Taxation

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Taxable Payable = Tax rate * (Assessable income (s 6-5) – Allowable deduction (s 8-1/8-5)) – Tax offset + Medicare levy and surcharge Tax offset:
For individual: franking credit, foreign tax credit; low income earner rebate For company: franking credit, foreign tax credit
Low income earner: s 159N ITAA36: 600 – (36,000 – 25,000) * 0.04; Less than 25001, rebate $600 Medicare levy threshold: 50,000+ 1% surcharge
0~16284, Nil; 16285~17604, Nil + 20% of excess over 16284; over 17604, 1.5% of taxable income Deduction: (general 8-1; specific 8-5)
General deduction: s 8-1
Expenditure is deductible, there must be a nexus between the expenditure and income (Ronpibon Tin case – apportionment of expenditure would be necessary when the expenditure is included both capital nature and deductible expenditure) or expenditure must be necessarily incurred in carrying on a business to gain or produce such income (FCT v Snowden & Willson Pty Ltd). The loss incurred when the company was robbed – deductible under s 8-1; and the recovery of the loss from insurance would be assessable. Business travel expenses (airfare, accommodation) related to the existing client – deductible; related to create new business – capital nature – not deductible If before the trip, business intention while charged into partially private, airfare is still full deductible (计划是business trip,但是中途改变主意,多了部分private trip,机票全deductible) If before the trip, private intention changed into business, airfare is still full deductible under s 8-1 (计划是private trip,但是中途改变主意,多了部分business trip,机票全deductible) 关于air ticket, 只要trip中包含business的部分,那就是deductible Accommodation & meal/entertainment would be apportioned to business and private. Business part would be deductible under s 8-1 Capital expenditure: If the expenditure relating to the firm’s business structure and therefore the regarded as capital expenditure and not deductible under s 8-1 (Sun Newspaper Ltd & Associated Newspapers Ltd v FCT). But under s 40-880 provides a deduction over 5 years for capital expenditure that is otherwise not deductible and that related to a business that is, was or is proposed to be carried on for the purpose of producing assessable income. The deduction is allowed in equal proportions over the period of 5 income years starting in the year which the expenditure is incurred. (超过5年的expenditure可以被deducted,像depreciation一样,平均5年来deduct). The new building would qualify as an eligible building and a deduction would be allowed equal to 2.5% of the cost of the building. If the building is industrial building, attract the higher rate of 4% pa (s 43-150). Depreciation = cost * 2.5% * holding days / 365 Borrowing expense: s 25-25: TP may obtain a deduction for expenses incurred in borrowing money where the money is used to produce assessable income (e.g. stamp duty, legal fee). Expense ≤100 may be written off in the first year. If the expenses ≥100 they are spread over the period of the loan, not exceeding 5 years (1826 days). Depreciation = (borrowing expense / 1826) * days Bad debts: s 25-35: it is necessary that the debt is bad (not merely doubtful), and has been written off as a bad debt during the year in which the deduction is sought. A write-off by means of adjustment after the end the year is insufficient. The debt must also have been brought to account as assessable income, or relate to money which has been lent in the ordinary course of a business of lending money by a TP who carries on a money lending business. Legal expenses:

BP Australian v FCT – only sell BP oil ⋄ deductible [if the petrol station does not sell BP oil, it will lead the market share of BP reduced. But if the TP spend the legal fee ⋄ BP market share will go up ⋄ revenue nature] NAB v FCT – provide home loan to defence ⋄ deductible

Hallstroms v FCT – prevent rival patent from being extended ⋄ deductible [patent: if one company have this patent, on other company can use that technology. If TP spend the legal fee ⋄ the company...
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