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HI3042 Assignment on Taxation Law

   

Added on  2020-04-07

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HI3042 Taxation LawT2 2017 Individual Assignment

QUESTION 1IssueIn accordance with the provisions of sec 8-1 of ITAA 1997 expenses incurredby business will be allowed for general deductions if conditions cited in it is satisfied.Thus present case study deals with the analysis of given transaction to determinewhether they are deductible or not. Description of legal provisionsA general deduction in business is supported by provisions of section 8-1 ofITAA 97. Section 8-1(1) allows that an individual or business can subtract a loss to aparticular extent, if it can meet the direct requirement cited in provisions of both s 8-1(1)(a) or s 8-1(1)(b) (Somers and Eynaud, 2015). While, taking a look at expense toobserve if it is deductible next to assessable income or not, one must first determinewhether they are allowable to a general deduction, or there is any exclusionprovisions been applicable to refuse the deduction. S8-1(1) has two positive aspects from which minimum one must be confirmedto be applicable before there is deduction in any of the amount, as a specificdeduction (Buchanan and Consett, 2016). Further; S8-1(2) has four negative aspectswhich describe the circumstances in which deduction will not be provided if one ofthe following aspects is satisfied (any of these) (Dunne, Mason and Patto, 2014).NB: While taking a look at a potential amount as a specific deduction, one mustassess the positive limbs and demonstrate one of them, further look after thenegative limbs to ensure none of the cited condition is satisfied (Liu, Huang andFreudenberg, 2014). First prove that, if the company has any of the loss or outgoingamount, it must be incurred in, next the expense must be valid and real and it mustrelate to the income of taxpayer (Millar, 2016). After that the Assessable income isnot needed to be generated in the particular deductibility period, as it may besubjected to Apportionment Exclusion – s 8-1(2) ITAA 1997 as per s 8-1(2), if the positive limbs arefulfilled according to the terms, a deduction will not be still entitled to the level, if theloss or outgoing is capital nature or is of a personal or domestic nature or is incurred

regarding earning or generating excused income or it prohibited from being deductedfrom provision of the Act.Application of cited provisions to determine allowance of expenseThe cost of moving machinery into a new site; this expense is Non-Deductible, it is because fixed asset’s shifting cost from place to place said tobe a capital expenditure, by which reduction will be done as per s 8-1 ofITAA97 (Datt, Nienaber and Tran-Nam, 2017). While, this expense is allowedto increase the item cost in regards to the transactions for depreciationThe cost of revaluing assets to effect insurance cover; this expense isdeductible, it is because in order to identify the expense deduction regardingthe fixation of assets, it is vital to identify either the subjected amount willmake increment in the earning capacity or are subjected just for the intentionto protect or preserve (Edmonds, Holle and Hartanti, 2015). According to thiscase; it can be stated that the benefit are expected to be temporary or can behabitual in nature therefore it is deductible as per s 8-1. Legal Expenses experienced by a company facing an appeal for windingup; these expenses are Non-Deductible, as In this described situationprimary issues related to income generation effectiveness or are related tooperational activities (Dixon and Nassios, 2016). In the existing transaction, itseems that these transactions will help company in winding up therefore thiswill be considered as capital transaction as it is neither revenue in nature andnor has recurring prospects.Legal Expenses occurred for the services provided by the lawyerregarding several matters; this expense is deductible. For the aspect ofdetermining additional deductibility, requirement of information is necessarylike expense nature, distribution or any other similar aspects. On the otherhand, these expenses appear to be revenue in nature, further it can be saidthat it meets the term and conditions given as per s 8-1.

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