Taxation Law 14 Assignment - Autumn Semester, University Name

This taxation law assignment solution addresses several key issues related to Australian taxation law. It examines the deductibility of various expenses under the Income Tax Assessment Act 1997 (ITAA 1997), including costs associated with moving machinery, revaluing assets for insurance, legal expenses incurred in opposing a business winding up, and legal expenses related to business operations. The assignment analyzes relevant case law, such as British Insulated & Helsby Cables and Snowden and Wilson Pty Ltd v FC of T, and taxation rulings, including TD 93/126 and ID 2004/367, to determine whether these expenses qualify as allowable deductions. The assignment also explores the determination of input tax credits under the GST Act 1999, referencing GSTR 2006/3 and the Ronpibon Tin NL v FC of T case, particularly in the context of advertising expenses. The solution provides detailed explanations and conclusions for each scenario, offering valuable insights into complex tax principles and their practical application.

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................3
Answer to Scenario I:.................................................................................................................3
Issue............................................................................................................................................3
Laws:..........................................................................................................................................3
Applications:..............................................................................................................................3
Conclusion:................................................................................................................................4
Answer to Scenario II:...............................................................................................................4
Laws:..........................................................................................................................................4
Applications:..............................................................................................................................4
Conclusion:................................................................................................................................5
Answer to Issue III:....................................................................................................................5
Issue:..........................................................................................................................................5
Laws:..........................................................................................................................................5
Applications:..............................................................................................................................5
Conclusion:................................................................................................................................6
Answer to Issue IV:....................................................................................................................6
Issue:..........................................................................................................................................6
Laws:..........................................................................................................................................7
Applications:..............................................................................................................................7

2TAXATION LAW
Conclusion:................................................................................................................................7
Answer to question 2:.................................................................................................................8
Issue:..........................................................................................................................................8
Laws:..........................................................................................................................................8
Application:................................................................................................................................8
Conclusion:..............................................................................................................................10
Answer to question 3:...............................................................................................................10
Answer to question 4................................................................................................................11
Reference List:.........................................................................................................................13

3TAXATION LAW
Answer to question 1:
Answer to requirement I:
Issue
The problem statement introduces the issues relating to the determination of claiming
allowable deductions under “section 8 (1) of the ITAA 1997”.
Laws:
I. “Section 8 (1) of the ITAA 1997”
II. “British Insulated & Helsby Cables”
Applications:
From the given scenario it is found that a cost has been incurred for moving the
machinery to the new site. An assertion can be put forward in this context that deductions are
prohibited within the framework of “section 8-1 of the ITAA 1997” With the objective of
depreciation, shifting the machinery to the new site results in an increase price of the asset
(Pyrmont 2014). With reference to the “Section 8-1 of the ITAA” it can be said that cost that
is incurred from moving the machine to the new site represents a small change (Tan,
Braithwaite and Reinhart 2016). The main cause of taking into the account the expense as the
allowable deductions due to the reason that cost constitute the portion of business expenditure
originated from the daily business transactions.
As defined in British Insulated & Helsby Cables the cost that is incurred at the time
of transpiration symbolizes an unremitting benefit of the business premises by moving the
depreciable asset (Grange et al. 2014). As stated in the Taxation ruling TD 93/126 upon the

4TAXATION LAW
installation of machinery and on the commencement of commercial operations, cost involved
in moving the machine to the new site forms the part of revenue (Cao et al. 2015). It is worth
mentioning that cost occurred in locating machine to new site stands as the cost of capital and
will constitute non-allowable deductions.
Conclusion:
It can be concluded that cost that is occurred in locating the machine to the new site
constitute locating of asset to the new site will be regarded as capital expenditure. With
reference to the present scenario it can be said that no kind of permissible deductions will be
allowed in this context.
Answer to requirement II:
The present scenario is based on the determination of the revaluation of the assets to
effect the insurance coverage. This issue raises the question whether or not such expenses
would be treated as allowable deductions in section 8-1 of the ITAA 1997.
Laws:
I. “Section 8 (1) of ITAA 1997”
Applications:
From the current questions the scenario raises that incurrence of cost from the
revaluation of assets to effect cover of insurance constitute permissible deductions that is
allowable as deductions under “section 8-1 of the ITAA 1997” as the expense is recurring in
nature (James 2015). From the current study, it can be stated that the expense has direct
relation with the fixed asset (Woellner et al. 2016). Therefore, at the time of determining
deductibility of the expenses it is vital to ascertain that whether the expense that has occurred

