Topic 5 (Week 8) – 翻译(1).pptx

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1、Topic 5 (Cont.) Specific Deductions, Capital Allowances and Trading StockMark Brady,Topic 8 Specific Deductions, Capital Allowances and Trading Stock (follows Australian Taxation 2019 Chapters 11, 13 and 5 (p146-151),Main concepts:Specific DeductionsCapital AllowancesTrading Stock,University of Adel

2、aide,2,Specific Deductions - Calculating taxable income,4-15How to work out your taxable income(1)Work out your taxable income for the income year like this:Taxable income = Assessable income Deductions (If the deductions equal or exceed the assessable income, you dont have a taxable income.)Note:If

3、 the deductions exceed the assessable income, you may have a tax loss which you may be able to deduct in a later income year: see Division36.,University of Adelaide,3,Definitions of “deduction” and “deduct”: s995-1(1),deduction means an amount that you can deductdeduct has the meaning given by secti

4、ons 8-1 and 8-5,University of Adelaide,4,Specific deduction provision,8-5 Specific deductions(1)You can also deduct from your assessable income an amount that a provision of this Act (outside this Division) allows you to deduct.(2)Some provisions of this Act prevent you from deducting an amount that

5、 you could otherwise deduct, or limit the amount you can deduct.(3)An amount that you can deduct under a provision of this Act (outside this Division) is called a specific deduction. For a summary list of provisions about deductions, see section 12-5.,University of Adelaide,5,Relationship between pr

6、ovisions about deductions,8-10No double deductionsIf 2 or more provisions of this Act allow you deductions in respect of the same amount (whether for the same income year or different income years), you can deduct only under the provision that is most appropriate.Statutory interpretation - The more

7、specific provision will provail over the general.,University of Adelaide,6,Specific deduction provisions in ITAA 1997,Specific deductions under the 1997 ActSome amounts that can be deducted: Div 25Car expenses: Div 28Gifts or contributions: Div 30Tax losses of earlier income years: Div 36Capital all

8、owances: deductibility of capital expenditure: Div 40Excess of opening value over closing value of tradingstock on hand: s70-35(3),University of Adelaide,7,Specific deduction provisions in ITAA 1997 Div 25,25.5. Tax-related expenses 25.10. Repairs 25.15. Amount paid for lease obligation to repair 25

9、.20. Lease document expenses 25.25. Borrowing expenses 25.30. Expenses of discharging a mortgage 25.35. Bad debts 25.40. Loss from profit-making undertaking or plan 25.45. Loss by theft etc. 25.47. Misappropriation where a balancing adjustment event occurs 25.50. Payments of pensions, gratuities or

10、retiring allowances 25.55. Payments to associations 25.60. Parliament election expenses 25.65. Local government election expenses 25.70. Deduction for election expenses does not extend to entertainment 25.75. Rates and land taxes on premises used to produce mutual receipts 25.85. Certain returns in

11、respect of debt interests 25.90. Deduction relating to foreign non-assessable non-exempt income 25.95. Deduction for work in progress amounts 25.105. Deductions for United Medical Protection Limited support payments 25.100. Travel between workplaces 25.110. Capital expenditure to terminate lease etc

12、.,University of Adelaide,8,Tax-related expenses: s25-5,Section 25-5 ITAA97 allows a deduction for expenditure incurred on managing tax affairs. Expenses allowed would include costs incurred for using a registered tax agent (s25-5(2)(e) ITAA97 AND s995-1 ITAA97) to prepare an income tax return; or to

13、 attend to an objection with the Australian Taxation Office; or to prepare and lodge a business activity statement.Deductions not permitted under this provision include payments of income tax; expenditure excluded from s8-1(1) ITAA97 such as penalties and fines; or expenditure of a capital nature su

14、ch as tax advice regarding the acquisition of a new business.This provision only relates to tax affairs. Tax is a defined term (s995-1) and means income tax. This doesnt include other taxes such as GST and fringe benefits tax.,University of Adelaide,9,25-10 Repairs,(1)You can deduct expenditure you

15、incur for repairs to premises (or part of premises) or a *depreciating asset that you held or used solely for the *purpose of producing assessable income.Property held or used partly for that purpose(2)If you held or used the property only partly for that purpose, you can deduct so much of the expen

16、diture as is reasonable in the circumstances. No deduction for capital expenditure(3)You cannot deduct capital expenditure under this section.,University of Adelaide,10,Meaning of repairs,The word repairs is not defined in the Act.The courts developed the following six principles for interpreting th

17、e word:A repair restores an item to its previous condition without changing its functionAn item must need restoration before it can be repairedA repair replaces part of an item rather than the entire itemFunctional approachCapital repairs are not deductibleProperty held or used partly for an income-

18、producing purpose,University of Adelaide,11,Repairs - Functional approach,Lindsay v FCT (1961) 106 CLR 377Facts: The taxpayer repaired ships in its premises, which included two slipways. A timber slipway was replaced with concrete because timber was not available. The new slipway was longer than the

19、 old one, although the greater length produced no greater efficiency.Court held: Not a deductible repair as the slipway was an entirety.,University of Adelaide,12,Repairs - Capital repairs are not deductible,Additions: An addition to a capital asset will not be deductible. For example, where an extr

20、a wing is added to a cement factory.Improvements: A repair restores an item to its former condition while an improvement makes the item functionally better. It does not matter that modern materials are used, provided the materials do not improve the functional efficiency.FCT v Western Suburbs Cinema

