Taxation Law Assignment on Deductions, GST, and Legal Matters

This taxation law assignment delves into various aspects of Australian taxation, addressing key issues related to allowable deductions under the Income Tax Assessment Act 1997 (ITAA 1997) and the Goods and Services Tax (GST) Act 1999. The assignment analyzes four distinct scenarios concerning deductible expenses, such as the cost of moving machinery, revaluation of assets, legal expenses related to opposing a winding-up petition, and legal fees for solicitor services. Each issue is examined through relevant legislation, case law, and taxation rulings, providing detailed applications of the law. Furthermore, the assignment tackles input tax credits, specifically focusing on the eligibility of a company to claim input tax credits for advertisement expenses, referencing the GST Act 1999 and related rulings. The assignment also includes calculations for taxable income and net income from a partnership, providing a comprehensive overview of taxation principles and their practical application. The document concludes with a comprehensive reference list of legal and taxation resources.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to Issue I:.......................................................................................................................2
Issue............................................................................................................................................2
Laws:..........................................................................................................................................2
Applications:..............................................................................................................................2
Conclusion:................................................................................................................................3
Answer to Issue II:.....................................................................................................................3
Issue............................................................................................................................................3
Laws:..........................................................................................................................................3
Applications:..............................................................................................................................3
Conclusion:................................................................................................................................4
Answer to Issue III:....................................................................................................................4
Issue:..........................................................................................................................................4
Laws:..........................................................................................................................................4
Applications:..............................................................................................................................4
Conclusion:................................................................................................................................5
Answer to Issue IV:....................................................................................................................5
Issue:..........................................................................................................................................5
Laws:..........................................................................................................................................5
Applications:..............................................................................................................................5

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Conclusion:................................................................................................................................6
Answer to question 2:.................................................................................................................6
Issue:..........................................................................................................................................6
Laws:..........................................................................................................................................6
Application:................................................................................................................................7
Conclusion:................................................................................................................................9
Answer to question 3:.................................................................................................................9
Answer to question 4:...............................................................................................................10
Reference List:.........................................................................................................................12

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Answer to question 1:
Answer to Issue I:
Issue
This issue determines whether an individual tax payer will be liable to claim
allowable deductions for the cost of moving the machine to the new site.
Laws:
I. Section 8-1 of the ITAA 1997
II. Taxation ruling TD 93/126
Applications:
As it is evident from the current situation that tax payer has occurred cost for moving
the machine to the new site and it can rightly bought forward in respect of section 8-1 of the
ITAA 1997, deductions will not be allowable in this context1. As defined in the Taxation
Ruling of 93/126 cost that is occurred in the process of transportation will be regarded as
constant advantage for the business premises by locating the depreciable asset to the new site.
Therefore, the taxation ruling is states that installation of machine and starting the production
process results in cost that are regarded as the part of revenue2. So it can be said that cost
1 Coleman, Cynthia, and Kerrie Sadiq. Principles Of Taxation Law 2013.
2 Kenny, Paul. Australian Tax 2013. Chatswood, N.S.W., Lexisnexis Butterworths, 2013,.

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involved in moving the machine to the new site would be held as expense which cannot be
treated as deductions.
Conclusion:
Moving the machine to the new site is cost that is forms the part of capital outlay.
Hence, in reference to section 8-1 of the ITAA 1997 no deductions can be claimed in this
respect.
Answer to Issue II:
Issue
The current situation is related to the determination of the cost that is incurred in
revaluation of asset as the effect of insurance coverage. This issue introduces that whether
such expenses shall be treated as allowable deductions under section 8-1 of the ITAA 19973.
Laws:
I. Section 8-1 of ITAA 1997
Applications:
From the above stated issue it is found that the taxpayer incurs cost on the revaluation
of asset to the effect of insurance cover and it can be treated as deductions that are deductible
under section 8-1 of the ITAA 19974. The cost incurred in this context represents they are
directly related to the fixed asset. Hence, in considering the nature of deductibility of the cost
3 Krever, Richard E. Australian Taxation Law Cases 2013. Pyrmont, N.S.W., Thomson
Reuters, 2013,.

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it is necessary that such expenditure is occurred in respect of producing the assessable
revenue or simply to protect the asset. If the later results in advantage of provisional nature
and it would be treated as the allowable deductions under section 8-1 of the ITAA 1997.
Conclusion:
In respect of the above defined situation it is concluded that cost incurred in covering
the effect of insurance would be treated as allowable deductions because the cost is repetitive
in nature as classified under section 8-1 of the ITAA 1997.
Answer to Issue III:
Issue:
As evident from this issue it can be stated that whether or not the cost incurred in
legal expense with the objective of opposing the petition for winding up will be considered
deductible expense 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 above defined issue is related to the issue where a taxpayer incurred a cost for
opposing the winding up the business and such cost under section 8-1 of the ITAA 1997
4 Morgan, Annette et al. A Practical Introduction To Australian Taxation Law. North Ryde
[N.S.W.], CCH Australia, 2013,.

