Apportionment and Dissection of Expenses What provision of the ITAA gives the Commissioner power …

Apportionment and Dissection of Expenses

What provision of the ITAA gives the Commissioner power to apportion an expense between income earning and non-income earning activities so that only part of it is deductible?

What is the difference between apportionment and dissection of a loss or outgoing?

If an expense cannot easily be apportioned between its deductible and non-deductible components how is it treated for income tax purposes? Provide authority?

What principles govern the Commissioner’s apportionment power?

‘Incurred’

When is an expense considered to have been ‘incurred’?

What is the meaning of ‘necessarily’ in the context of ‘necessarily incurred’ in s 8-1(1)(b)? Provide authority.

Briefly explain the following ‘tests’ – used to determine whether an expense is on revenue or capital account:

(a)        the ‘once and for all’ test;

(b)       the ‘enduring benefit’ test;

(c)        the ‘fixed vs circulating capital’ test;

(d)       the ‘business entity’ test.

What will expenditure be ‘of a private or domestic nature’?

Repairs

What is the difference between a repair and:

(a)        a replacement;

(b)       an improvement;

(c)        an addition?

What test is used to determine whether something is an ‘improvement’?

What is an ‘initial repair’?

What is a ‘pre-emptive’ repair?

In what circumstances will a ‘pre-emptive repair’ be an allowable deduction?

What is a ‘notional’ repair?

In what circumstances with a notional repair be allowed as a deduction?

How might capital expenditure on income producing premises be deducted if the work cannot be categorised as a repair?

Bad Debts and Carry-forward Losses

What conditions must be satisfied before a taxpayer is permitted to deduct the amount of a bad debt?

Under what provisions are carry forward losses deductible?

What income do you offset your carry forward losses against – and in what order do you offset them against that income?

How long can you carry a loss forward and offset it against income you earn in later years?

Gifts

In what cases are gifts deductible?

What is the minimum amount of a gift that is deductible?

X makes a large donation to her son’s school’s building fund in lieu of paying school fees? Are donations to school building funds deductible? Is this donation deductible?

Y gifts $1 million to the Townsville Families Society, a non-profit organisation set up to provide counselling to families in distress, upon condition that it lends him back $900,000 for 99 years at nil interest. Are donations to such societies normally deductible? Is this donation deductible? Why/why not?

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