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Taxation Law Assessment Act, 1997

   

Added on  2019-11-26

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Taxation law

TABLE OF CONTENTSQuestion 1..................................................................................................................................3Question 2..................................................................................................................................4Question 3..................................................................................................................................6Question 4..................................................................................................................................9References................................................................................................................................11

QUESTION 1As per the general deduction in income tax assessment act 1997 - SECT 8.1, theincome that is incurred in gaining or producing from current business’s accessible incomecan be deducted, however, the amount which is unavoidably incurred in carrying on abusiness for the purpose of gaining or producing assessable income is also subtracted fromincome (Commonwealth Consolidated Acts, 2017). Nonetheless, the act shows that anindividual cannot deduct loss or outgoing of capital or loss that is of capital nature. Includingthis, any loss of private or domestic nature cannot be deducted. When an amount is incurredin relation to gaining or producing the exempted income of the business is not subtracted.Any losses or outgoings which can be deducted under the section of section12-5 are termedas a general deduction.ParticularAllowedDisallowedJustificationThe cost of movingmachinery to a new site Yes_The income or expenses done inrelation to current business arededucted and moving a machineto a new site is a revenueexpense, and it is not a capitalexpense The cost of revaluing assets toeffect insurance cover Yes-The cost has been incurred inrelation to business thus same hasbeen allowed to business. Legal expenses incurred by acompany opposing a petitionfor winding up YesThe kind of expenses which arenot related to current business arededucted. However, the legalexpenses incurred for winding upare not related to current businessare not exempted , therefore, suchkind of expenses cannot bededucted.Legal Expenses incurred forservices of a solicitor inrespect of a number ofmattersYes_Payment paid for services of asolicitor are related to theoperational expenses of thebusiness, therefore such kinds ofexpenses are legal expensesrelated to current business. Thus,can be deducted.

QUESTION 2The case of Big Bank Limited can be resolved using an IRAC approach Issue According to the given case scenario, Big Bank Limited operates at the nationalplatform with more than 50 branches and the company has recently registered for GST. Asper the information, the company is budgeted to spend $ 1650000 including GST onadvertisement campaign. A part of this amount was allocated to television advertisingcampaign that is promoting Big Bank home and contents to the general advertisement,including this $100000 was allocated to general advertisement campaign. The advertisementconsultants have issued their tax invoice for $1650000, so the issue is whether the companycan claim input tax credit with respect to its advertising expenditure of $1650000. Regulation The guidelines of GST reveal that individual can claim GST credits in case offulfilling the following four conditions. The foremost condition is that if a business intendsto purchase solely or partly in carrying company’s operations and the purchase does not relateto carrying input-taxed supplies (Warren, Harding and Lloyd, 2005). Furthermore, thepurchase price must include GST. The company should provide or should be liable to offerpayment for the items that have been purchased. As per the last condition, a business musthave tax invoice from the supplier, and the purchase limit of the supplier should not morethan $82.50.The case given herewith can be analysed using the guidelines of section 11-15. Theguidelines are showing that an individual is claiming input tax credits or a person who makesclaims for a whole range of business overhead costs, while undoubtedly acquired for generalenterprise purposes. The organisation is also entitled to claim input tax credits in a situationwhere business acquisition can be linked to potentiality,and as opposed to the fact of taxablesupplies (Rametse and Pope, 2002). In such case, credit is available in full, and costs werenatural in connection with the takeover and business assets receipts. .However, such assetsmust be subsequently deployed post-takeover then they are fully conjectural.The similar situation has arisen in the case given in C& E Commrsv/sUBAF BankLtd; however, it has not presented any problem under this statutory test. In such case, UBAFBank has acquired 3 leasing companies through initially acquiring share capital then it was

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