Taxation and Foreign Tax Offset

The assignment focuses on the calculation of foreign tax offset for an individual named Angelo. It requires understanding how taxes paid to foreign governments can be deducted from US taxes owed. The document provides a detailed explanation of this concept and guides the reader through the process of calculating the foreign tax offset for Angelo's specific situation.

Running head: TAXATION LAW
Taxation Law
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to Question No 1...........................................................................................................3
Requirement 1.1.....................................................................................................................3
Issue:..................................................................................................................................3
Rules:..................................................................................................................................3
Application:........................................................................................................................3
Conclusion:........................................................................................................................4
Requirement 1.2.....................................................................................................................4
Issue:..................................................................................................................................4
Rule:...................................................................................................................................4
Application:........................................................................................................................4
Conclusion:........................................................................................................................5
Requirement 1.3.....................................................................................................................5
Issue:..................................................................................................................................5
Rule:...................................................................................................................................5
Applications:......................................................................................................................5
Conclusion:........................................................................................................................6
Requirement 1.4.....................................................................................................................6
Issue:..................................................................................................................................6
Rule:...................................................................................................................................6
Applications:......................................................................................................................7
Conclusion:........................................................................................................................7

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Answer to Question No 2...........................................................................................................8
Issue:..................................................................................................................................8
Rule:...................................................................................................................................8
Application.........................................................................................................................8
Conclusion:......................................................................................................................10
Answer to Question No 3.........................................................................................................11
Answer to Question No 4.........................................................................................................13
Reference List..........................................................................................................................14

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Answer to Question No 1
Requirement 1.1
Issue:
The threat and the challenge that has been depicted in accordance to the current
scenario has been to take care of the transportation cost for the moving the machine to a new
location and gaining the permissible deductions within the income tax. There are various
rules that can be used for this case study and they have been laid down as follows:
Rules: “Section 8-1 of ITAA 1997” “British Insulated & Helsby Cables v. Atherton (1926)”
Application:
The expense that is created for the intention of transferring the machine to a new site
is added in the capital expenditure which has been due to “Section 8-1 of ITAA 1997”.
“Section 8-1 of ITAA 1997” has indicated that subtractions are allowable for the income tax
purpose is permitted when the cost is undertaken for trading activities for every day. It has
even depicted that the cost that is generated for the relocation of the machine reveals a small
transition, which may not allowed for any deductions and in a manner increases the
depreciation expenses (Gitman, Juchau and Flanagan 2015).
It has been highlighted in the “Taxation Ruling of TD 93/123” that the cost
connected for the machine installation and the establishment of the process of production
declares the profit and hence leads to increase in the operational benefits of the organization.
Therefore, in accordance to “Section 8-1 of ITAA 1997” the cost of relocating of the
machine in the new area is known as the capital expenditure and hence no permissible
subtractions are given in this condition (Petty et al. 2015). In compliance to “British

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Insulated &Helsby Cables v. Atherton (1926), it has been observed to be a upliftment of
revenue for the company for the transference of the assets that depreciable in nature for the
companies.
Conclusion:
The description of “Section 8-1 of ITAA 1997” in accordance to the cost of relocation
of the machine to a newer location has been defined as the capital expense that is non-
permissible for income tax subtractions.
Requirement 1.2
Issue:
The topic of explanation in this section has understood the insurance coverage effect
in the revaluation of the asset and this would be regarded as granted deductions in the income
tax in accordance to “Section 8-1 of ITAA 1997”. The law that is best suited for this case has
been:
Rule: “Section 8-1 of ITAA 1997”
Application:
The background has depicted that the expenditure is associated with the recurring
expense. Hence, during the time of ascertaining the total value of the allowable
organizational deductions, it is authoritative for the company to ascertain the information that
cost incurred for the revaluation mechanism, increases the revenue of the company and the
cost that is undertaken during this process has been to secure the asset (Braithwaite 2017). In
this respect, the asset revaluation cost is determined to be the characteristic of recurrence and

