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PACC6006 Taxation Law

tag 0 Download 2 Pages / 274 Words tag 24-08-2021


Discuss whether the following are allowable as deductions under s 8-1 of ITAA 1997.
1. The cost of moving machinery to a new site
2. The cost of revaluing assets to effect insurance cover
3. Legal Expenses incurred by a company opposing a petition for winding up
4. Legal Expenses incurred for services of a solicitor in respect of a number of matters, including conveyancing,discharge of a mortgage, and general legal advice relating to a client business operations. (The Solicitor account does not separate the costs for various matters.)

Big Bank Ltd operates nationally with more than 50 branches, a 10-storey head office and numerous call centres. It is registered for GST purposes. Big Bank has for many years provided loans and deposit facilities to customers in Australia. Last year it launched a new product, Big Bank home and contents insurance policies. It was a significant step for Big Bank and required it to change some of its computerised accounting systems due to the fact that GST needed to be charged on the new product.
Big Bank budgeted to spend $1,650,000 (including GST) on advertising campaigns last year. Of that sum, $550,000 was allocated to a television advertising campaign specifically promoting Big Bank home and contents insurance policies. The other $1,100,000 was allocated to a general advertising campaign, including television, radio and print media advertisements promoting Big Bank to the public as the bank that is Here for You.
When Big Bank Ltd launched Big Bank home and contents insurance policies, it forecast that its home and contents insurance business would constitute 2% of its entire enterprise. Big Bank has been proved correct in its forecasts. The other 98% of its enterprise is made up of its traditional loans and deposit facilities businesses.
Last month, the advertising consultants issued their tax invoice for $1,650,000.
Discuss Big Bank's ability to claim input tax credits with respect to its advertising expenditure of $1,650,000.
The following are the current year details of Angel income, expenses and the foreign tax he paid. All of Angel foreign income amounts have been converted to Australian dollars.
Gross income $
Employment income from Australia 44,000
Employment income from United States 12,000
Employment income from United Kingdom 8,000
Rental income from property in United Kingdom 2,000
Dividend income from United Kingdom 1,200
Interest income from United Kingdom 800
Total gross income 68,000
Expenses $
Medical expenses 5,000
Expenses incurred in deriving employment income from Australia 4,000
Expenses incurred in deriving employment income from United States 900
Expenses incurred in deriving rental income from United Kingdom 500
Gift to a deductible gift recipient 400
Interest (debt deductions) incurred in deriving dividend income 140
Expenses (debt deductions) incurred in deriving interest income 60
Total expenses 11,000

Foreign tax paid $
Employment income from United States 3,600
Dividend income from United Kingdom 120
Interest income from United Kingdom 80
Rental income from United Kingdom 600
Total foreign tax paid 4,400
Determine Angel foreign tax offset.
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