Permissible Deductions Under Section 8-1 Of ITAA 1997

Situation related to machinery movement cost

In accordance with the “Section 8-1 of the Income Tax Assessment Act 1997”, the situation is related to the cost incurred because of the machinery movement to a new site.

The regulations are Section 8-1 of the Income Tax Assessment Act 1997 and British Insulated & Helsby Cables

According to the “Section 8-1 of the Income Tax Assessment Act 1997”, the taxpayers have a right to claim the deductions of a permissible nature. In case the machinery is utilized for earning income, the cost of transporting machinery will be treated as allowable deductions (Van Thiel 2002).

It can be said according to the “Taxation ruling of TD 92/126” that installation and starting of the machinery operation will be treated as revenue parts. The incurred cost is helpful in understanding that it provides the business with an advantage from depreciable asset movement (Richardson and Lanis 2007).

Conclusion:

It is clearly understood from the discussion that the machinery movement cost is basically capital expenditure. Hence the cost will not be treated to allowable deductions.

It is basically to be determined what is actually the allowable deduction based on the “Section 8-1 of the Income Tax Assessment Act 1997”.   It is related to the asset revaluation.

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

It is clear from the discussion that the cost arisen is due to the asset revaluation. It can also affect the insurance cover related to the fixed assets directly. Based on the “Section 8-1 of the Income Tax Assessment Act 1997”, it is bound to be subjected to deductions. The revaluation of asset is connected to fixed assets and can affect the insurance cover, The tax returns have to be computed and the nature of deduction is to be determined (Wenzel 2005).

The revaluation cost is also deductable by nature and the incurred cost also causes temporary benefit. Under “Section 8-1 of the Income Tax Assessment Act 1997”, the cost is eligible for allowable deductions.

Conclusion:

The cost being generated for the purpose of assessable income will be subject to permissible deductions in compliance with the “Section 8-1 of the Income Tax Assessment Act 1997”.

The situation deals with a company’s legal expenses, for opposing the wind up petition based on “Section 8-1 of the Income Tax Assessment Act 1997”.

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

It is to be mentioned that the cost related to the business wind up of business in incurred from the company’s business operations and is treated as capital expenditure. In compliance with “Section 8-1 of the Income Tax Assessment Act 1997”, the cost will not be permitted as deductions. The main purpose is the revenue production and so the expenditures are related to discharge of business opportunities, are permissible deductions.

The “FC of T v Snowden and Wilson Pty Ltd (1958)” verdict states that unusual expenses by the taxpayers need not be allowed for the purpose of deductions.

Situation related to asset revaluation

Conclusion:

Based on the above discussion it can be concluded that the cost of opposition of the petition and the winding of the capital expenditure is responsible for forming the company structure. It will not be allowed as deductions based on “Section 8-1 of the Income Tax Assessment Act 1997”.

The case includes the allowable deduction determination according to “Section 8-1 of the Income Tax Assessment Act 1997”. The issue is connected to the legal expenses for solicitor payment for different purposes (Aaron and Slemrod 2004).

“Section 8-1 of the Income Tax Assessment Act 1997” is the required legislation.

The legal expense occurrence is to be treated to permissible deductions based on the “Section 8-1 of the Income Tax Assessment Act 1997”. These expenses being personal, capital; or domestic in nature are not permissible deductions.

Legal expenses not connected to the income generation will not be treated as allowable deductions. The legal expenses falling under the category of business will make the legal expense as the allowable deductions according to “Section 8-1 of the Income Tax Assessment Act 1997”.      

Conclusion:

Legal expenses for the solicitor payment will be considered as business expenditures and according to “Section 8-1 of the Income Tax Assessment Act 1997”, the legal expenses will be permissible deductions under  the laws of taxation.

The current scenario is connected to the input tax credit determination for advertisement of expenses for Big Bank, under the “GST Act 1999”.  

The regulations are Goods and Service taxation ruling of GSTR 2006/3, Ronpibon Tin NL v. FC of T, GST Act 1999, paragraphs 11-5 and 15-5 and finally subsection 15-25.