5TAXATION LAW
in revaluation is obtained from the increase in the revenue generation ability or it is just
incurred in safeguarding the asset. If the later leads to an advantage of temporary in nature or
possess the character of recurring than that will be regarded as allowable deductions under
“Section 8-1 of the ITAA 1997.
Conclusion:
On arriving at the conclusion, it can be said that cost derived from the insurance cover
constitutes a permissible deductions because the cost is repetitive and under “Section 8-1 of
the ITAA 1977” will be allowed as permissible deductions.
Answer to requirement III:
Issue:
The introductory statement familiarises with the issue pertaining to the determination
of deductible nature of the legal spending incurred by the individual tax payer with the
objective of opposing the petition of the winding up of business.
Laws:
II. “Snowden and Wilson Pty Ltd (1958) v FC of T ”
III. “Section 8 (1) of the ITAA 1997”
Applications:
The scenario introduces the question that the cost that is occurred at the time of
winding up business are usually occurred during the business operations and they will not be
treated in the form of allowable deductions in reference to “Section 8-1 of the ITAA 1997”.
The “Taxation Ruling of ID 2004/367” defines that legal cost incurred from the business

6TAXATION LAW
operations constitute as an allowable deduction (Jover 2014). This is because such expenses
are incurred by the individual tax payer should be from carrying out of the business
operations from which the taxpayer produces an assessable income.
Noting down the judgement of federal court in the case of “Snowden and Wilson Pty
Ltd (1958) v FC of T ” spending’s occupying the nature of infrequent and the individual
taxpayer under no kind of previous occasion was necessarily under obligations of incurring
legal actions (Kenny, 2013). Since under not any situation it forbids the outlay to from being
measured as admissible income tax deductions.
Even though the legal expense is meeting, the criteria of the positive limbs would
under no circumstance be permitted as allowable business deductions (Krever 2013). The
reason for not considering the expenditure for allowable business expense is that they are
regarded in the nature of the capital expense (Anderson, Dickfos and Brown 2016). The
incurrence of legal expense that is incurred at the time of winding up the petition shall not be
considered as the allowable deductions because they represents the features of capital.
Conclusion:
The above defined problem statement can be concluded by stating that the legal
expense that has resulted from opposing the petition would be treated for non-permissible
business deductions. The spending is capital expenditure and does meet the eligibility criteria
of section 8-1 of the ITAA 1997.

7TAXATION LAW
Answer to requirement IV:
Issue:
The issue brings forward the query that legal expenses incurred by the taxpayer
concerning the service of solicitor for several business functions of the clientele constitute
deductions that are permitted under “section 8-1 of the ITAA 1997”.
Laws:
I. “Section 8 (1) of the ITAA 1997”
Applications:
The above stated issue brings forward the question that whether an individual
taxpayer incurring legal expenses in regard to the business operations will be accounted as
the allowable deductions under “section 8-1 of the ITAA 1997” (Tran-Nam and Walpole
2016). Nevertheless, there prevail few kinds of exceptions relating to the legal expenditure
that is occurred by the taxpayer from the service of the solicitor. If the expenses are in the
nature of capital, private or domestic and incurred in gaining an exempted and non-assessable
income then it will not be considered as the allowable deductions.
From the above stated explanation, for a taxpayer occurrence of legal expenditure that
does not forms the part of the business income or not associated with the process of carrying
on of a business activities then it will not be allowed as allowable deductions (Morgan,
Mortimer and Pinto 2013). As it can be said that legal expenditure that is occurred by the
taxpayer in the present context will be allowed as deductions (Snape and De Souza 2016).
The primary reason for accounting the legal spending for allowable income tax deductions is

