prepaid amount of rent would be regarded taxable given the objective of the person signifies the lump sum receipt of payment in advance for use of dwelling for a fixed time period. The case study provides that the taxpayer received a lump sum amount of $15,000 in prepaid from the tenant for lease negotiation. The court of law in “Frezier v Commissioner of Stamp Duties (NSW)” the board of taxation explained that sum of prepaid rent in the form of lump sum constitutes rent[2]. The judgement of board of taxation stated that prepaid rent contained the character of home coming for the taxpayer and such sum will be wholly considered for taxation in which the sum is derived. Citing the reference of Arthurs, the receipt of prepaid lump sum received by the landlord would be considered taxable under income from ordinary concept[3].
According to the Australian Taxation Office insurance pay-out for wholly private items should not be included while filing tax return. But the ATO provides that individual deriving an insurance pay-out for items that are employed in generating taxable income may be required to be included in their assessable return[4]. If it is noticed that a person receiving a lump sum amount of payment for covering the assets, the taxpayers are required to allocate such receipts of payment among the assets for assessment purpose. The present scenario highlights that Cheryl held a warehouse which was destroyed in fire and subsequently received an insurance payment of $500,000 to compensate the loss.
Referring to the verdict in “Allied Mills Industries Pty Ltd v FCT (1989)” the taxation commissioner identified that an item having the nature of compensation receipts is dependent upon the amount received[5]. Compensation are usually regarded as the capital item except in circumstances of substitution principle where it replaces what was lost. It is worth mentioning that receipt of compensation for the loss of employment is held as income because it constitutes what is lost. In the present circumstances of Cheryl, compensation payment that is received is regarded as the capital receipt for the loss of warehouse from fire constitute a capital item. Referring to the view of taxation commissioner the receipt of compensation payment is held a capital receipt and shall not be included in the assessable income of the taxpayer.
“Section 8-1 of the ITAA 1997” defines an individual is permitted to claim an allowable deduction for expenditure that are incurred in deriving the assessable income[6]. As defined by the Australian taxation office a person incurred expenditure on managing their tax affairs shall be allowed to claim deductions. The present situation of Boris states that he incurred an expense of $500 for lodging the tax return in 2015-16. In terms of the guidelines that is provided by the Australian Taxation Office Boris can claim the deductions for preparing and lodging tax return by tax agent.
In a statement released by Australian Taxation Office a person can lodge objection relating to the decisions regarding their tax affairs. The cost incurred by Boris for raising the objection regarding the wrong tax statement shall be allowed for claiming permissible deductions. Under “section 8-1 of the ITAA 1997” Boris shall be permitted to claim an allowable deduction[7].
As defined under the “section 8-1 (2) (b) of the ITAA 1997” an individual taxpayer is prohibited from claiming allowable deductions relating to expenses that are incurred in the course of private or domestic in nature[8]. These expenses are not within the criteria of positive limbs and shall not be considered allowable deductions in second limbs as well. As evident in the current situation of James, it is found that James worked in hospital and often purchases lunch from his café’s hospital. As a result of this a sum of $2000 was incurred by taxpayer for his lunch purpose.
According to the judgement in “Lunney v Commissioner of Taxation (1958)” the commissioner explained that it is vital to consider the feature of loss or outgoing which is inadequate for the outgoings to be held as the necessary prerequisite in gaining the assessable income. In an alternative instance the commissioner declined the taxpayer from claiming deduction for the expenditure that is occurred in shifting new home with his family to another city. Likewise, in the current situation of James, expenses occurred on meal at hospital café constitute personal or domestic in nature and shall not be considered as deductible expenditure.
As stated under the “section 32-10 of the ITAA 1997” business entertainment constitutes the intent of considering the food and drink taken in the circumstances for entertainment notwithstanding of whether the business transaction or discussion happens during that time[9]. Additionally, the Australian taxation office provides guidelines in ascertaining whether the food and drink given to the person would constitute an entertainment. As understood from the evidences of Frances situation he commenced a new business and invested guest as some of his potential customers and incurs a cost of $5000. Expenditure occurred by James is regarded appropriate under the expression of the term entertainment through food and entertainment defined under “paragraph 32-10 (1) of the ITAA 1997”[10]. James in such circumstances can claim an allowable deduction for the expenses occurred in respect of business expenses by way of food and drinks.
The present case study of Usman is related to ascertaining whether the taxpayer will be held as the Australian resident for income tax purpose for the year ended 2016-17. The “Taxation Ruling of 98/17” is provides explanation of the ordinary term of the word resident within the description of “subsection 6 (1) of the ITAA 1936”. The taxation ruling of TR 98/17 is applied on most of the person that enters to Australia such as
The court of law in “Federal Commissioner of Taxation v Miller (1946)” explained that to determine the residency status of an individual based on the question of fact and degree along with the necessary requirement that helps in ascertaining whether the person shall be liable for taxation[11]. The “taxation ruling of TR 98/17” that an individual intention and purpose of entering Australian is regarded as necessary factor.
