Cost of Moving the Machine and Gaining Permissible Income Tax Deductions | Case Study

Added on -2020-02-19

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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
TAXATION LAW1Answer to question 1:Issue:The issue that has been illustrated in this case study is dealing with the cost of movingthe machine and gaining permissible income tax deductions. Rule:1.“British Insulated & Helsby Cables v. Atherton (1926)”2.“Section 8 (1) of the ITAA 1997”Applications:The cost that has been generated in relocation of machine to the new place comprisesof capital expenditure under the context of “Section 8-1 of the ITAA 1997”. It is depicted thatthe cost occurred from the shifting the machine to the new site representing a small changewhich cannot be cannot be allowed for deductions and ultimately increases the depreciationcost. Section 8-1 of the ITAA 1997 puts forward those allowable deductions for income taxpurpose is only permitted when the cost is incurred for every day trade functions (Manning,Sciacca and Alford 2016.). The judgement of “British Insulated & Helsby Cables v. Atherton (1926)” the factthat there was the increase in the business benefits because of the shift of the depreciableasset in the business (Coleman and Sadiq 2013). As depicted under the Taxation ruling of TD93/123 charge involve in setting the machine and commencing the production procedurerepresents revenue in nature and leads to an increase in the business benefit. Considerably,
TAXATION LAW2understanding the proviso that has been explained under the “Section 8 (1) of the ITAA1997” more specifically the expense that has been made by the person involved in theproblem statement for moving the machine to a new site would lead to a cost having thefeatures of capital. Because of this such cost under section 8 (1) of the ITAA 1997 are notpermitted for claiming deductions (Ismer 2016). Conclusion:The clarification stated above regarding the spending made on machine is not abusiness related deductible cost. The cost has the nature of capital and they will not be treatedfor deductions for income tax purpose. Requirement 1.2:Issue:The problem that has been defined from the statement is matter of revaluation cost ofasset. Therefore, such can be considered for deductions that is allowed under “section 8 (1) ofthe ITAA 1997” income tax deductions. Rule:1.“section 8 (1) of the ITAA 1997”Application:The situation provides that the expenditure has relations with the recurring cost.Henceforth, at the time of ascertaining the sum of allowable business deductions it isimperative for the business to ascertain the fact that the expense has incurred in the process ofrevaluation of asset that increase the income of the business or the expense has just occurred
TAXATION LAW3in the process of protecting the asset. Perceiving down the above-defined argument related tocost of revaluation of asset, such kind of cost are treated as periodic cost and it will bemeasured as permissible deductions for the business under “section 8 (1) of the ITAA 1997”(Nechaev 2014). Conclusion:The assessment that has been performed in the above context signifies that the costwill be considered for the purpose of business deductions under “section 8 (1) of the ITAA1997”. The chief reason for considering the cost for income tax deductions is because theexpenditure is possessing the characteristics of recurring nature. Requirement 1.3:Issue:The issue that is mentioned in this case is dealing with the problems of legal expensethat is incurred in the process of opposing the winding up of business. The character of theexpense is evaluated under “section 8 (1) of the ITAA 1997”. Rule:a.“section 8 (1) of the ITAA 1997”b.Sun Newspapers Ltd v F C of T (1938)Applications:The evaluation of the “section 8 (1) of the ITAA 1997” provides that expense that islegal and incurred at the time of performing business activities will be viewed as businessdeductions for taxation purpose (Gordon and Kopczuk 2014). Nevertheless it is imperative to

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