HI6028 Taxation Law: Implications for RIP Pty Ltd - Case Law Analysis

This report provides a comprehensive analysis of Australian taxation law, focusing on the application of key principles to RIP Pty Ltd, a funeral services company. It examines the Arthur Murray (NSW) Pty Ltd v FCT case to determine the treatment of prepayments for tax purposes, advising RIP Pty Ltd on whether to include prepayments in assessable income before or after service provision. The report further discusses the tax implications of forfeited amounts and offers guidance on inventory management, the treatment of franked dividends, and deductible expenses like prepaid rent. The analysis aims to provide RIP Pty Ltd with a clear understanding of its tax obligations and optimal strategies for compliance.

HI6028 Taxation Law
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Contents
Introduction...........................................................................................................................................3
PART A.................................................................................................................................................4
PART B.................................................................................................................................................7
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11
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Introduction
In the worldwide economic climate, it's quite crucial that all the laws, as well as regulations,
shall be adhered to by the organization in many effective, therefore, will be the taxation laws
that are specified. In this article, the Australian taxation is considered and also on the
foundation of that, all of the guidance will be provided. In that, the situation when laws will
additionally be looked at therefore the findings, as well as choices, may likewise be utilized
for the making of proper choices. The RIP Pty Ltd is looked at by in the below-mentioned
report.
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PART A
a) Description of Arthur Murray (NSW) Pty Ltd v FCT (1965) situation.
In the formula of the assessable income, it's needed that appropriate thought shall be offered
to each of the elements plus one is prepayments that are created. They'll be incorporated in a
proper way and because of this the case law linked to Arthur Murray (NSW) Pty Ltd v FCT
(1965) 114 CLR 314 is utilized. The total amount that is going to have been paid for tax is
going to be thus ascertained in a precise way.
Facts of the situation: In this, the situation is connected to the products of the dancing classes
that are offered to the pupils and in that, you will find numerous facilities that are provided.
The company is making these kinds of charges which may be paid out by the customers on
the foundation of the hours that the instructions are attended which imply it's adjustable. A
brand new provision has been launched based on that the students will likely be supplied with
the 1200 hours that they can use some time in the life of theirs but the payment for that can
need to be made in full in a single installment just (ATO, 2018). They are able to avail the
center of the discount by the making of the quick transaction. In case there's some customer
that fails to attend the course a don't avail the service subsequently the transaction that
associated with it won't be refunded in every condition and also the exact same shall be
transferred to the unattended classes account. This will likely be charged to the standard
income once the services will likely be provided to the pupil.
Problem associated with the case: The primary problem that is experienced by the company is
associated with the therapy that will be supplied for the prepayments which were created by
the pupils. It is going to have to be discovered that whether it'll be expected being viewed in
the calculation of the entire assessable income or perhaps not. The therapy that is suggested
by the company for this's distinct from what's chosen by the commissioner. The organization
doesn't include this particular quantity in the assessable earnings as it's from the perspective it
is going to form a part of the revenue after the service is going to be supplied and prior to that
there'll be no transaction of the tax that shall be made therefore it didn't capture the total
amount. The commissioner really wants to include the total amount as based on them once
the total amount is acquired t forms component of the revenue and shall be chargeable to tax.
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The realization is drawn out of the case: The assessable money will be the revenue that is
attained by the business and in this, the amount that is merely experienced won't be provided
and this's supplied by the Act. Based on it, the business makes the appropriate therapy by not
like the prepayment in the assessable earnings as this's merely the agreement that is created
by the business and there are zero programs which are offered in this specific respect (Austlii,
2018). And so the last inclusion is going to be made mainly after the receipt of the total
amount and giving the service both are done.
The RIP Pty Ltd could be the business that is associated with the company of giving the
funeral services where different sort of plans is provided by them. The payments in relation to
them are obtained by the organization in advance. Based on the case, they'll be incorporated
in the revenue just after they're earned and service is offered and prior to that, they'll be
forfeited as well as transferred to the next account. The recommendations are supplied by
thinking about this and also the same is presented below:
• The funeral services are furnished and also in the payments will likely be collected by the
organization right after the provision of the program and in case they're done before, in that
case, it is going to have been excluded from the entire assessable income. This's due to the
choices which are supplied by the court, based on that the tax is paid after the revenue is
gained and not just experienced. Therefore there'll be absolutely no addition of the
prepayments in the revenue and this also will probably be charged following airers4you is
giving the solutions on the customer.