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has been treated as subtractions that can be allowed for the income tax purpose provided in
“Section 8-1 of the ITAA 1997”.
Conclusion:
By looking at “Section 8-1 of the ITAA 1997”, it is depicted that the revaluation of
the asset has a key effect on the insurance coverage and therefore is considered as income tax
deduction. The essential reason for adding the deductions in the income tax is mainly due to
the fact that the cost has the recurrence characteristics.
Requirement 1.3
Issue:
The issue that has been defined in this question has been managing the threats that are
associated to the legal cost that occurs during the process of closing the operations of the
firm. Hence, legal costs have been experienced to be subtractions that are non-permissible
under “Section 8-1 of ITAA 1997”. The law that can be compared with this situation is given
as follows:
Rule:
 Sun Newspaper Ltd v F C of T (1938)
 Section 8-1 of the ITAA 1997
Applications:
“Taxation Ruling of ID 2004/367” explains the feature that there are various legal
costs that can be cleaned for intention of any deductions associated with the operations of the
business. By looking at “Sun Newspaper Ltd v F C of T (1938)” and its verdicts it has been
said that in case the legal cost is engrossed in the matter towards structural purpose rather
than the operational functions then the cost and the expenses would be regarded as cost of

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capital (Miller and Oats 2016). It is due to this effect that costs are not taken for the purpose
of deductions in the income tax. There are specific legal expenses that have taken in the
process of the operations of the company and these expenses have been taken for subtractions
in the revenue in accordance to “Section 8-1 of ITAA 1997”. Additionally, it is essential to
determine the characteristics of the legal expenses while claiming for the deductions
associated with the income tax (Picciotto 2015). By looking at the operations of the lawyer is
represented as business costs that are related directly to the establishment of the profit for the
organization. Due to this impact, the costs would be allowable for ascertaining the income
tax as it has been generated from the operations of the business.
Conclusion:
The observations of the factors that has been given description earlier and taking help of the
“Section 8-1 of ITAA 1997”, it is said that the solicitor cost can be taken for subtractions that
would be granted.
Requirement 1.4
Issue:
The issue statement has highlighted the concerns that the payment of legal cost that is
paid to the solicitor is ascertained as subtractions that would be allowable in accordance to
“Section 8-1 of the ITAA 1997”. The laws similar to this condition are as follows:
Rule: Section 8-1 of the ITAA 1997 Herald and Weekly Times v F C of T (1962)

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Applications:
In regards to “Section 8-1 of ITAA 1997”, there has been a precise explanation that
the legal cost incurred for the charging of the business activities establishes a portion on the
everyday operations of the individuals who pay tax and these are considered for deductions.
There exist an exclusion in case the cost has been nationalised or the carrying feature of the
private cost that has taken place for the establishment of the income that is not exempted and
in this manner taken for deductions within the income tax (Lang 2014). The decisions that
has been depicted in the case of “Herald & Weekly Times v F C of T (1932)” the cost that
official in nature and conformity to “Section 8-1 of the ITAA 1997” and has been seen from
everyday actions of the business and in that case would be considered as the income tax
deductions (Dowling 2014).
The present case has focused that legal expense for undertaking the service of the
solicitor is in conformity to several business functions, which are regarded as permissible
income tax subtractions under “Section 8-1 of ITAA 1997”. The service of the solicitor
explains the cost that is related in a direct manner for the liberation of the activities of the
business and hence would be considered as income tax deduction purpose.
Conclusion:
As explained in the case scenario, it is said that the legal cost for the activities of the
solicitor in giving out numerous services that are connected with the daily activities would be
regarded as deductions in accordance to “Section 8-1 of ITAA 1997”.

