Disallowable Expenses

The assignment content discusses various tax-related issues and cases in Australian taxation law. The main topics covered include the allowability of legal expenses incurred during the winding up of a business, the claimability of input tax credits for advertisement expenses, and the computation of taxable income from a partnership. The cases discussed are FC of T v Snowden and Wilson Pty Ltd (1958) and Ronpibon Tin NL v FC of T. The assignment also references various Australian taxation laws, including the ITAA 1997 and GST Act 1999, as well as several academic sources.

Running head: TAXATION LAW THEORY AND PRACTICE
Taxation Law, Theory and Practice
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW THEORY AND PRACTICE
Table of Contents
Answer to question 1:.................................................................................................................3
Answer to Issue I:.......................................................................................................................3
Issue:..........................................................................................................................................3
Laws:..........................................................................................................................................3
Applications:..............................................................................................................................3
Conclusion:................................................................................................................................4
Answer to Issue II:.....................................................................................................................4
Issue:..........................................................................................................................................4
Laws:..........................................................................................................................................4
Applications:..............................................................................................................................4
Conclusion:................................................................................................................................5
Answer to Issue III:....................................................................................................................5
Issue:..........................................................................................................................................5
Laws:..........................................................................................................................................5
Applications:..............................................................................................................................5
Conclusion:................................................................................................................................6
Answer to Issue IV:....................................................................................................................6
Issue:..........................................................................................................................................6
Laws:..........................................................................................................................................6
Applications:..............................................................................................................................6

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Conclusion:................................................................................................................................7
Answer to question 2:.................................................................................................................7
Issue:..........................................................................................................................................7
Laws:..........................................................................................................................................7
Application:................................................................................................................................7
Conclusion:................................................................................................................................8
Answer to question 3:.................................................................................................................8
Answer to question 4................................................................................................................10
Reference List:.........................................................................................................................12

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Answer to question 1:
Answer to Issue I:
Issue:
From the existing scenario of moving the machinery from one site to another site it
can be said that the cost that is incurred can be considered for non-allowable deductions with
reference to “Section 8-1 of the ITAA 1997”.
Laws:
i. “Section 8-1 of the ITAA 1997”
ii. “British Insulated & Helsby Cables”
Applications:
As it has been evident from the existing situation that moving of machinery to new
site involves cost and it can be said that no permissible subtractions or deductions will be
permitted under section “8-1 of the ITAA 1997”. For the purpose of depreciation, moving
the machine to the new site can be said that it involves cost that ultimate results in increase in
the cost of machine. As held in “British Insulated & Helsby Cables” any form of cost
incurred at the time of transportation symbolizes a recurring advantage for the business by
shifting the machinery to new site (Barkoczy, 2016). According to the “Taxation ruling TD
93/126” installing the machine and starting the business functions results in cost involved in
moving the machine to new site and simultaneously forms the part of revenue. It must be
noted that cost involved in moving the machine to new site cannot be accounted as allowable
deductions.

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Conclusion:
With reference to “Section 8-1 of the ITAA 1997”, it can be concluded that cost of
moving the machine will not be allowed as deductions since it is a capital expenditure.
Answer to Issue II:
Issue:
The issue brings forward the question whether or not the revaluation of asset to effect
insurance cover would form the part of allowable deductions under “Section 8-1 of ITAA
1997”.
Laws:
i. “Section 8-1 of the ITAA 1997”
Applications:
It can be said that cost originating from revaluation of asset to effect insurance cover
can be treated as permissible subtraction under “Section 8-1 of the ITAA 1997”. This is
because the expense of insurance cover is recurring in nature and it is directly linked with the
fixed asset (Kenny, 2013). While assessing the deductable nature of the expense it is
obligatory to make sure that whether such incurrence of expense in revaluation of asset
results in the income producing capability or it is merely occurred to protect the asset. If it
provides a provisional advantage to business in nature or it is recurring in nature than that
will be considered as deductions that are permissible in “Section 8-1 of the ITAA 1997”.

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Conclusion:
It can be concluded that cost of insurance cover will be treated as deductions that is
permissible under “Section 8-1 of the ITAA 1997” because it possess a recurring character
of expense.
Answer to Issue III:
Issue:
This issue brings forward the subject that whether or not the cost of winding up
business will be considered as allowable under “Section 8-1 of the ITAA 1997”.
Laws:
i. “FC of T v Snowden and Wilson Pty Ltd (1958)”
ii. “Section 8-1 of the ITAA 1997”
Applications:
The issue brings forward matter that cost that is involved during the process of
winding up of business have took place in the business operations and will not be allowed as
deductions under “Section 8-1 of the ITAA 1997” (Krever, 2013). As defined in “Taxation
Ruling of ID 2004/367” legal cost incurred will be permitted as deductions that are
allowable. This is because the taxpayer occurred the expense at the time of carrying out the
business functions from which the taxpayer produces income. Citing the case of “FC of T v
Snowden and Wilson Pty Ltd (1958)” legal cost for opposing the winding up of petition
even though meeting the criteria of positive limbs will not be considered as deductions that

