大三下合作課稅法part e lectures78sem2

1、PART EGENERAL DEDUCTIONS2Deductions some fundamentalsTaxable e = assessable e deductions (s.4-15(1) ITAA 1997).Only deductions allowed are those provided for in the ITAA. Some losses and outgoings are made specifically non-deductible.Some outgoings and losses must be specially substantiated before a

2、 deduction is allowed.3Deductions - typesGeneral deductions (s. 8-1 ITAA 1997)This is a general provision under which most deductions are claimed.Specific deductionsDeductions allowed under specific provisions for particular outgoings (e.g. depreciation)4Deductions basic testFirst ask was the expend

3、iture for e-producing purposes?If yes, it is deductible UNLESS (a) it is capital, personal or for gaining exempt e; or (b)it is specifically made non-deductible.If no, it is non-deductible UNLESS specificallymade deductible (such as gifts to charity). 5General deductions: s.8-1S.8-1 has:(1)two limbs

4、 and (2)four exclusionsGeneral deductions: s.8-1The two limbs:S 8-1 allows a deduction for losses and outgoingsto the extent that they :(first limb) were incurred in gaining or producing assessable e; or(second limb) were necessarily incurred in carrying on a business for the purpose of gaining or p

5、roducing assessable e67General deductions: s.8-1The four exclusions:Losses and outgoings:of capital or of a capital natureof a private or domestic naturein relation to the gaining of exempt ewhich other provisions of the ITAA make non-deductible8S.8-1: terminology common to both limbs losses and out

6、goingslosses and outgoings to the extentthat they were incurred in producingassessable e.Covers the intentional (outgoings)and non-intentional (losses)movement of resources out of thetaxpayers control.9S.8-1: terminology common to both limbs: incurredLosses and outgoings to the extent thatthey were

7、incurred in producingassessable e.The loss/outgoing must be incurred in the year it is claimed as a deduction.An outgoing is incurred when the taxpayer is definitely committed to the outgoing this may precede actual payment.3)S.26-10 applies to leave payments.10S.8-1: terminology common to both limb

8、s: to the extentLosses and outgoings to the extent thatthey were incurred in producingassessable e. Requires apportionment where theloss/outgoing was partly incurred for non e producing purposes.11S.8-1: terminology common to both limbs: inLosses and outgoings to the extent thatthey were incurred in

9、 producingassessable e. To be deductible, the loss/outgoing must berelevant and incidental to the gaining ofassessable e that is, there must be aconnection between the expenditure and the e production.12S.8-1: typical first limb deductions(A) Can be used by employees and business.(B) Some typical em

10、ployee first limb deductions:Work clothingTools of tradeTechnical journalsSelf-education expensesHome office expensesMotor vehicle expensesProfessional association fees13S.8-1: second limbCan only be used by business.Three conditions to be met:Taxpayer was carrying on a businessThe loss/outgoing was

11、 necessarily incurred in carrying on the business.The carrying on of the business was for the purpose of gaining or producing assessable e.14S.8-1: second limb pre and post-business expensesPre-business expenses are not normallydeductible (see Softwood Pulp and Paper Ltd vFCT)Post-business expenses

12、are not normallydeductible. However, interest payments incurredafter a business has ceased can be deductible ifthe payment still relates to the e productionwhen the business was in operation (see: FCT vBrown; AGC (Advances) Ltd v FCT andFCT v Jones)15S.8-1: typical second limb deductionsSome typical

13、 business deductions:Cost of acquiring trading stockPlant/equipment hire costsSalary/wage costsExpenditure on market researchRental costsInterest and bank chargesAdvertising expensesFBTCost of utilities16S.8-1: the four exclusionsThe following are NOT deductible: Losses and outgoings:of capital or o

14、f a capital natureof a private or domestic naturein relation to the gaining of exempt ewhich other provisions of the ITAA make non-deductibleS.8-1: exclusions: capital expenditure(1) Capital losses/outgoings are NOT deductible: (s.8-1(2)(a)Factors suggesting expenditure is capital:It brings into exi

15、stence an asset or advantage for the enduring benefit of the taxpayer.It is a once-only expenditure.It is incurred in establishing, replacing or enlarging the taxpayers profit making structure.It is incurred in maintaining or defending the taxpayers profit making structure.Expenditure in the ordinar

16、y continuing battle forbusiness is on revenue account.1718S.8-1: exclusions: capital expenditureBUT NOTE: Capital expenditure that is nototherwise deductible may be deductible over 5years under s 40-880 ITAA 1997.Called black hole expenditure, it coversbusiness capital expenditure not otherwise take