8TAXATION LAW
because they are regarded as the part of the business and meets the deductions criteria of
“Section 8-1 of the ITAA 1997”.
Conclusion:
The problem statement can be concluded by defining the legal expense inuccred by
the taxpayer in this context is for gaining the business income and they are daily business
expense. This expense meets the criteria of “Section 8-1 of the ITAA 1997” for being
regarded as allowable business deductions for income tax purpose.
Answer to question 2:
Issue:
The issue raises the question regarding the determination of the input tax credit
regarding the incurrence of advertisement expenses occurred under the “GSTR Act 1999”.
Laws:
I. “GST Act 1999”
II. “Subsection 15-25”
III. “GSTR 2006/3”
IV. “Ronpibon Tin NL v FC of T”
Application:
The Goods and Service Taxation Ruling of GSTR 2006/3 lay down the guidelines
concerning the procedures which can be applied arrive at the input tax credit and the
administration of change that is put into the use by the financial supplies as per the new
taxation system of “GST Act 1999” (James 2016). An important contemplation to be noted in

9TAXATION LAW
this context is that degree of creditable purpose and authentic employment of the ruling under
“division 11-15 and 129 of the GST Act 1999”. The discussed GST Ruling is generally
applicable for all the assessable entities that is registered or mandatorily necessary to get
registered so that it can acquire the financial supplies which is beyond the prescribed limit of
the financial acquisition and falls under the input tax credit or lowered input tax credit
(Nethercott et al. 2016).
The case of Big Bank evidently puts forward that the bank had a spending of
$1,650,000, which additionally included the amount of the GST relating the advertisement
that has been made, by the bank. The Goods and Service taxation ruling of GSTR 2006/3 is
applied in the present situation of Big Bank Ltd as because the company shall be considered
to be eligible for the input tax credit or lower input tax credits (Russell 2016). In agreement
with the taxation rulings if it is found that the company is registered or it is required to obtain
registration, GST will be payable in relation to the assessable supplies made. The system of
GST lay down that the a taxable entity or the person can bring forward the claim of the input
tax credit the supplies that are inclusive of GST that is obtained in the process of importation
by the entity (Sadiq 2016). If an entity makes financial supplies and surpasses the threshold
limit of the financial acquisition, such taxable entities will not be allowed to recover all the
amount of GST that is charged to them but a portion of such GST can be recovered by the
company (Kenny 2013).
As it has been stated in the case of Ronpibon Tin NL v FC of T the principle of
“extent” and “to the extent” is used to analyse the law of GST. This consists of the
obligations in which the methodology of the allocation adopted should be fair and reasonable
in relation to the specific enterprise (Krever 2013). Taking in the account the contemplation
that is made in para 11-5 and 15-5 of the GSTR 2006/3 in order to make an acquisition

10TAXATION LAW
entitled as creditable acquisition it should be noted that the financial supplies must be
creditable solely or in fragments.
Moreover there is additional compulsory necessities of para 11-5 and 15-5 that helps
in determining an acquisition as the entitled creditable import, the acquisition is ought to be
absolutely in the direction of creditable purpose (Woellner 2013). If it is found that the
acquisition is partly for creditable reason than it is obligatory to establish the degree of
creditable function. As it has been defined under the “Section 11-15 or 15-10” an acquisition
shall be eligible as creditable if the taxable entities claims input tax credits for the financial
supplies made by it (Morgan, Mortimer and Pinto 2013). Big bank in context of present
situation incurred an advertisement spending that was entirely dedicated for the creditable
purpose. Big Bank has also surpassed the financial acquisition threshold limit and the bank in
the present context can be regarded for the entailment of claiming input tax credit in
conformity with the GSTR 2006/3 (Milton 2013).
Conclusion:
As apparent from the overhead conversation, the problem statement can be concluded
by stating that Big Bank Ltd will be taken into the considerations for the entitlement of
claiming input tax credit. Such input tax credit can be claimed in accordance with the GSTR
2006/13 for the sum that is incurred by Big Bank Ltd relating to the advertisement outlay
sustained on creditable acquisition.
Answer to question 3:
Computation of Taxable Income of Angelo

11TAXATION LAW