• The simple funeral program is additionally among the plans that are provided by the
business to the client of its and in this, the solutions are supplied as well as the transaction for
similar will be supplied ahead of time by the customer. This is the prepayments etc this,
airers4you will be using the decision that is realized previously. The total amount is going to
have been excluded from the organization from the entire taxable quantity. The customer is
going to have to avail the center and in case there's some default in this subsequently the
company won't be making some sort of the return. The entire amount of that prospect is going
to be forfeited which is moved to several other accounts and this will probably be charged to
tax whenever the service is offered to them.
Carden's situation (1938) 63CLR108 is yet another judgment which has been offered in this
specific relation and based on it, the company provides the alternative to make the addition of
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the total amount at the evaluation earnings when it's received. Under this, the provision of the
program isn't essential therefore the prepayments will additionally be incorporated in the
entire taxable income plus tax will need to be paid out on this (Jaidi, et. al., 2017). In case the
company is pleased with this then it is able to undertake the therapy based on it and also are
the charges of the simple funeral program in the assessable earnings for the transaction of tax.
By this the necessity of transferring the total amount to the next account is going to be
removed as that will probably be charged to tax anytime it's received.
b) the organization is now keeping the balance in the forfeited account which amounts to
1dolar1 16200. This's the total amount which hasn't been claimed by the services and the
client in relation to it hasn't been supplied by the business. This can need to be viewed in the
correct way as well as for that, the choices that are determined in the above-mentioned
portion of the article is going to be looked at. Based on the company will be choosing the
main option from of all the two options that are readily available. In case the very first choice
is going to be selected then the business won't be asked to add in this in the entire income
therefore that tax won't be paid out on this amount. This can be looked at for the intent behind
the tax in the entire year whenever the service is going to be provided in real (Bentley, 2016).
Additional choice is usually picked where airers4you is which includes this in the assessable
cash flow, therefore, chances are they will have been paid out in the past now it won't be
incorporated in income that is taxable as the tax is paid out one time for every transaction. So
it could be stated the business is going to be spending tax following the provision of the
program in case the very first choice is going to be selected and in case another is used then
no tax is paid as today the forfeited quantity will likely be transferred and tax would've been
paid already.
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PART B
In the business, there's the necessity to make use of the different laws that are readily
available and for that, all of the legislation should be looked by us. They have to get an
understanding of the laws so that appropriate choice is created by the business. The
recommendation associated with it's giving that are as follows:
a) Airers for you will likely be requiring the numerous kinds of the materials along with the
assistance of that, the operations will likely be carried in a good way. This will help the
organization in making the returns in the business. The inventory is like the intangible and
physical both of the property and this's offered to the tax laws that are specified by the
Australian government. But you will find several of the points that are not deemed when the
inventory by the business as well as they're consumables, extra parts of other crops and the
assets that are developed (Tuske and hemmings, 2015). By the assistance of it, every one of
the functions that preparation, manufacturing, exchange, and revenue will likely be
performed. In the organization also the inventory is going to be needed so that funeral
services could be supplied by them in the correct fashion. The primary elements that are
contained in this are accessories and caskets. They are going to be useful in the earning of the
revenue and as a result of this particular, it'll be looked at when the inventory for the
organization as they'll be utilized for the provision of the services without which it won't be
achievable.
The tax sum that will be identified is dependant on the taxable income, therefore, it is going
to have been estimated in a good fashion. There'll be a deduction of the company cost that
will be produced in the organization for the carrying not procedure. All of the discounts that
are furnished will additionally be utilized by the organization in the formula of the total
amount, therefore, will be deducted out of the sales length.
b) The incomes of the organization stand for the entire length that is gained and in which the
business will additionally be like the dividend that is received by it from the investments that
are probably available in the opposite company. In the specified situation as well there's the
total amount that is received in type of the dividend amounting to 1dolar1 21000. So it shall
be incorporated in the revenue but there's an exception to this particular situation and in that,
in case the tax has been paid out on that quantity by the provider of the dividend it won't be
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taxed by the business. In the specified case the company is getting the completely franked
dividend and that's the worth on which tax has been paid out by the declaring organization.
