TAXATION LAW

The assignment content discusses taxation law, specifically focusing on the views of the Australian Taxation Office (ATO) regarding the term 'incurred' under Section 8-1 of the Income Tax Assessment Act (ITAA) 1997. The content also explores the treatment of various expenses under ITAA 1997, including machinery moving costs, revaluation cost of assets for insurance offset, and legal expenses for fighting against winding up petitions or hiring solicitor services. Additionally, it covers input tax credit calculation and foreign tax offset computation, as well as net income from a partnership during an assessment year.

Running head: TAXATION LAW
Taxation law
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1TAXATION LAW
Table of Contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................4
Question 3..................................................................................................................................5
Question 4..................................................................................................................................7
References..................................................................................................................................8

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Question 1
Section 8-1 of ITAA 1997 states about the views of ATO (Australian Taxation office)
regarding whether the term incurred under the ruling has same meaning with regard to the
taxpayers those file their return on income on the basis of receipt as it deals with the
taxpayers those normally file their return on earning basis1. However, the ruling is not applied
to use of the term incurred or incur in different parts of ITAA, for instance, section 25-10.
To be qualified for the allowable deduction under ITAA 1997, Section 8-1, the
expenditure or loss shall have been incurred. However, for the term incurred –
 Any statutory definition is not there
 In a broad sense, the term is considered as incurring of an expense while the taxpayer
owe an obligation that he cannot escape. However, this broader sense guide is subject
to the propositions issued by the court.
Treatment of various expenses under ITAA 1997, Section 8-1 will be as follows –
a. Machinery’s moving cost to new site
Under the ITAA 1997 for section 8-1, the capital expenses are not allowed for
deduction. The expenses incurred with regard to movement of the asset to the new site will
enhance the cost of the asset and will therefore be allowed for depreciation. However, as the
expense is in the nature of capital expenses, it will not be allowed for deduction purpose
under taxation ruling.
1 Buchanan, Richard, and Edward Consett. "Section 974-80 ITAA97: The current state of play." Tax
Specialist 19.5 (2016): 217.

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b. Revaluation cost of asset for the purpose of insurance offset
For the admissible deduction, it must be contemplated over the way that whether costs
builds the limit of income earning capacity or the consumption are done to save or secure the
asset. On the off chance that it is brought about only to protect the advantage, at that point the
asset will be viewed as of temporary nature2. However, if the costs are of repeating nature, it
will be taken into consideration as allowable deduction under ITAA 97 for Section 8-1.
c. Legal expenditure for fighting against winding up petition
As per ITAA 1997 for Section 8-1, the regular expenses of business incurred for
carrying out the regular operation will be regarded as revenue expenses that will be allowed
for deduction under the taxation ruling. Legal expenses incurred in relation to fight against
the wind-up petition will be regarded as regular operational expenses for the business.
Therefore, the amount will be permissible for deduction.
d. Legal expenses with regard to hiring of solicitor’s service
As per the ITAA 1997, section 8-1, when any expenses are incurred to normal
operation of the business, it is regarded as the revenue expenses and therefore, allowed as
permissible deduction under the taxation. Further, the amount incurred towards legal fees will
be a permissible deduction provided that the amount in some way incurred for creating any
income3. From the given case scenario, it can be concluded that the expenses towards legal
2 Brink, Sophia. "An evaluation of the income tax treatment of client loyalty programme transactions by South
African suppliers." Journal of Economic and Financial Sciences 8.1 (2015): 145-164.
3 Andrews, Harwood. "Trust structures." Trust Structures Guide: The Ultimate Resource for Anyone Advising
on Trusts, Structuring and Planning Issues(2013): 81.

