大三下合作課稅法part e

1、DEDUCTIONSAssessable e represents gross eGross e includes recovery of costs and thus does not represent profitTo better accord with accounting concepts taxable e is a net amountThis net amount is arrived at by allowing deductions against the gross (assessable) amountThus the taxing formula is:DEDUCT

2、IONSASSESSABLE ELESS ALLOWABLE DEDUCTIONSDETERMINESTAXABLE EDEDUCTIONSPrimary Deduction Section8-1Two Positive LimbsFour Negative LimbsNegative limbs override positive limbsLegislation Positive LimbsSection 8-1You can deduct from your assessable e any loss or outgoing1 to the extent2 that:a) it is i

3、ncurred3 in gaining or producing4 your assessable e; orb) it is necessarily5 incurred in carrying on a business6 for the purpose of gaining or producing your assessable eLegislation Negative Limbs8-1(2)However, you can not deduct a loss or outgoing under this section to the extent that:a) it is a lo

4、ss or outgoing of capital, or of a capital nature; orb) it is a loss or outgoing of a private or domestic nature; orc) it is incurred in relation to the gaining or producing your exempt e; ord) a provision of this Act prevents you from deducting itDEDUCTIONSWas expenditure for Producing e? YES NO Do

5、es the expenditure Satisfy 8-1(1) only YES NO Does a Specific provision applyYESNO DEDUCTIBLENOT DEDUCTIBLEGENERAL DEDUCTIONSS 8-1 nexusWhat is a sufficient link between e and outgoing?First limbMust be in gaining or producing assessable e.Second limb must be in carrying on a business for gaining or

6、 producing assessable e.DEDUCTIONSWhat deductions do either limb allow which would not be allowed by the other?There appears to be no significant difference in what can be claimed under either limb.Who can rely on each limb differs however.Business can rely on both limbsIndividual can rely only on 1

7、st limbPositive LimbsTerms Common to Both LimbsLosses or outgoingsTo the extentIncurredGaining or producing DEDUCTIONSLoss or outgoingHow does a loss arise?Charles Moore v FCT (1956) 6 AITR 379To the extentIncurredDEDUCTIONSLoss or OutgoingTo the extent (apportionment)If expense is made for a dual p

8、urpose then it may need to be apportionedRonpibon Tin NL v FCT (1949) 78 CLR 47There must be some fair and reasonable basis of apportionmentLegal Rights basis for apportionment (see slide 21)Purpose as basis for apportionment (see slide 21)IncurredDEDUCTIONSLoss or OutgoingTo the extentIncurredMeans

9、 encountered, run into, or fallen upon. It does not include a loss or expenditure that is impending, threatened or expected.(from NZ Flax Investments Ltd v FCT 61 CLR 179)A potential liability or one that is subject to or dependent on certain contingencies is not incurred until the contingencies hav

10、e been satisfied.FCT v Flood (James) Pty Ltd (1953) 88 CLR 492INCURREDA liability can be incurred even where the tax payer does not know the extent of the liabilityCommonwealth Aluminium v FCT (1977) 7ATR 376 RACV Insurance Pty Ltd v FCT (1974) 4 ATR 610 (case 395 in Australian Tax Cases by cch)INCU

11、RREDA tax payer can obligate itself to pay an expense in a future year but the expense will be incurred progressively over the period to which it is referable i.e. pro rata the expense over the period of liabilityColes Myer Finance Ltd v FCT 93 ATC 4214 (case 119 in Australian tax Cases by cch)See T

12、R 94/26 which sets out the ATO view of the word incurredTEMPORAL NEXUSMust expenditure be incurred in the same year the e is derived?NOAmalgamated Zinc v FCT (1935) 54 CLR 295Steele v FCT 99 ATC 4242FCT v Brown 99 ATC 4600TR 2004/4GAINING OR PRODUCINGNexus RequirementFirst LimbALL taxpayers can rely

13、 on this limb.Second LimbOnly businesses can rely on this limbBoth require the loss or outgoing to be in gaining or producingGAINING OR PRODUCINGHow do the courts determine if expenditure is “in” gaining or producing assessable e?Relevant & Incidental TestEssential character testCondition of employm