And so the business won't be asked to add in this & amp; no adjustment is going to be
produced in this respect.
c) The expenses that are made in the company has all of the payments that are made by the
business. In that, total amount is paid in advance is included as well as considered when the
prepayment. The provisions of the tax offered the cost is going to be deductible in the time
that it's connected (Bhatti, 2015). By that, the appropriate assessable income is calculated
after which the tax will be recognized on the same. The organization is earning the
transaction for the rent and this's made in relation to the future 2 years which amounts to
1dolar1 57000. Out of this the total amount that is connected to the present period of 4
months will likely be viewed in the present season. This amounts to 1dolar1 9500 and also
the exact same is incorporated by the organization in the present 12 months. The total amount
that will be retained will additionally be split on the proportioned basis with the remaining
period. As the organization has made the necessary therapy so there is going to be no
adjustment that will be produced by the organization in the earnings.
d) The workers in the organization are paid the necessary quantity of the fundamental wage
and along with them, you will find several various other incentives that are additionally paid
by the organization to them. It's needed which they shall be also incorporated in the formula
of assessable earnings therefore correct tax treatment is created. The organization is making
the transaction of 1dolar1 22000 to a worker in relation to particularly long service leave that
is offered. It's needed this shall be deducted from the revenue. This's the advance payment
that is certainly created by the business and as a result of this it can't be deducted and will
need to be looked at when the prepayment. Because of this, airers4you is only able to create
the provision as this is going to be deductible in the time to which it relates. The company has
already been making the provision so that it could be stated that treatment that is appropriate
is created and there'll be no requirement in terminology of the adjustment.
e) Because of the earning of the revenue, it's needed that appropriate costs can also be
produced. Out of them, several of them are company expenses that are associated with the
standard business. And some are capital expenditure that is created the moment, as well as
the gain of that, will probably be acquired for the lifetime. The people that are associated with
the company will need to be deducted as well as the others are capitalized. In the company,
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also different such expenditures can be earned and they add the ones which 8 I for this
purpose (Nassios and Dixon, 2016). As this's the fixed advantage so all of the expense that is
created on this is thought by the organization as the capital cost as long-range return shipping
will be produced with the aid of them. The charges that are incurred for the automobile
parking, fixation and construction is going to be capitalized as they're the capital in nature
won't be deductible from the revenue. The architectural style connected cost that is made
amounting to 1dolar1 250000 additionally is based on the group of capital cost, therefore,
there'll be absolutely no adjustment because of this additionally that will need to be produced
in the earnings. The demolition costs are revenue and may be charged in the company but as
in the specified situation they're amounting to 1dolar1 50000 as well as they're for the
opposite time so will be expected to be incorporated in that without in the present time. In
accordance with this, there's no amount which will be modified therefore the earnings of
airers4you will continue to be similar. The treatment that is supplied by the company is
absolutely appropriate and therefore it is going to remain unaltered.
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Conclusion
By the article and that is provided above the data regarding the laws as well as regulations
that are implemented in the Australian taxation are identified. The way in which the therapy
of the different things is created has been based on the earnings of the organization are
impacted due to them. You will find case laws which are taken into wearing the same and just
for this they're additionally understood in a good fashion. All of the problems that are there
have appropriately be considered as well as the suggestions for the exact same can also be
supplied in accordance with the regulations.
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References
 ATO 2018, Deductions for prepaid expenses 2010-11. [online] Available at:
https://www.ato.gov.au/Forms/Deductions-for-prepaid-expenses-2010-11/?page=3
[Accessed 27 Apr. 2018].
 Austill, 2018. INCOME TAX ASSESSMENT ACT 1997 - SECT 70.110You stop
holding an item as trading stock but still own it. [online] Www5.austlii.edu.au.
Available at:
http://www5.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s70.110.html
[Accessed 24 May 2018].
 Austlii, 2018. INCOME TAX ASSESSMENT ACT 1997. [online] Available at:
http://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/itaa1997240/
[Accessed 27 Apr. 2018].
 Barwick C.J., Kitto, and Taylor, JJ., 2017. High Court of Australia. Jade, pp-316-320.
 Hemmings, P. and Tuske, A., 2015. Improving Taxes and Transfers in Australia.
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