17、ninto account and not denied a deduction undersome other provision of the Act.19S.8-1: exclusions: private expenditure(2) Private or domestic losses/outgoings are NOTdeductible: (s.8-1(2)(b)These are not deductible because they are notincurred in the production of assessable e.Many cases involve cla

18、ims for:(1)Self-education expenses(2)Working from home expenses(3)Travel expenses(4)Child care expenses20S.8-1: exclusions: private expenditure - self-education expensesAre deductible if:Directly relevant to the taxpayers current e earning activities.They enable taxpayer to keep abreast of developme

19、nts in his/her field.They will enable the taxpayer to better discharge existing e producing duties.They are likely to lead to an increase in e.21S.8-1: exclusions: private expenditure - self-education expensesNOT deductible if:Designed to enable taxpayer to get employment or to get new employment.De

20、signed to open up a new field of e producing activity.It comprises the first $250 of expenses in a prescribed course of education (s.82A ITAA 1936).They are HELP payments. 22S.8-1: exclusions: private expenditure - self-education expensesExpenses that can be claimed include:Tuition, course or confer

21、ence fees.Cost of textbooks, journals and photocopying.3)Travel expenses, including modation and meals where required to be away overnight.4)Interest on money borrowed to pay for the expenses.5)Depreciation on items such a professional library, computers, filing cabinets etc.23S.8-1: exclusions: pri

22、vate expenditure -working from home expensesMust distinguish between:The home as a place of business; andThe home containing an office or private studyand between:Occupancy expenses and Running expenses24S.8-1: Exclusions: private expenditure - working from home expenses25S.8-1: exclusions: private

23、expenditure - working from home expensesOccupancy expensesInclude:RentMortgage interestRatesInsurance premiumsCalculated on a floor area basis.26S.8-1: exclusions: private expenditure - working from home expensesRunning expensesInclude:Heating, lighting and cooling expensesCleaning costsDepreciation

24、, insurance and repairs on equipmentLeasing charges on equipmentMaintenance costsTelephone expenses27S.8-1: exclusions: private expenditure - travel expensesNOT deductible for travel:Between home and work.Looking for employmentBy an panying relative (s.26-30 ITAA 1997)Deductible for travel:In the co

25、urse of workBetween places of work (see s 25-100 ITAA 1997)28S.8-1: exclusions: private expenditure - child care expensesNOT deductible.They are considered to be:private; andlacking the relevant connection to the taxpayers actual e producing activities.29S.8-1: exclusions: expenditure producing exem

26、pt e(3) Losses and outgoings incurred in gaining exempt e (s.8-1(2)(c ) ITAA 1997)30S.8-1: exclusions: specifically non-deductible expenditure(4) Losses and outgoings which other sections of the ITAA make non-deductible(s.8-1(2)(d) ITAA 1997)31Particular general deductions: interest paymentsInterest

27、 paid on borrowed funds is deductible if the money was borrowed for the purpose of gaining assessable e. This is so even if a capital asset is bought.The use which has been made of the borrowed funds is vital.The nature of the security given for the loan is irrelevant.Interest that is a post-busines

28、s expense may be deductible.Pre-paid interest: s 82KZM ITAA 193632Particular general deductions: salaries, wages and directors feesDeductible under s.8-1(1) ITAA 1997Deductibility subject to:(a)S.26-35 ITAA 1997 excessive remuneration to a relative of employer(b)S.109 ITAA 1936 excessive remuneratio

29、n to a director or shareholder of a private company(c)S.25-50 ITAA 1997 payments for past services33Particular general deductions: legal expensesDeductible under s.8-1(1) unless a negative limb applies.Note: some legal expenses are specifically deductible: e.g. legal expenses associated with borrowi

30、ng money used for e producing purposes are deductible under s.25-25.34Particular general deductions: motor vehicle expensesDeductible under s.8-1 if incurred in the course ofderiving assessable e or carrying on abusiness for that purpose.Deductible expenses include:Petrol and oilRepairs and servicin

31、gLease charges Interest on loanDepreciation, if owned by the taxpayer35Particular general deductions: motor vehicle expensesFor employees, a self-employed personor a partnership that includes at leastone individual as a partner, there are four methods of claiming car expenses. These are found in Div

32、.28 ITAA 1997.2)Each method has its own substantiation rules which are described in Div.900 ITAA 199736Particular general deductions: motor vehicle expensesThe four methods:Log book methodOne-third of actual expenses method*12% of original value method*Cents per kilometre method*can only be used if

33、business kilometresexceed 5,000.*claim limited to 5,000 business kilometres.37Particular general deductions: motor vehicle expensesSubstantiation for log book method:Log book for at least 12 weeksOdometer recordsWritten evidence of expensesFuel and oil may be substantiated by odometer records38Particular general deductions: