Question 1
Issue
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 some matters, including conveyancing, discharge of a mortgage, and general legal advice relating to a client's business operations. (The Solicitor account does not separate the costs for various matters.)
Rule
Gains and losses from certain capital gains were recorded by the taxpayer by the Legal Division IIIA. A "Real" (or deemed remote) for the company, the taxpayer received or after September 20, 1985, remained under the capital gains tax ("GCC"), "no property" means in 160A Department. "Delete" is described in 160M and 160R sections.
Application
In the case of a capital gain, if the asset takes place for more than 12 months (Section 160ZH), the base cost of the asset is indexed under the direction of the TFE. Calculate any capital losses of any indexing, but it can reduce the cost compared to the article 160ZK.
Conclusion
According to the above clause:
1. Cost of moving assets is not an allowable tax deduction.
2. Revaluing assets do not qualify for an allowable deduction.
3. Any cost affiliated to the ending up/winding up a business qualifies for allowable tax deductions.
4. Any legal fees or services acquired from outsources are not construed as an allowable tax deduction.
Question 2
Big Bank Ltd operates nationally with more than 50 branches, a 10-storey head office, and numerous call centers. 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 computerized accounting systems because 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.
Issue
Discuss Big Bank's ability to claim input tax credits concerning its advertising expenditure...
