Integrity

HA3042 Taxation Law
Tutorial 8


Reading:

Coleman, C. et al, Principles of Taxation Law 2012, Thomson Reuters -Chapters 16 & 17


Suggested Solutions:


Question 16.4

Computer Consultants Pty Ltd:

1. Provision for long service bestow is non deductible, only the quantity actually stipendiary: s 26-10 of ITAA 1997.

2. Maintenance fee over a 12-month period; outgo not over 12 months, so s 82KZL of ITAA 1936 applies and the amount amount is deductible.

3. Provision for bad debts is not deductible, only the amount written off after action has been taken to reclaim the amount through debt collectors or legal action: s 25-35 of ITAA 1997.


Question 16.5

According to the legal principle established in Hendersons sequel, only small subscriber linees ar entitled to number on a cash base. Medium to large businesses are required to bank note on an accruals basis. This principle is only erect in the common law and some medium-sized businesses whitethorn account on a cash basis if appropriate for their pillowcase of business ie sales on credit. A business with a turnover of $20 million should account for its income on an accruals basis.


Question 16.8

If accounting on a cash basis then it would not be derived in the current pecuniary year.



However, s 6-5(4) may catch the income as the taxpayer was in a position to deal with the income. Part IVA, the tax avoidance provisions, may also apply. If accounting on an accruals basis it would make no difference as the income is derived when the invoice is sent to the client, not when it is paid by the client.


Question 17.2

Shares can be traffic deport (Investment & Merchant Finance (1971)) but not in this case as Lex holds the shares with a long-term investment purpose and not for sale or exchange in the ordinary line of work of his business. See Investment & Merchant Finance (1971) 2 ATR 361 at 373: even where the owner of shares is a dealer in shares, share may show that particular shares are not trading stock....If you want to get a full essay, order it on our website: Ordercustompaper.com



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