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cannot be treated as allowable deductions. Additionally the Taxation Ruling of ID 2004/367
legal cost that are incurred by the taxpayer would be considered as allowable deductions
under section 8-1 of the ITAA 19975. To support the view point a judgement has been
considered in the case of “FC of T v Snowden and Wilson Pty Ltd (1958)” where the
expenditure incurred in previous occasion would not prohibit the expenditure from being
regarded as deductible. The expense in the present context that is incurred by the taxpayer
though meets the positive limbs but would not be regarded as deductible expense because
they are held as capital in nature.
Conclusion:
Considering the above discussion, it is discerned in respect of section 8-1 of the ITAA
1997 that expense of opposing the winding up of business would not be considered for
deductions.
Answer to Issue IV:
Issue:
The issue introduces that whether the legal expense for hiring the service of the
solicitor would be treated as allowable deductions under section 8-1 of the ITAA 1997.
Laws:
I. “Section 8-1 of the ITAA 1997”
5 The Taxpayers' Guide 2013 & 2014. Milton, Qld., Wrightbooks, 2013,.

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Applications:
Section 8-1 of the ITAA 1997, defines that legal outlay that occurs in producing the
taxable income will be treated as the allowable deductions. However, an exception to this rule
is that to qualify the legal expense as the allowable deductions there has to be a business
relation6. Hence, the expenditure should be incurred in producing the taxable income of the
taxpayer. It is understood that the legal expense in the present cost that is incurred for the
service of solicitor would be deductible under “section 8-1 of the ITAA 1997”7.
Conclusion:
The analysis that has been conducted above evidently puts forward that legal expense
for taking the service of solicitor will be deductible business expense since they are occurred
producing the assessable revenue of the taxpayer.
Answer to question 2:
Issue:
In respect of the existing issue, the matter that is bought forward is related to the input
tax credit which can be claimed by the company for the advertisement expense that has been
occurred.
6 Woellner, R. H. Australian Taxation Law 2012. North Ryde [N.S.W.], CCH Australia,
2013,.
7 Davison, Mark, Ann Monotti, and Leanne Wiseman. Australian intellectual property law.
Cambridge University Press, 2015.

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Laws:
I. “GST Act 1999”
II. Subsection 15-25
III. Goods and Service Taxation Ruling of GSTR 2006/3
IV. Ronpibon Tin NL v FC of T
Application:
As it is understood in the case study Big Bank incurred an expense that is related to
the advertisement. It is noteworthy to denote that Goods and Service Taxation Ruling of
GSTR 2006/3 defines the procedure of that is involved in computing the input tax credit. As
understood from the division 11-15 and the 129 of the GST Act 1999 the ruling of GST is
usually applicable for the commercial units that are further than the prescribed limit of the
financial acquisition8. It is understood that Big Bank Ltd incurred an expenditure of
$1,650,000 that includes the amount of GST that is incurred by the company for the sum that
is incurred in the advertisement expenditure. The Goods and Service taxation ruling of GSTR
2006/ is implemented on Big Bank since the company has passed the financial acquisition
threshold limit and it is eligible to claim input tax credit. In compliance with the taxation
ruling if an organization is under the obligation of obtaining registration or it is required to
obtain registration will be required to pay for the taxable supplies that is made by it. The
above stated ruling defines that a commercial unit can be entitled to claim input tax credit for
the financial supplies that is made by entity9. Furthermore, if an organization makes the
financial supplies and goes past the acquisition limit then those entities will not be provided
8 Woellner, R. H et al. Australian Taxation Law 2014.
9 Barkoczy, Stephen. "Foundations of Taxation Law 2016." OUP Catalogue(2016).

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the opportunity of recovering the amount of GST charged on those entities. However, those
companies will be able to recover a part of those GST imposed on the company10.
To support this viewpoint in this case of Ronpibon Tin NL v FC of T is considered
where the principle of “extent” and “to the extent” is bought forward to under the assess the
legislation of GST. The rule of GST states that the method of apportionment that is adopted
must be just and reasonable to the certain entities11. Additionally, of para 11-5 and 15-5
defines that an acquisition will be treated as eligible creditable import the acquisition must be
entirely or altogether for the use of the creditable purpose. In reference of the present context
of Big Bank Ltd the advertisement expenditure that is incurred by it would be treated as
creditable purpose. Furthermore, as it is defined under the “GSTR ruling of 2006/3” it is
found that Big Bank Ltd in the present context will be able to claim for the input tax credit
that is made by it since it has surpassed the financial acquisition threshold limit12.
10 Braithwaite, Valerie, ed. Taxing democracy: Understanding tax avoidance and evasion.
Routledge, 2017.
11 Snape, John, and Jeremy De Souza. Environmental taxation law: policy, contexts and
practice. Routledge, 2016.
12 Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury
Publishing, 2016.

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Conclusion:
The discussion conducted above provides clearly that Big Bank Ltd would be able to
claim input tax credit for the amount of advertisement expenditure made by it with reference
to the ruling of GSTR 2006/13.
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