Taxation Theory, Practice and Law

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

TAXATION THEORY, PRACTICE AND LAW1
Table of Contents
Answer to Question 1.....................................................................................................2
Answer to Question 2.....................................................................................................3
References.....................................................................................................................6

TAXATION THEORY, PRACTICE AND LAW2
Answer to Question 1
Issue
City Sky Co. has been operating in the field of investing in properties and
developing them. The company recently bought a piece of land that was untaken and is
preparing to construct 15 apartments in that particular site. It will sell these completed
apartments on a future date. In order to obtain the necessary legal advice involved in
the development of a property, the entity hired a solicitor named Maurice Blackburn.
The lawyer’s fees was $33000. Mr Blackburn is conducting his business as a sole
proprietor and manages a yearly turnover worth $300000. City Sky Co. has managed to
register itself for GST for taxation purposes. They are interested in knowing whether
and how much input tax credit will be accessible to them in the given financial year.
Law
As per the rules of the Australian Taxation Office (ATO), GST credit is sometimes
also referred to as the input tax credit. This is a benefit received by the taxpayer in
which the amount of input tax credit is deducted from the GST payable on the sales
made by him in a financial year (Palil et al. 2013). In order to obtain the benefits of GST
credit, it is compulsory for a taxpayer to register themselves for GST purposes. The
ATO regulations also state that if the yearly turnover inclusive of GST of a business is
more than $75000, then the GST provisions are automatically applicable on a taxpayer.
Some other requirements that are to be fulfilled to obtain the input tax credit are as
follows:
 If any purchase is worth more than $82.50, then an invoice supporting that
particular purchase should be maintained;
 It is to be remembered that the input tax credit cannot be availed on purchases or
services that are obtained in relation to an input-tax sale. The input-tax sale is
one in which the inputs used are inclusive of the GST but the final product
produced is not being sold at once. Instead it is being let out for the use of others
over a certain period (Bain 2015). Any entity that is involved in the business of
letting out properties for residential purposes for exchange of rent is not eligible
to obtain input tax credit on the amount spent for renovating and repairing the
property;
 The organisation that sells the goods or provides services to the entity making
GST related sales should also be covered under the GST act;
 Any company that deals in letting out properties for residence should note that
the term ‘properties’ includes units, houses apartments and other forms of
residence. Vacant land, however, is not covered under the regulations;
 GST is not applicable on the resale of a property. This means that if GST was
paid on the sale of a property once, then the tax need not be paid on the further
sales of the property;
 GST, though, is available on the sale of new residential premises. A new
residential premise is a property that has been built recently and has not been
sold already. In case of an already existing property, substantial renovations
must be made to it to be classified as a new property and in a situation where a
demolished building is being replaced, the new building should also be
constructed in the same land in which the prior building existed;