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are allowed as they possess the feature of capital and goes right into the business structure
(Morgan et al., 2013).
Conclusion:
It can be concluded that cost that is incurred in opposing the petition of winding up
will not permitted as allowable business deductions under “Section 8-1 of the ITAA 1997”.
Answer to Issue IV:
Issue:
The issue introduces the matter of legal expense arising from the service of solicitor
for various business functions of the client can be claimed as allowable deduction under
“Section 8-1 of the ITAA 1997”.
Laws:
i. “Section 8-1 of the ITAA 1997”
Applications:
From the above discussed issue, the matter brings forward the question that whether
an individual taxpayer occurring a legal expenditure relating to business expense shall be
treated for deductions that are allowable defined under “Section 8-1 of the ITAA 1997”
(Cao et al., 2015). If a taxpayer incurred any legal outlay that is not related to business then it
will be considered as non-allowable deductions (Woellner, 2013). From the given context it
can be said that legal outlay incurred by the taxpayer would be allowed as permissible
deductions since they are part of the business and it is occurred in producing the assessable
income of the taxpayer.

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Conclusion:
It can be stated by concluding that legal expense derived from of the business
functions would be permitted in the form of deductions under “Section 8-1 of the ITAA
1997”.
Answer to question 2:
Issue:
The existing issue brings forward the subject concerning the ascertainment of the
input tax credit resulting out of the occurrence of advertisement expense under “GSTR Act
1999”.
Laws:
i. Goods and Service Taxation Ruling of GSTR 2006/3
ii. Ronpibon Tin NL v FC of T
iii. Subsection 15-25
Application:
A guiding principle has been provided under the “GST ruling of GSTR 2006/3”
which is implemented to arrive at the input tax credit (Braithwaite, 2017). It is noteworthy to
denote that the creditable purpose and the original application of the ruling is defined in
“division 11-15 and 129 of the Goods and Service Tax Act 1999”. The above stated GST
ruling is implemented on all the taxable units that have been registered or they are required to
obtain the registration in order to acquire the monetary supplies that have exceeded the
agreed extent of the monetary acquisition and are regarded for input tax credit or reduced

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amount of input tax credit. As it has been understood from the current scenario of Big Bank
Ltd outlay of $1,650,000 includes the cost of GST for advertisement.
As evident from the existing circumstances of Big Bank ltd Goods and Service
“taxation ruling of GSTR 2006/3” is applicable because the unit qualifies for the eligibility
of the input tax credit (Robin, 2017). The “GST Act 1999” states that a taxable entity can
introduce the claim of input tax credit for the supplies that includes GST derived in the
process of import. Citing the reference of “Ronpibon Tin NL v FC of T” to make the
eligible acquisition under “para 11-5 and 15-5” it is necessary to obtain creditable either in
parts or completely (Tran-Nam & Walpole, 2016). As stated under the “Section 11-15 or 15-
10” of the “GST Act 1999” an acquisition will be eligible as creditable given that the taxable
units brings forward the claims of input tax credit for the monetary supplies they make. It
must be understood that the advertisement expense that is incurred by Big Bank Ltd was for
the purpose of creditable acquisition (James, 2016). As it has been found that Big Bank Ltd
has gone past the financial acquisition threshold limit and it qualifies for claiming input tax
credit for the GST supplies that is made during the business process.
Conclusion:
It can be concluded that Big Bank Ltd would be considered eligible for claiming input
tax credit as per the “GSTR 2006/13” for the amount that is occurred for the advertisement
outlay on creditable acquisition.
Answer to question 3:
Computation of Taxable Income of Angelo

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Answer to question 4
Computation of Net Income from the Partnership

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Reference List:
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ... & Wende, S.
(2015). Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP, 1.
James, K. (2016). The Australian Taxation Office perspective on work-related travel expense
deductions for academics. International Journal of Critical Accounting, 8(5-6), 345-
362.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2013). Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
Morgan, A., Mortimer, C., & Pinto, D. (2013). A practical introduction to Australian taxation
law. North Ryde [N.S.W.]: CCH Australia.
ROBIN, H. (2017). AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.
Tran-Nam, B., & Walpole, M. (2016). Tax disputes, litigation costs and access to tax
justice. eJournal of Tax Research, 14(2), 319.
Woellner, R. (2013). Australian taxation law select 2013. North Ryde, N.S.W.: CCH
Australia.

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