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Answer to Question No 2
Issue:
The problem statement of this question has depended on ascertaining the privileges of
the advertisement and the promotional costs that have been paid out by Big Bank Ltd under
“Legislation of GSTR Act 1999”. There are distinct rules that can be implied in accordance
to this situation and they have been highlighted below:
Rule: “GST Act 1999” Paragraphs 11-5 and 15-5 Subsection 15-25 “Goods and Services Tax ruling of GSTR 2006/3” “Ronpibon Tin NL v F C of T”
Application
The problem that is in connection to Big Bank aims to ascertain the input tax credit by
understanding the “Taxation Ruling of GSTR 2006/03”. “GSTR 2006/3” has been hesitant
with the process that needs to be implied in the present condition of Big Bank so as to
understand the amount of input tax credit for the financial supplies values that is taken by Big
Bank in addition to the amount that includes the “GST Act 1999”. The GST legislation
expressively brings forward that the degree of understanding the creditable intentions and this
has been seen in “Section 11-15 and 129 of the GST Act”. The entities that can be taxed
need to be recorded according to GST Act 1999 and has even overpassed the degree of the
financial achievements (Zucman 2014). The “Goods and Service Tax Ruling of GSTR
2006/3” specifically highlights the objects of the organization needs to be incurred in
accordance to GST Act 1997 for the value of GST that is added in the supply of finance.

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Therefore, as a result, the companies would be liable for input tax credit only if they are
registered.
With respect to the current condition, depicted in the case of Big Bank, it is clear from
the operation that the bank has undergone a cost of $1,650,000, which has been due to the
advertisement cost this cost is GST inclusive. It can be explained with respect to Big Bank
that they are qualified for the input tax credit privilege or reduced input tax credit. It has been
explained in “GSTR Ruling of 2006/3”, a company who is GST Act registered are required
to undertake the registration so that the company can price for the financial supplies that is
GST inclusive. The legislation of GST defines that the companies are required to GST
included in the financial supplies produced or imported by the company.
Calculation of Input Tax credit
Particulars Amount ($)
Amount
($)
Total spending on advertisement and promotional activities
1,650,000.0
0
GST input credit 100% eligible for:
1,100,000.0
0
Portion of advertisement expenditures ineligible for input credit in respect of
GST 550,000.00
100% GST input credit
100,000.0
0
Add: 2% contribution in revenue 3,000.00
Amount of input credit allowed to the bank
103,000.0
0
In conformity to “Ronpibon Tin NL v. F C of T”, the principle of the degree that is
incorporated is with the aim of investigating the GST Act. The verdict in this case has
highlighted those favourable mechanisms of assigning that practically needs to be
implemented by the organization. Paragraph 11-5 and the 15-5 of the GST Act 1999, has
highlighted that the ownership to be qualified for the purpose of undertaking a credit and the
mechanism of undertaking a credit requires being permanent or temporary (Snape and De

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Souza 2016). By looking at the present condition of Big Bank, it is seen that financial supply
given out by the bank has overpassed the entry limit of the financial credit (McCluskey and
Franzsen 2017). So in order to be qualified for the input credit tax, Big Bank can undertake
temporary claims for the financial credit asked by it. In regards to Section 11-5 and 15-10 of
the “GSTR Ruling of 2006/3” it is depicted that the financial supplies by the firm and they
can ask for the input tax credit privilege in compliance to the undertaken financial supplies
(Dicey 2017).
By looking at the case study of Big Bank, the cost of advertisement paid for the
creditable purpose will be entitled for gaining the input tax credit. In accordance to
“Taxation Ruling of GSTR 2006/3”, it can be explained that Big Bank looks to attain the
objective of gaining the input tax credit in relation to the financial supplies that have been
incorporated by the bank.
Conclusion:
In accordance to the answers obtained from the assessment of the case study of Big
banks, it can be said that the bank would be qualified for asking for input tax credit claims.
The financial supplies done with respect to the “Goods and service tax ruling of GSTR
2006/3” related with the amount has been included in the price of the financial supplies taken
by the bank.

