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Issue Based on the GST Act 1999

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Added on  2020-04-07

Issue Based on the GST Act 1999

   Added on 2020-04-07

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TAXATIONStudent number[Pick the date]
Issue Based on the GST Act 1999_1
TaxationQuestion 2 IssueBased on the GST Act 1999, the amount of input tax credits in relation to the advertisingexpenditure needs to be computed.Relevant LawThe following things are noteworthy in relation to claiming input tax credits (Barkoczy, 2017).All acquisitions would not be creditable; however those which involve taxable supplierswould be classified as creditable acquisitions.A reporting entity can adopt a 100% claim on the input tax credit only if the FAT(Financial Acquisition Threshold) threshold value breach does not take place.The definition of FAT is provided by applicable sections of the GST Act 1099. The lower of thefollowing two listed values would be considered as FAT (CCH, 2013).“10% of the entitled total input tax credits”$ 150,000For the claiming of input tax credit to 100% extent, the FAT threshold limit must not be crossedby the concerned entity (Deutsch et. al., 2016).ApplicationIt is known that amount of promotional advertisement which relates to insurance (home andcontent) amounts to $ 550,000.GST amount included in the above amount = 550000*(1/11) or $ 50,000Since, this spending would amount to creditable acquisition; hence input tax credit to the extentof $ 50,000 can be potentially availed by Big Bank.The Bank also incurs some expense on general advertising which as a whole cannot beconsidered as creditable acquisition. Hence, only that portion needs to be chosen which can beassumed to be diverted to the insurance business. Since, insurance business constitutes only 2%of total business, thus, general advertising linked to the advertising business = 2% of 1,100,000or $ 22,000The above amount includes the GST of 22000*(1/11) or $ 2,000 on which the input tax creditmay be claimed by the Big Bank.Conclusion1
Issue Based on the GST Act 1999_2
TaxationOn account of discussion highlighted above, it would be fair to come to conclusion that an inputtax credit to the extent off $ 52,000 is available to the Big Bank for claiming due to the givenadvertising expense. Question 4 Issue Leon and Johnny are running a partnership firm for which the computation of net income needsto be performed for the given assessment year. Rule Net income can be determined with the help of the two factors i.e. assessable income andavailable total tax deductions. The essential points for the computation of tax deductions andassessable income as per Income Tax Assessment Act, 1997 are listed below (Barkoczy, 2017).Any generated capital gains needs to be distributed among the respective partners of the firm.Any exempt income would not be the part of assessable income. The amount of “bad debt” would also not be the part of tax deductions as per the highlightsof “section 25(35), ITAA 1997 (CCH, 2013).Any previous year’s capital loss assumed to be offset against the previous year’s capital gainsof the respective individual partners. Legal fees and payment made to lower would not be the part of tax deduction as per thehighlights of “section 8 (1), ITAA 1997.”Salaries extended to the partners and the interest payment is also not available for taxdeduction (Deutsch et. al.,2016).Application2
Issue Based on the GST Act 1999_3

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