The present situation of Usman provides that he entered Australia holding a French passport ranging from the year 2012 to 2016 that allowed him to work and live in Australia. According to the “taxation ruling of TR 98/17” a person’s period of physical presence in Australia helps in ascertaining the behaviour that highlights the existence of continuity or a routine or habit as the matter of fact[12]. The court of law in the case of “Federal Commissioner of Taxation v Joachim (2002)” stated that the span of six months is held as the considerable period of time when ascertaining whether the behaviour of an individual portrays the existence of continuity of living in Australia.
According to view of federal commissioner the period of physical presence and intention match on numerous occasions. Once a person has established a home at a specific place or even voluntary the person would not cease to be an Australian resident simply because an individual is physically absent. The “taxation ruling of TR 98/17” explains whether the individual has held the continuousness of relation with the place together with the objective of returning to the place and the expression that the place continues to remain home[13]. Evident in the present circumstances of Usman he has been existent in Australia from the year 2012 till the end of 2016-17. Therefore, the existence of Usman highlights that a considerable amount of time has passed coinciding with the behaviour of period of continuity.
Likewise, a person that enters Australia with the objective of living for a span of six months but in the later instances prolongs their stay for more than six months will be considered as the Australian resident from the time they arrived in Australia. As evident in the situation of Usman his presence in Australia demonstrates the existence of habitual or nature of continuity throughout the time Usman stayed in Australia. Under “subsection 6 (1) of the ITAA 1936” for the taxation year of 2016-17 Usman shall be held as the Australian resident for taxation purpose[14]. Conclusively, Usman shall be held as Australian resident since his behaviour reflected a period of continuity of stay in Australia. For the taxation year 2016-17 Usman will be held as Australian resident.
The present issue is concerned with the determination of capital gains tax implications for Norman that purchases his main residence and determining whether Norman shall be subjected to exemption under main residence.
According to “Section 118-192 of the ITAA 1997” there is a special rule that helps in working out the capital gains tax or loss for dwelling used as main residence in producing income[15]. Whereas, “Subdivision 118 B” enables an individual to claim partial main residence exemption given a part of the dwelling is used in making income during the course of ownership of dwelling by the taxpayer.
A person is allowed to claim exemption that helps in reducing the implications of capital gains tax or losses. Generally, a capital gains and losses derived from the assets that are pre-CGT or acquired before 20 September and shall be exempted from implications of CGT[16]. Nevertheless, there are some other assets relating to capital gains tax which is not subjected to CGT this includes;
For a taxpayer to obtain the exemption on dwelling must have the required character of main residence. On finding that the person has more than two dwellings it is vital to determine which is the main residence for the taxpayer together with the eligibility of exemption.[17] Whether the dwelling of the taxpayer qualifies for the main residence is held as the matter of fact and degree. Evidently in the present situation of Norman being the hairdresser purchases his main residence for a sum of $700,000 with a stamp duty of $70,000. Additional expenses were incurred by the taxpayer in making an improvement in asset by additionally spending $100,000 as improvement to property.
In the current situation of Norman, it is vital to determine the degree of occupancy to qualify for exemption of main residence and reducing the capital gains tax thereon. The commissioner of taxation stated that there is no direct legislation of determining the main residence exemption. As per “section 118-150” a property shall be held for main residence exemption if the property is bought and repaired or renovated before occupying it may offer some indications.
In case of Norman it is found that he incurred an expenses of 100,000 for property improvement to carry out the hairdressing business. The Australian Taxation Office provides that an individual would gain main residence exemption from capital gains tax. Nevertheless, a person shall only be able to gain full exemption if the dwelling is used entirely or else the person shall be allowed to claim partial exemption if the property is used partly to generate income. As evident in the case of Norman he used two out of six rooms for the business of hairdressing and under “Subdivision 118 B” Norman will be able to claim partial main residence exemption from the capital gains tax implications.
The present issue determines the whether Avon Pty Ltd shall be permitted to claim expenditure on the Scientific Research and Development from the approved research institute. According to the “taxation ruling of 92/2” it provides that an expenses that are enterprise incurring expenditure on the research and development shall be allowed for claiming allowable deductions under “subsection 73 (A) of the ITAA 1997”. The activities undertaken by an organization for research and development from the approved research institutes shall be allowed to claim deduction[18]. Similarly, in the case of Avon Pty Ltd, the company formed a contract with Central Queensland University an approved institute for undertaking research and development activities.