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Answer to Question No 3
Computation for Foreign tax Offset for Angelo
Assessable Income Amount ($) Amount ($)
Gross Income
Employment income from Australia 44000
Employment income from United States 12000
Employment income from United Kingdom 8000
Rental income from property in United Kingdom 2000
Dividend income from United Kingdom 1200
Interest income from United Kingdom 800
Total Taxable Income 68000
Tax on Taxable Income 13647
Medicare Levy 1360
Less: Tax Offset for Medical Expenses 750
(5000-1250)
Total Tax Payable 14257
Average rate of tax payable on Angelo Taxable Income (%) 21.0
(14257/68000)*100
Net Foreign Income From Each Class
Foreign Rental Income 2000
Less: Expenses incurred in Deriving 500 1500
Gross foreign dividend income 1200
Gross Interest income from United Kingdom 800
Net passive foreign income 3500
Other Foreign Income
Gross Employment income from United States 12000
Less: Expenses incurred in deriving employment income from United States 900 11100
Gross Employment income from United Kingdom 8000
Less: Expenses incurred in deriving employment income from United Kingdom 500 7500
Net Other Foreign Income 18600
ANFI for each Class
ANFI For Passive Foreign Income 3479
(3500*68000(68000+400)
ANFI other Foreign Income 18491
(18600*(68000/68000+400)
Amount of Australian Tax Payable on Passive Foreign Income (3749*21%) 787.29
Amount of Australian Tax Payable on Other Foreign Income (18491*21%) 3883.11

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Tax payable on his passive foreign income
Tax on Dividend income from United Kingdom 120
Tax on Interest income from United Kingdom 80
Tax On Rental income from United Kingdom 600
Total passive foreign Income tax paid 800
Amount of Australian Tax Payable on Passive Foreign Income 787.29
Tax Credit on Passive Forign Income 12.71
Foreign Tax Paid on Employment income from United States 3600
Total Other foreign Income tax paid 3883.11 283.11
Tax Credit Angelo can claim
On Passive Income 787.29
On Other Foreign Income 3883.11
Total foreign tax offset he can claim 4670.4

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Answer to Question No 4
Assessable Income Amount ($) Section Amount ($)
Gross Sales 400000 Section 6-5 of ITAA 97
Less: GST 40000
Net Sales 360000
Australian Sourced Interest Income 10000
Australian Sourced Dividend Income
Fully Franked Net 12600
Gross Up Franking Credits 8400 21000
Other Income
Bad Recovered 10000
Other Exempt Income 50000
Net Capital Gain on Disposal Of Shares 30000
50% CGT Discount -15000 15000
Total Assessable Income 466000
Allowable Dedections
Interest on loan made by Johnny to the partnership Section 8-1 of ITAA 97 4000
Legal fees for the renewal of lease of the office building Section 8-1 of ITAA 98 2,000
Legal expenses for preparation of a partnership agreement Section 8-1 of ITAA 99 1,200
Legal expenses for preparation of new lease of business premises Section 8-1 of ITAA 100 700
Debt collection expenses paid to a solicitor Section 8-1 of ITAA 101 500
Council rates on business premises Section 8-1 of ITAA 102 500
Staff Salaries Section 8-1 of ITAA 103 20000
Rent on retail shop Section 8-1 of ITAA 104 20000
Provision for doubtful debts Section 8-1 of ITAA 105 30000
Business lunches Section 8-1 of ITAA 106 10000
Total Allowable Deduction 88900
Net Income From Partnership 377100
Tax on Taxable Income 142927
Gross Tax Payable 234173
Medicare Levy 7542
Budget Levy Repair 3942
Net Tax Payable 154411

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Reference List
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record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
Dicey, A.V., 2017. Lectures on the relation between law and public opinion in England
during the nineteenth century. Routledge.
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irresponsible?. Journal of Business Ethics, 124(1), pp.173-184.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Howard, S.J., Gordon, R. and Jones, S.C., 2014. Australian alcohol policy 2001–2013 and
implications for public health. BMC public health, 14(1), p.848.
Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.
McCluskey, W.J. and Franzsen, R.C., 2017. Land value taxation: An applied analysis.
Routledge.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Niazi, S.U. and Krever, R., 2017. Romance and Divorce between International Law and EU
Law: Implications for European Competence on Direct Taxes. Stan. J. Int'l L., 53, p.129.

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Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M.,
2015. Financial management: Principles and applications. Pearson Higher Education AU.
Picciotto, S., 2015. Indeterminacy, complexity, technocracy and the reform of international
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Schenk, A., Thuronyi, V. and Cui, W., 2015. Value added tax. Cambridge University Press.
Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice.
Routledge.
Ting, A., 2014. iTax-Apple's International Tax Structure and the Double Non-Taxation Issue.
Zucman, G., 2014. Taxing across borders: Tracking personal wealth and corporate
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