Taxation Law 3 Assignment: Income Tax, GST, and Partnership Analysis

This taxation law assignment provides detailed answers to several questions. Question 1.1 examines allowable deductions for moving machinery, referencing the ITAA 1997 and relevant rulings, concluding that such costs are not deductible. Question 1.2 discusses asset revaluation based on insurance, again referencing ITAA 1997. Question 1.3 addresses legal expenditure related to business shutdown, distinguishing between deductible and non-deductible expenses. Question 2 analyzes GST and input tax credits for a bank, applying the GST Act 1999 and relevant rulings to determine the eligibility of advertising costs for input tax credits. Question 3 calculates an individual's taxable income, including foreign income and tax offsets. Finally, Question 4 computes net income from a partnership, detailing revenue, deductible expenses, and the resulting partnership income. The assignment provides a comprehensive analysis of key taxation concepts and their application.

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 1.1:.............................................................................................................3
Issue:..........................................................................................................................................3
Rule:...........................................................................................................................................3
Application:................................................................................................................................3
Conclusion:................................................................................................................................3
Answer to question 1.2:..............................................................................................................4
Issue:..........................................................................................................................................4
Rule:...........................................................................................................................................4
Application:................................................................................................................................4
Answer to question 1.3:..............................................................................................................4
Issue:..........................................................................................................................................4
Rule:...........................................................................................................................................5
Application:................................................................................................................................5
Rule:...........................................................................................................................................5
Applications:..............................................................................................................................6
Conclusion:................................................................................................................................6
Answer to question 2:.................................................................................................................6
Issue:..........................................................................................................................................6
Rule:...........................................................................................................................................6
Applications:..............................................................................................................................6

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Conclusion:................................................................................................................................8
Answer to question 3:.................................................................................................................9
Answer to question 4:...............................................................................................................10
References................................................................................................................................13

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Answer to Question 1.1:
Issue:
With reference to “Section 8-1 of the ITAA”, is allowable deduction applicable for
placing machinery from one location to another.
Rule:
I. “Section 8-1 of the ITAA 1997”
II. “British Insulated & Helsby Cables”
III. “Taxation ruling of TD 92/126”
Application:
On applying the rulings of “Section 8-1 of the ITAA”, it has been discerned that
moving of machinery involves inflated asset value. As the activity of shifting the machinery
has taken place based on the assessable income it cannot be held liable for deductions as this
has led to increased cost of asset.
As per the findings of the case “British Insulated & Helsby Cables”, it has been
discerned that previously companies have taken advantage of moving a depreciable asset. As
per the rulings of “Taxation ruling of TD 92/126” the cost of assembling a new machinery
can be considered as a part of the revenue under cost of capital which cannot be held for
allowable deductions (Barkoczy 2016).
Conclusion:
It can be rightly said that the cost of moving the depreciable asset/machinery cannot
be taken into account for the purpose of deductions which are allowable as they are a division
of the capital.

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Answer to question 1.2:
Issue:
The issue has been recognised for the consideration of asset revaluation based on the
insurance cover with reference to “Section 8-1 of the ITAA 1997”.
Rule:
I. “Section 8-1 of ITAA 1997”
Application:
As per the applicability aspect of “Section 8-1 of the ITAA 1997”, it has been
discerned that any cost which is recurring in nature needs to be entitled for the allowable
nature of deductions. As for the given case the cost of the expenditure is seen to be repeating
and moreover the outer cost incurred for the fixed asset is seen to be considered as per
straight-line basis such costs depict impertinent advantages. Therefore it is important to take
into consideration the cost of asset revaluation as per “Section 8-1 of the ITAA 1997”
(Millar 2014).
Conclusion:
The given rulings under “Section 8-1 of the ITAA 1997”, shows that it is important
to consider the asset revaluation as an outcome of insurance cover.
Answer to question 1.3:
Issue:
The basic question has highlighted on the important aspect of legal expenditure
incurred in opposition to a shutting down of business activity and the same is to be
considered under permissible amount of deductions.