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fees has been incurred for earning taxable income from business operation and therefore, it
will be qualified as permissible deduction.
Question 2
The input tax credit to be qualified as permissible deduction, the document related to
the expenses must be provided at the time of claiming deduction. Further, all business that are
operated with the aim of earning profit will be entitled to claim input tax credit as per the
ruling of GST act, 1999. Here, as per given scenario, Big Bank Limited spend a measure of $
165,000 comprehensive of GST for the advertising purpose4. According to the GST (Goods
and Services) Act 1999, if any costs are brought about amid typical business course, the
consumption will be permitted as deduction. Real utilization of the decision under division
11,15 and 129 of the GST Act. The decision is generally pertinent to all the assessable
elements that are enlisted or are fundamentally required to get enrolment with a specific end
goal to make or gain the finance related services that goes past the edge furthest reaches of
the budgetary securing and who meets all requirements for the information charge credit or
lessened credit from input tax.
According to the given contextual analysis, Big Bank Limited gives the services
related to finance and have more than 50 branches everywhere throughout the country5. The
bank kept aside a measure of $ 16,50,000 for the costs of promoting. Out of the aggregate
sum $ 550,000 was spend towards the protection and home ad. Be that as it may, from $
4 Fisher, Donna. "Mid market focus: No joy regarding FBT on travel expenses for FIFO
arrangements." Taxation in Australia 49.7 (2015): 377
5 "GSTD 2006/3 - Goods and services tax: are settlement adjustments taken into account to determine the
consideration for the supply or acquisition of real property? (As at 16 April 2008)". Law.ato.gov.au, 2017.
Online. Internet. 8 Sep. 2017. . Available:
http://law.ato.gov.au/atolaw/view.htm?docid=GSD/GSTD20063/NAT/ATO/00001.

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5,50,000 just 2% is spend for money era and adjust $ 11,10,000 is spend for limited time
commercial of the bank. In this way, $ 550,000 will be dealt with as the capital costs as the
item has not yet been propelled and the measure of $ 11,10,000 will be viewed as the cost for
limited time items and administrations6. Along these lines, $ 11,00,000 will be considered
derivation and on $ 550,000, just 2% will be took into account for credit of input tax.
Input tax credit calculation
Question 3
In accordance with the sub division of 717A dealing with the income tax off setting,
foreign tax offset computation for Angelo will be as follows –
6 May, Stephen. "Applying the GST to imported digital products and services: Problems and solutions." Tax
Specialist 19.3 (2016): 110.

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The assessable income that includes the foreign income are assessed as follows –
The foreign tax offsetting is computed through decreasing the payable measure of
income taxes from the first choice from diminishing the payable expense from second

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alternative7. Along these lines, the sum will be constrained to ($ 11,794.18 - $ 6,821.68) = $
4,972.5. In this way, it can be recognized that the measure of foreign tax offsetting is more
prominent than the measure of remote assessment paid. In this manner the measure of
balance will be restricted to $ 4,400.
Question 4
Net income from the partnership during the assessment year will be as follows –
7 "Legal Database". Ato.gov.au, 2017. Online. Internet. 8 Sep. 2017. . Available:
https://www.ato.gov.au/law/view/document?docid=PAC/19970038/8-1.

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References
"GSTD 2006/3 - Goods and services tax: are settlement adjustments taken into account to
determine the consideration for the supply or acquisition of real property? (As at 16 April
2008)". Law.ato.gov.au, 2017. Online. Internet. 8 Sep. 2017. . Available:
http://law.ato.gov.au/atolaw/view.htm?docid=GSD/GSTD20063/NAT/ATO/00001.
"Legal Database". Ato.gov.au, 2017. Online. Internet. 8 Sep. 2017. . Available:
https://www.ato.gov.au/law/view/document?docid=PAC/19970038/8-1.
Andrews, Harwood. "Trust structures." Trust Structures Guide: The Ultimate Resource for
Anyone Advising on Trusts, Structuring and Planning Issues(2013): 81.
Brink, Sophia. "An evaluation of the income tax treatment of client loyalty programme
transactions by South African suppliers." Journal of Economic and Financial Sciences 8.1
(2015): 145-164.
Buchanan, Richard, and Edward Consett. "Section 974-80 ITAA97: The current state of
play." Tax Specialist 19.5 (2016): 217.
Fisher, Donna. "Mid market focus: No joy regarding FBT on travel expenses for FIFO
arrangements." Taxation in Australia 49.7 (2015): 377