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HA 3042-Taxation & Accounting

Added on - 04 Mar 2020

The below given report discusses the Income Tax Assessment Act 1997 of Australia. The report also discuss various deductions and explains whether these deductions are applicable under the law or not.

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Running head: TAXATION AND ACCOUNTINGTaxation and AccountingStudent’s Name:University Name:Author Note
1TAXATION AND ACCOUNTINGTable of ContentsQuestion 1........................................................................................................................................2Question 2........................................................................................................................................2Question 3........................................................................................................................................4Question 4........................................................................................................................................8References......................................................................................................................................13
2TAXATION AND ACCOUNTINGQuestion 1Under Section 8-1 of Income Tax Assessment Act 1997:1.The cost of moving machinery to a new site will be allowed as deduction because it hasbeen incurred while producing or gaining the assessable income.2.The cost of revaluing assets to effect insurance cover will not be allowed as a deductionbecause it has been incurred while producing or gaining the exempt income or non-assessable income(Tran-Nam & Evans, 2012).3.Legal Expenses incurred by a company opposing a petition for winding up will not beallowed as a deduction because it is considered as an outgoing of a domestic or privatenature.4.Legal Expenses incurred for services of a solicitor in respect of a number of matters,including conveyance, discharge of a mortgage, and general legal advice relating to aclient’s business operations will be allowed as a deduction as the cost has been incurredwhile producing or gaining assessable income.Question 2In question 2 it can be observed that Big Bank had a budget of expending $1650000, outof which $550,000 was given to media advertising campaign especially for promotion ofcontents insurance policies and Big Bank home. The remaining $1,100,000 was spent on ageneral campaign, including radio, television and print media promoting Big Bank.
3TAXATION AND ACCOUNTINGNow to calculate the input tax credit, the fact that acquisitions in relation to input taxedsupplies that is the traditional borrowing as well as deposit facilities business will not beconsidered(James, 2015). Accession in relation to taxed supplies will be taken intoconsideration. Therefore as in the case of Question 2 the advertisement expenditure incurred forthe promotion of Big Bank home and contents insurance policies will be considered whilecalculating input tax credit but the expenditure incurred for general advertisement campaign willonly be considered for that part about which the Big Bank home and contents insurance businessis concerned that is 2 percent off $1100000.Therefore,PARTICULARSAMOUNTExpenditure on advertisements for Big Bank home and content insurancepolicies(+) Expenditure on general advertisements [ 2%*1100000]TOTALBank's ability to claim input tax credits is($572000*10%)/100+10%$550000$22000$572000$571.43FORMULA FOR CALCULATING INPUT TAX CREDIT{RATE(10%) * PURCHASE($572000)/100+RATE(10%)}
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In brief, Legal Expenses incurred by a company opposing a petition for winding up will not be allowed as a deduction because it is considered as an outgoing of a domestic or private nature.