14、ent testPositive LimbsNecessarily Incurred (many of these cases also can be referred to in relation to the “apportionment concept)Carrying on a business(already considered)For purpose of gaining your assessable e(already considered)SECOND POSITIVE LIMBNecessarily IncurredWhat is clearly appropriate

15、or adopted for the tax payerFCT v Snowden & Willson Pty Ltd (1958) 99 CLR 431W Neville & Co Ltd v FCT (1937) 56 CLR 290Magna Alloys & Research Pty Ltd (1980) 11 ATR 276 PURPOSE OF EXPENDITUREIn Magna Alloys it was said: It is for the man carrying on the business to be the judge of what outgoings are

16、 necessarily to be incurred. It is no part of the function of the Act or of those who administer it to dictate to taxpayers in what business they shall engage or how to run their business profitably or economicallyDoes this mean courts will not examine the purpose of the expenditure i.e. Is expendit

17、ure to reduce tax payable “in producing assessable e”?PURPOSE OF EXPENDITUREWhat is the indirect intention or motive of the tax payer?Magna Alloys & Research Pty Ltd v FCT (1980) 80 ATC 4542Ure v FCT 81 ATC 4100Fletcher v FCT 91 ATC 4950FCT v Phillips (1978) 78 ATC 4361Hart v FCT (2004) HCA 26 Compa

18、re the older decision of Europa Oil (NZ) Ltd (No 2) v Inland Revenue Commissioner (NZ). (1976) 76 ATC 6001. PurposeKey principlesWhere the outgoing is involuntarily incurred or solely incurred in acquiring an asset under a contract or discharging a legal liabilityThe amount involved is commercially

19、realisticThe nature and scope of the taxpayers operation are not in dispute thenThe subjective purpose and motive of the tax payer does not matterPurposeKey principlesWhereThe outgoing is voluntary and excessiveThere is no obvious commercial explanation for incurring the expenditureThe nature and sc

20、ope of the tax payers operations are in dispute thenThe subjective factors (motive and purpose of the tax payer) are relevantNegative LimbsCapital or of a Capital NaturePrivate or Domestic NatureGaining Exempt eSpecific Provisions denies DeductionCAPITALStructure or Product of Structure?Sun Newspape

21、rsThere are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means

22、adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment Capital The facts of the present case show the following features:-(i) T

23、he expenditure was of a large sum incurred to remove finally the competition feared from the Star and actually experienced from the World. (ii) It could be regarded as recurrent only in the sense that the risk of a competitor arising must always be theoretically present and that the reality or immin

24、ence of the risk depends upon circumstances which can never clearly be foreseen. (iii) The chief object of the expenditure was to preserve from immediate impairment and dislocation the existing business organization of the taxpayers. (iv) The impairment or dislocation feared involved a lowering of s

25、elling price, a loss of circulation, a change in advertising rates and a reorganization of selling and production arrangements all of a lasting character; that is, the changes would be of indefinite duration and their effects would continue until they disappeared under influences brought by the futu

26、re the exact nature of which could not be foreseen. (v) The transaction involved the acquisition for a cash consideration of the right to enjoy for three years all the property tangible and intangible of an existing undertaking, that is, the acquisition of a going concern for a period, a thing recog

27、nized as a capital asset. The advantage in terms of profit was not to be obtained by the use of the undertaking but by putting it out of use; but in itself it remained a capital asset. CapitalSOME EXAMPLESBroken Hill Theatres Pty Ltd v FCTBP Australia Pty Ltd v FCTNational Australia Bank v FCTPrivat

28、e ExpenditureSelf EducationIs your current employment enhancedHECS is not an allowable deductionPrivate ExpenditureWorking From HomeHome as the place of businessHome officeDeductionsUtility expensesFixed expensesDepreciationTravelSee TR93/30Home ExpensesIS THE ACTIVITY CARRIED ON AT HOME A: Place Of

29、 BusinessHome Office Can deductCan Deduct Occupancy and runningrunning expenses expensesHome as Place of BusinessAnti Avoidance ProvisionsDivision 85 Individuals who are not conducting personal services businesses are denied certain deductions such as:Rent, mortgage, Interest, rates, land taxPayments to associates (with limited exceptions)Payments for ass