Big Bank being an economic service provider has introduced the concept of insurance policy as well as home content apart from the loans and deposits. The “Goods and Service Taxation Ruling of GSTR 2006/3”, clearly show the guidelines for input tax credit computation.

It is clearly stated in the second chapter of the “Goods and Service Act 1999”, that the business organisations will be eligible for input tax credit on business expenses incurred for ordinary business purposes (Cockfield 2002).

Based on “Ronpibon Tin NL v FC of T”, the concepts of ‘extent’ and ‘to the extent’ are applicable for GST rulings recognition. Based on “para 11-5 and 15-5”, it is necessary for the creditable acquisition to be partially or totally complete. In addition to this the acquisition needs to be creditable based on the ruling of “Para 11-5 and 15-5”.

It can be said easily from the application of the “GSTR ruling of 2000/3” that the Big Bank has crossed the limit of the financial acquisition threshold. It is eligible therefore to claim the input tax credit related to the GST supplies.

Conclusion:

It can be stated clearly that expense advertisements by Big bank, is for acquisition of the creditable supplies. According to “GSTR ruling of 2000/3”, it can be said that the Big Bank will be eligible for the credit of the input tax on amount spend for expenses of advertisement (Kahng 2004).

Computation of Foreign Tax Offset For Angelo
Assessable Income	Amount ($)
Employment income from Australia	44000
Employment income from United States	12000
Employment income from United Kingdom	8000
Rental income from property in United Kingdom	2000
Dividend income from United Kingdom	1200
Interest income from United Kingdom	800
Foreign Rental Income	2000
Less: Expenses incurred in Deriving	500
Gross Employment income from United States	12000
Less: Expenses incurred in deriving employment income from United States	900
Gross Employment income from United Kingdom	8000
Less: Expenses incurred in deriving employment income from United Kingdom	500
Tax on Dividend income from United Kingdom	120
Tax on Interest income from United Kingdom	80
Tax On Rental income from United Kingdom	600
Total passive foreign Income tax paid	800
Amount of Australian Tax Payable on Passive Foreign Income	787.29
Foreign Tax Paid on  Employment income from United States	3600
Total Other foreign Income tax paid	3883.11

Assessable Income	Amount ($)
Net Sales	360000
Australian Sourced Interest Income	10000
Gross Up Franking Credits	21000
Bad Recovered	10000
Other Exempt Income	50000
50% CGT Discount	15000
Total Assessable Income	466000
Interest on loan made by Johnny to the partnership	4000
Legal fees for the renewal of lease of the office building	2,000
Legal expenses for preparation of a partnership agreement	1,200
Legal expenses for preparation of new lease of business premises	700
Debt collection expenses paid to a solicitor	500
Council rates on business premises	500
Staff Salaries	20000
Rent on retail shop	20000
Provision for doubtful debts	30000
Business lunches	10000
Total Allowable Deduction	88900
Net Income From Partnership	377100
Tax on Taxable Income	142927
Gross Tax Payable	234173
Medicare Levy	7542
Budget Levy Repair	3942
Net Tax Payable	154411

References:

Aaron, H. and Slemrod, J. eds., 2004. The crisis in tax administration. Brookings Institution Press.

Cockfield, A.J., 2002. The law and economics of digital taxation: challenges to traditional tax laws and principles. Bulletin for International Fiscal Documentation, 56(12), pp.606-619.

Kahng, L., 2004. Innocent Spouses: A Critique of the New Tax Laws Governing Joint and Several Tax Liability. Vill. L. Rev., 49, p.261.

Richardson, G. and Lanis, R., 2007. Determinants of the variability in corporate effective tax rates and tax reform: Evidence from Australia. Journal of Accounting and Public Policy, 26(6), pp.689-704.

Van Thiel, S., 2002. Free Movement of Persons and Income Tax Law: The European Court in Search of Principles: an Investigation Into the Constitutionality of Income Tax Laws and Tax Treaties of the Member States and the Potential Consequences of the Court’s Income Tax Case Law (Vol. 3). IBFD.

Wenzel, M., 2005. Motivation or rationalisation? Causal relations between ethics, norms and tax compliance. Journal of Economic Psychology, 26(4), pp.491-508.