Taking into the considerations the circumstances of Avon Pty an advice can be made by stating that in respect to “section 73A of Income Tax Assessment Act, 1936” it shall be able to claim allowable deductions for undertaking scientific research and development. It is worth mentioning that section 73A of Income Tax Assessment Act, 1936 provides an organization to claim an allowable deduction for the expenditure incurred for the scientific research and development shall only be allowed if the expenditure is occurred in gaining taxable income[19]. On noticing that an organization have incurred expenditure on the research and development which is in the direction of generating assessable income. Additionally, an important assertion has been bought forward under the subsection 1 of the section 73A of the ITAA 1936 an organization that has undertaken the activities of scientific research and development shall only be allowed of claiming allowable deductions only from the approved provider of scientific research and development.
As evident in the circumstances of Avon Pty Ltd the activities of research and development that is undertaken is from the approved institute of therefore Avon Pty Ltd shall be able to claim allowable deductions. Additionally, an assumption is made that such activities are directed towards the business activities[20]. Avon in such circumstances will be allowed to claim a permissible deduction from the taxable income of the taxpayer.
As defined under the section 73A of ITAA, 1936 of the “taxation ruling of TR 92/2” an organization can avail the tax incentive that it incurs on the research and development given the expenditure is occurred with approved research and development institute[21]. Nevertheless, in respect to “taxation ruling of TR 92/2” it lay down that to obtain the benefit of tax incentive the business should satisfy the obligatory requirements relating to deductions.
Considering the situation of Avon Pty Ltd the activities of scientific research and development undertaken is from the approved research institute and the activities meets the obligatory requirement of “Section 73A of the ITAA 1997”[22]. Additionally, Avon Pty Ltd shall be allowed to avail the benefits of tax incentives from the taxable income because the expenses of $500,000 is associated with improving the functioning efficiency of Avon Pty Ltd and the same is related to approved research and development.
Reference List:
Barkoczy, Stephen. “Foundations of taxation law 2016.” OUP Catalogue (2016).
Blakelock, Sarah, and Peter King. “Taxation law: The advance of ATO data matching.” Proctor, The 37.6 (2017): 18.
Braithwaite, Valerie, ed. Taxing democracy: Understanding tax avoidance and evasion. Routledge, 2017.
Cao, Liangyue, et al. “Understanding the economy-wide efficiency and incidence of major Australian taxes.” Canberra: Treasury working paper 2001 (2015).
Christie, Michael. “Principles of Taxation Law 2015.” (2015): 814-816.
Coleman, Cynthia, et al. Australian Tax Analysis. Thomson Reuters, 2013.
Davis, Angela K., et al. “Do socially responsible firms pay more taxes?.” The accounting review 91.1 (2015): 47-68.
Fry, Martin. “Australian taxation of offshore hubs: an examination of the law on the ability of Australia to tax economic activity in offshore hubs and the position of the Australian Taxation Office.” The APPEA Journal 57.1 (2017): 49-63.
Ismer, Roland, and Christoph Jescheck. “The Substantive Scope of Tax Treaties in a Post-BEPS World: Article 2 OECD MC (Taxes Covered) and the Rise of New Taxes.” Intertax45.5 (2017): 382-390.
Jones, Sally, and Shelley Rhoades-Catanach. Principles of Taxation for Business and Investment Planning. McGraw-Hill Higher Education, 2015.
Keen, M., and P. Mullins. “International Corporate Taxation and the Extractive Industries: Principles, Practice, Problems.” International Taxation and the Extractive Industries, New York and London: Routledge (2017).
Kennedy, Tom, et al. “Does income inequality hinder economic growth? New evidence using Australian taxation statistics.” Economic Modelling 65 (2017): 119-128.
Kiprotich, B. A. “Principles of Taxation.” governance (2016).
Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing, 2016.
Pope, Thomas R. Pearson’s Federal Taxation: 2017 Comprehensive. Prentice Hall, 2016.
Robin & barkoczy woellner (stephen & murphy, shirley et al.). Australian taxation law 2018. Oxford University Press, 2018.
Robin, h. Australian taxation law 2017. Oxford University Press, 2017.
Saad, Natrah. “Tax knowledge, tax complexity and tax compliance: Taxpayers’ view.” Procedia-Social and Behavioral Sciences 109 (2014): 1069-1075.
Sadiq, Kerrie, et al. Principles of taxation law 2013. Thomson Reuters, 2013.
Tan, Lin Mei, Valerie Braithwaite, and Monika Reinhart. “Why do small business taxpayers stay with their practitioners? Trust, competence and aggressive advice.” International Small Business Journal 34.3 (2016): 329-344.
Vann, Richard. “Hybrid Entities in Australia: Resource Capital Fund III LP Case.” (2016).
Woellner, Robin, et al. “Australian Taxation Law 2016.” OUP Catalogue (2016)
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download