Taxation Law Solved Assignment

This solved assignment addresses several questions related to taxation law. Question 1 deals with allowable deductions for various expenses, including moving costs, asset revaluation, and legal fees. Question 2 focuses on input tax credit calculations under the GST Act 1999 for a bank's advertising expenses. Question 3 involves calculating Angelo's foreign tax offset using subdivision 717A. Finally, Question 4 demonstrates the computation of net income for a partnership. The assignment provides detailed calculations and explanations, referencing relevant sections of the ITAA 97 and GST Act 1999. It also includes a list of references used in the solutions.

Running head: TAXATION LAW
Taxation law
Name of the student
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Question 1
a. Moving cost of machinery to the new sites
The moving cost related to the fixed asset to a new site from one site will be treated as
the capital expenditure and the amount will not be an allowable deduction under ITAA 97,
Section 8-11. However, the expenses will increase the item’s cost for the depreciation
purpose.
b. Cost of revaluing the asset for effecting the insurance cover
For the allowable deduction, it must be taken into consideration the fact that whether
expenses increases the capacity of earning the income or the expenditure are carried out to
preserve or protect the asset. If it is incurred just for protecting the asset, then the benefit will
be regarded as of temporary nature2. However, if the expenses are of recurring nature, it will
be allowed for deduction under under ITAA 97, Section 8-1.
c. Legal expenses for opposing the winding-up petition
If the stated case is related to doing the operation process of the business, as seems in
the given case, then the expenses will be regarded as revenue expenditure and will be allowed
for deduction.
d. Legal cost incurred for the service of a solicitor
1 Buchanan, Richard, and Edward Consett. "Section 974-80 ITAA97: The current state of play." Tax
Specialist 19.5 (2016): 217.
2 Fisher, Donna. "Mid market focus: No joy regarding FBT on travel expenses for FIFO
arrangements." Taxation in Australia 49.7 (2015): 377.

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As per ITAA 97, Section 8-1 if the expenditure is carried out for hiring a solicitor to
earn the business income then the expenses will be allowed for deduction.
Question 2
Input credit for GST is permissible on eligible purchases only if the related documents
are provided. All the businesses running with the motive of earning profit is eligible to claim
input tax credit under the GST Act, 1999. Here, in the given case, Big Bank Limited spend an
amount of $ 165,000 inclusive of GST towards advertisement. As per the GST (Goods and
Services) Act 1999, if any expenses are incurred during normal business course, the
expenditure will be allowed as deduction3. As per the given case study, Big Bank Limited
provides the financial services and have more than 50 branches all over the nation. The bank
kept aside an amount of $ 16,50,000 for the expenses of advertising. Out of the total amount
$ 550,000 was spend towards the insurance and home advertisement. However, from $
5,50,000 only 2% is spend for income generation and balance $ 11,10,000 is spend for
promotional advertisement of the bank. Therefore, $ 550,000 will be treated as the capital
expenses as the product has not yet been launched and the amount of $ 11,10,000 will be
regarded as the expense for promotional products and services4. Therefore, $ 11,00,000 will
be allowed for deduction and on $ 550,000, only 2% will be allowed for taking input tax
credit.
Computation of Input tax credit
3 Brink, Sophia. "An evaluation of the income tax treatment of client loyalty programme transactions by South
African suppliers." Journal of Economic and Financial Sciences 8.1 (2015): 145-164.
4 Andrews, Harwood. "Trust structures." Trust Structures Guide: The Ultimate Resource for Anyone Advising
on Trusts, Structuring and Planning Issues(2013): 81.

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Question 3
Applying the subdivision of 717A that deals with the offsetting of income tax, the
computation of Angelo’s foreign tax offset are calculated as below –
Apart from this, the assessable income inclusive of the foreign income will be
computed as below –

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The offsetting of the foreign tax is measured through reducing the payable amount of
income tax from the 1st option from reducing the payable tax from second option. Thus, the
amount will be limited to ($ 11,794.18 - $ 6,821.68) = $ 4,972.5. Therefore, it can be
identified that the amount of foreign tax offset is greater than the amount of foreign tax paid.
Thus the amount of offset will be limited to $ 4,400.

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Question 4
Computation of net income for partnership under the income year will be as below –

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References
Andrews, Harwood. "Trust structures." Trust Structures Guide: The Ultimate Resource for
Anyone Advising on Trusts, Structuring and Planning Issues(2013): 81.
Brink, Sophia. "An evaluation of the income tax treatment of client loyalty programme
transactions by South African suppliers." Journal of Economic and Financial Sciences 8.1
(2015): 145-164.
Buchanan, Richard, and Edward Consett. "Section 974-80 ITAA97: The current state of
play." Tax Specialist 19.5 (2016): 217.
Fisher, Donna. "Mid market focus: No joy regarding FBT on travel expenses for FIFO
arrangements." Taxation in Australia 49.7 (2015): 377.