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Rule:
I. “FC of T v Snowden and Wilson Pty Ltd (1958)”
II. “Section 8-1 of the ITAA 1997”
Application:
As per the inference made from “Section 8-1 of the ITAA 1997”, the legal
expenditure which has been identified with shutting down of business cannot be held under
permissible nature of deductions. As per “Taxation ruling of ID 2004/367” the legal
expenditure cost which is proposed to carry out any business operation then only can be held
for permissible deductions. However, as the expense is a result of ordinary course of business
it cannot be treated under permissible deductions (Australian Trade Commission 2015).
In a similar case of “FC of T v Snowden and Wilson Pty Ltd (1958)”, the
expenses are borne as a result from ordinary course of business which prevented it from
consideration from allowable deductions (Australian Government 2015).
Based on the given situation shutdown of business may be qualifying under the
positive limbs but as the expenses are aligned with business structure it is having
characteristics nature of capital henceforth cannot be considered for deductions.
Conclusion:
The study shows how the expenses which are depicting capital characteristics of
business activities cannot be considered for deductions as per “Section 8-1 of the ITAA
1997”.
Rule:
I. “Section 8-1 of the ITAA 1997”

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Applications:
The depiction is made from “Section 8-1 of the ITAA 1997”, has been able to
demonstrate that legal outlay with characteristic features of capital cannot be held under non-
deductible income. The trading activities should be taken into consideration based on the
parameter of allowable deduction as it should be noted that the legal expenditure is directly
associated to the revenue producing aspect. By consideration of the given situation, it needs
to be noted that the cost born for solicitor services are duly considered for deductions as per
“Section 8-1 of the ITAA 1997” (Australian Taxation Office 2015).
Conclusion:
The different types of legal expenditure as a result of revenue generating criteria
allow for the deductions with the rulings of “Section 8-1 of the ITAA 1997”.
Answer to question 2:
Issue:
The important concern is related to “GST Act 1999” and to discern that the taxpayer needs to
determine the “Input Tax Credit (ITC)” for the GST supplies.
Rule:
I. “Ronpibon Tin NL v FC of T”
II. “Goods and Service Taxation Ruling of GSTR 2006/3”
III. “GST Act 1999”
Applications:
The main form of the GST supplies for the Big Bank has been duly noted with the
advertising cost. The consideration of ITC as per “Chapter 2 of the GST Act 1999”, shows
that any expense which has been incurred the normal business function should be inclusive of

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ITC. However, the claim for a city needs to be added up with the GST amount. The bank has
been recognised to provide its financial services in more than 50 branches throughout the
country. There have been several programs for insurance and home content apart from the
credit facilities. Henceforth, the various types of ITC have been considered under the rulings
of “Taxation Ruling of GSTR 2006/3”.
The consideration is made from “division 11-15 and 129 of the GST Act
1999”, has been further able to highlight on the acquisitions as per previous rulings. The
important applications of taxation ruling have been recognised with “GSTR 2006/3” which
depicts the benchmark on the acquisition limit associated to the acquisitions of ITC or “lower
input tax credit”.
In the given situation of the bank, it can be stated that the expenses has been
mainly incurred as a result of advertising cost and that has been already clubbed with GST
amount. Therefore, the present question needs to ensure whether the issue is able to comply
with “GSTR 2006/3”. By the rulings of “GSTR 2006/3”, it has been discerned that Big
Bank has duly met the criteria for ITC. As per the various types of depictions from “GSTR
2006/3”, it has been inferred that any registration of having commercial significance needs to
be recognised under “GST Act 1999”, for the payment of GST amount based on the financial
requirements (Besley and PerssonT 2013).
It has been for the discerned from the “GSTR 2006/3”, that the commercial activity
can be directly claimed for ITC as it has been associated to the GST amount for financial
supplies. On the other hand, commercial entity is seen to be related to claimable amount of
ITC. However, only a certain portion of the entity is claimable (ATO 2015).
As for the application of the case “Ronpibon Tin NL v FC of T”, significant criteria
as per the rulings of “GSTR 2006/3” for the GST depicts that “extent” and “to the extent”

