Business Taxation Law and Policy

Running head: BUSINESS TAXATION LAW AND POLICY
Business Taxation Law and Policy
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1BUSINESS TAXATION LAW AND POLICY
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................4
Answer to question 3:.................................................................................................................6
References..................................................................................................................................9

2BUSINESS TAXATION LAW AND POLICY
Answer to question 1:
An individual entity registered or required to obtain the registration is held liable for
GST payable relating to the taxable supplies made by the entity1. The entity is also entitled to
obtain the input tax credit for the creditable acquisition that is made on carrying on the
enterprise. In order to make the acquisition creditable the entity is required to acquire or
import the goods entirely for the creditable purpose. When there is a circumstances of partly
creditable purpose the entity is not allowed to claim input tax credit unless and until
“Division 131” is applicable.
The taxation ruling of “Goods and Service Tax GSTR 2000/6” is associated with
the creditable purpose for the purpose of claiming input tax credits. The Australian taxation
office provides that an individual can claim credit for any amount of GST that is included in
the price of any goods and service that is bought by a person for the purpose of business 2.
This is known as the GST credits or the input tax credits – a credit that forms the part of the
price of an entity’s business inputs. An important consideration of claiming GST credits is
that it is necessary to ensure that the suppliers are registered for GST.
As evident from the current situation of ABC Comp the company has only managed
to make sales of $6,000 throughout the year. The company incurs business and input tax
expenses of $5,100 for the year 2016. The “taxation ruling of GSTR 2000/6” lay down the
guidance of determining the degree to which an entity for creditable purpose while making
acquisition and importation enables in claiming the correct sum of input tax credits3. An
individual can only claim input tax credits for the acquisition which is creditable. To
1 Brokelind, Cécile. Principles Of Law 2014. Print
2 Grange, Janet, Geralyn A Jover-Ledesma, and Gary L Maydew. 2014 Principles Of
Business Taxation. Print.
3 James, Simon. 2018 The Economics Of Taxation. Print.

3BUSINESS TAXATION LAW AND POLICY
correctly determine the value of input tax credit entitlement relating to the creditable
acquisition that a business makes, it is necessary to determine the extent of creditable purpose
for such acquisition made. “Division 11 of the GSTR 2000/6” explains that a business is
entitled to claim input tax credit in respect to any type of creditable acquisition that is made
by entity. The main obligation for the creditable acquisition is that it needs to be entirely for
the creditable purpose.
Computation of Input Tax Credit
Particulars Value without GST GST @ 10% Input Tax Credit
On Input
Purchase of Computer parts $ 1,000.00 $ 100.00
Overhead Expenses $ 5,100.00
Total Input tax credit $ 463.64
Therefore, an input tax credit of 463.64 (1/11 x $5100) is attributable for the tax
period ending 2016. As evident from the above stated explanation it can be stated that ABC
Comp can claim credit for any amount of GST that is included in the price of any goods and
service that is bought for the purpose of business. Similarly in the present context of ABC
Comp the taxation ruling of “GSTR 2000/6” is taken into the consideration to correctly
determine the amount input tax credit that can be claimed for the period ending 20164. To
correctly determine the value of input tax credit entitlement relating to the creditable
acquisition that is made by ABC Comp, it is necessary to determine the extent of creditable
purpose for such acquisition made. The purchase of computer and other overhead expenses
that was made by ABC-Comp included the GST in the price. Therefore, the business can
claim an input tax credit of $463.64 for the period ending 2016.
4 Jover-Ledesma, Geralyn. Principles Of Business Taxation 2015. [Place of publication not
identified]: Cch Incorporated, 2014. Print.