Taxation Law: Partnership Net Income and Fringe Benefits Tax

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................7
References:...............................................................................................................................10

2TAXATION LAW
Answer to question 1:
Issues:
Will the net income of the partnership under “section 90, ITAA 1936” will be
considered as assessable income given the partnership was the resident taxpayer less
allowable deductions?
Rule:
In accordance with the “section 995-1, ITAA 1997” the definition of partnership
includes the association of person apart from the company or the limited partnership that are
conducting the business as the partners or in receipt of the statutory or ordinary income
jointly (Abel 2017). To determine the net income of the partnership reference to “section 90,
ITAA 1936” should be made. The net income of partnership is in relation to the assessable
income of partnership that is computed following the allowable deduction.
Assessable income will be considered for income tax purpose since it is added to
taxable income. Under “section 6-5, ITAA 1997” income based on ordinary concepts is
treated as ordinary income. In “CT v Scott (1935)” the court have stated that interpretation of
the income must be ascertained in agreement with the usage of mankind and ordinary
concepts (Lang et al. 2018).
The main provision which offers the taxpayers with the deduction for the expenditure
is regarded as the provision of general deduction. The provision of “section 8-1, ITAA 1997”
possess the potential application to any taxpayer (Manning, Sciacca and Alford 2016). A loss
or outgoing of expenditure character might be deductible under the general provision of
“section 8-1” from the taxpayers assessable if the outgoings are occurred in producing the
taxable income. Under “section 8-1” a taxpayer can claim deduction from their assessable

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income if the outgoings are necessarily occurred by taxpayer in carrying on the business for
producing the taxable income (Becker, Reimer and Rust 2015). However, it is worth
mentioning that losses or outgoings are not considered for deductions under the rule of
general deduction given the expenses satisfies any of the negative limbs of “section 8-1 (2)”.
This includes expenses of capital, private or domestic in nature.
An allowable deduction is allowed for the expenses that is occurred on the repairs to
premises or the depreciating assets which is used to produce income under “section 25-10”.
As per “section 25-10”items should have been used for producing income for repairs to be
allowed as deduction (Santhanam 2016). This includes repairs conducted in the course of
carrying on of the business or repairs made to the investment property. Few kinds of
maintenance work is held as repair under “section 25-10”such as painting done on plant or
business premises to rectify the present deterioration and preventing further deterioration
(Buenker 2018). Correspondingly, replacing items of permanent fixtures installed on the
premises used for producing income is allowed as deductible repair under “section 25-10”.
However, the repair should be the replacement of worn out unit by the new unit of identical
design which only refurbishes the productivity of the asset and does not results in
enhancement.
As per the ATO business taxpayers are permitted to claim deduction for the
depreciating assets costing under $20,000 installed in the business premises used for
producing income.
Applications:
Olivia and Daniel are carrying on the business of partnership in accordance with the
definition stated under “section 995-1, ITAA 1997” and any receipts made during the income
year by the partnership will be treated as receipt of the statutory or ordinary income jointly