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concept is applied to the supplies of GST. Based on the aforementioned legislation, GST
assessment should be carefully taken into consideration for business concern. Adding to
another investigation as per “para 11-5 and 15-5” mentioned in “GSTR 2006/3”, it can
before the discerned that the various types of financial services which are eligible for credible
purposes should signify whether creditable acquisition is made fully or partially.
The application of “para 11-5 and 15-5” clearly signifies that the acquisition
needs to be considered fully. However the partial degree of flexibility also needs to be
ascertained.
Calculation of Input Tax credit
Particulars Amount
($)
Amount
($)
Total spending on advertisement and promotional activities 1,650,000.
00
GST input credit 100% eligible for: 1,100,000.
00
Portion of advertisement expenditures ineligible for input credit in
respect of GST
550,000.0
0
100% GST input credit 100,000.0
0
Add: For 2% contribution in revenue 3,000.00
Amount of input credit allowed to the bank 103,000.0
0
Henceforth, the depictions made as per GST under “GSTR 2006/3”, have been
seen to be surpassed the financial obligations. Therefore the bank needs to bring forward the
claim for ITC with the GST supplies.
Conclusion:
The main application has been seen with “GSTR 2006/3” which duly qualifies big
bank for “input tax credit” due to the advertising expenditure.

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Answer to question 3:
Computation of Taxable Income of 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
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
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

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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
Answer to question 4:
Computation of Net Income from the Partnership
Statement showing Calcuation of Income from Partnership
Particulars ($) ($)
Revenue from sporting goods sales 400,000.00
Interests incomes on bank deposits 10,000.00
Un-franked portion of dividend 8,400.00
Amount of Bad debts recovered 10,000.00
Incomes exempt -
Income from capital gain 30,000.00
The amount of gross total income 458,400.00
Expenses eligible as deduction:
Partners’ salaries 25,000.00
Fringe benefit tax 16,000.00
Interests on capital 2,000.00
Interests expenses on loan 4,000.00
Johnny’s travelling expenses 3,000.00
Office building renewal fees 2,000.00
Documentation related expenses 700
Expenses on debt collection 500
Council rates 500
Salaries of employees 20,000.00
Cost of goods sold {(Opening stock + purchases) – Closing
stock} 34,000.00
Retail shop rent 20,000.00
Bad debt losses 30,000.00

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Expenses related to business lunches -
Pilferage 3,000.00
160,700.00
Net income of the partnership firm for the income year 297,700.00
Statement showing Calcuation of Income from Partnership
Particulars Amount Amount
Revenue from sporting goods sales $
400,000.00
Interests incomes on bank deposits $
10,000.00
Un-franked portion of dividend $
8,400.00
Amount of Bad debts recovered $
10,000.00
Incomes exempt -
Income from capital gain $
30,000.00
The amount of gross total income $
458,400.00
Expenses eligible as deduction:
Partners’ salaries $
25,000.00
Fringe benefit tax $
16,000.00
Interests on capital $
2,000.00
Interests expenses on loan $
4,000.00
Johnny’s travelling expenses $
3,000.00
Office building renewal fees $
2,000.00
Documentation related expenses $
700.00
Expenses on debt collection $
500.00
Council rates $
500.00
Salaries of employees $
20,000.00
Cost of goods sold {(Opening stock + purchases) – Closing stock} $
34,000.00
Retail shop rent $
20,000.00
Bad debt losses $
30,000.00
Expenses related to business lunches -

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Pilferage $
3,000.00
$
160,700.00
Income of the partnership firm for the income year before setoff of loss
$
297,700.00
Less: Setting off loss incurred in the previous year
$
40,000.00
Net income of the partnership in the income year
$
257,700.00

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References
ATO (2015) Simplified depreciation rules | Australian Taxation Office, ATO. Available at:
https://www.ato.gov.au/Business/Small-business-entity-concessions/In-detail/Income-tax/
Simplified-depreciation-rules/.
Australian Government (2015) ‘Australian Taxation Office’, Registerting for GST. Available
at: https://www.ato.gov.au/Business/GST/Registering-for-GST/.
Australian Taxation Office (2015) Yearly reports and returns | Australian Taxation Office,
Yearly reports and returns. Available at: https://www.ato.gov.au/Business/Yearly-reports-
and-returns/.
Australian Trade Commission (2015) Australian Business Taxes, Company Tax. Available at:
http://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/
Understanding-Australian-taxes/Australian-business-taxes.
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
BesleyT. and PerssonT. (2013) ‘Taxation and Development’, Handbook of Public
Economics, 5, pp. 51–110. doi: 10.1016/B978-0-444-53759-1.00002-9.
Millar, R., 2014. Grappling with basic VAT concepts in the Australian GST: the meaning of
‘supply for consideration’. World Journal of VAT/GST Law, 3(1), pp.1-31.