21、s Ltd (1952) 86 CLR 102Facts: The taxpayer replaced a tin roof of a cinema with fibro sheeting which had advantages over the tin ceiling.Court held: Expenses not deductible, an improvement. The work would significantly reduce future repairs. Also the work, which had been carried out, was different i

22、n kind as well as degree from the type of repairs which are properly allowed as working expenditures for cinemas.,University of Adelaide,13,Repairs - Capital repairs are not deductible,Initial repairs: Where you acquire a property and fix up the defects, such initial repairs are not deductible.Law S

23、hipping Co v IR Commrs (1924) 12 TC 621Facts: The taxpayer bought a ship for 97,000, but the ship needed work before it could gain permission to sail with freight. It cost 51,558 to get it seaworthy.Court held: The costs were not deductible; they were capital as:the purchase price was substantially

24、less than it would have been if the ship was in good repair;at the time of purchase the ship was not in a profit-earning state; andthere was no evidence that the expenses were properly chargeable to revenue.However, in Odeon Associated Theatres Ltd v Jones things were viewed differently.Odeon Associ

25、ated Theatres Ltd v Jones 1972 1 All ER 681Facts: The taxpayer incurred expenses in repairing a cinema immediately after it was purchased.Court held: Deductible because:the purchase price was not affected by state of disrepair;at the time of purchase the cinema was in a profit-earning state and coul

26、d be used to produce income; andthere was ample evidence that expenses incurred could be properly charged to revenue account in accordance with accounting principles.The Australian Tax Office (ATO) takes the Law Shipping Co view: see TR 97/23.,University of Adelaide,14,Repairs - Taxation Ruling TR 9

27、7/23,An asset will be an entirety of an asset if it:Is separately identifiable as capital equipmentProvides a function on its ownIs a distinct item of plant, orIs a unit of property as per the depreciation rulesInitial repairs are capital and not deductible if the defect:Existed at the time of purch

28、aseDid not arise from the operations of the person who incurs the expenditure,University of Adelaide,15,25-20 Preparation of Leases,Section 25-20 ITAA97 allows a deduction for expenditure incurred for the preparation, registration and stamping of a lease or an assignment or surrender of a lease of p

29、roperty, that has been, or will be used for income producing purposes . The deduction will need to be apportioned where the property is only used partly for income-producing purposes (s25-20(2) ITAA97).,University of Adelaide,16,25-25 Borrowing Expenses,Section 25-25 ITAA97 allows a deduction for ex

30、penditure incurred for borrowing money and the purpose of the money is to produce assessable income (Ure v FC of T 81 ATC 4100). These costs refer to the “cost” of borrowing and include valuation fees, survey fees, stamp duty, and legal costs. Interest paid on loans is excluded from borrowing costs.

31、 They are deductible under s8-1 ITAA97.Borrowing expenses which are $100 or less, are fully deductible in the year the expense was incurred: s25-25(6) ITAA97,University of Adelaide,17,25-25 Borrowing Expenses example,Lesley obtained a three-year loan of $150,000 on 12 January 2019, which she used so

32、lely for income-producing purposes throughout the period of the loan. Borrowing expenses incurred in relation to the loan are $2000. The total period of the loan is three years, ie 1,095 days. The borrowing expenses would be allowed as follows:-2018-19: $ 312.30 ($2000 x 171/1,095 days)2019-20: $ 66

33、6.65 ($2000 x 365/1,095 days)2020-21: $ 666.65 ($2000 x 365/1,095 days)2021-22: $ 354.30 ($2000 x 194/1,095 days)$2000.00,University of Adelaide,18,Expenses of discharging a mortgage: s25-30,You can deduct expenditure you incur to discharge a mortgage that you gave as security for the repayment of m

34、oney that you borrowed if you used the borrowed money solely for the purpose of producing assessable income. If the expenditure relates only partly to the production of assessable income, the borrowing costs are only partially deductible. You cannot deduct payments of principal or interest under thi

35、s provision: s25-30(4).,University of Adelaide,19,25-35 Bad Debts,Four conditions must be satisfied to get a bad debt deduction:there must be an existing debt If the debt has been waived or a lesser amount has been accepted in satisfaction of the debt, there is no longer an existing debt to write of

36、f Point v FCT (1970) 119 CLR 453; 70 ATC 4021the debt must be bad Debt will be bad if the taxpayer makes a bona fide commercial decision that the debt is unlikely to be paid Debt must bad, not merely doubtful3. the debt must be written off as bad during the year of income in which the deduction is c

37、laimed Written record evidencing decision to write the debt off is sufficient4. the debt must have been included in the taxpayers income for the income year or earlier income year or the debt must be in respect of money lent in the ordinary course of a money lending business.,University of Adelaide,

38、20,25-40 Loss from profit-making undertaking or plan,You can deduct a loss arising from the carrying on or carrying out of a profit-making undertaking or plan if any profit from that plan would have been included in your assessable income by s15-15 (profit-making undertakings and plans). If the unde

39、rtaking or plan relates to property then the property must be acquired before 20 September 1985. A loss will not be deductible under s25-40 unless the Commissioner was notified that the property was acquired for a profit-making purpose in the relevant income tax year.,University of Adelaide,21,25-10

40、0 Travel between workplaces,Travel between workplaces is travel directly between two places, to the extent that:the individual at the first place was engaged in activities to gain or produce their assessable income; or engaged in activities in the course of carrying on a business for the purpose of

41、gaining or producing their assessable income; andthe purpose of their travel to the second place was to engage in activities to gain or produce their assessable income; or engage in activities in the course of carrying on a business for the purpose of gaining or producing their assessable income; an

42、dthey engaged in those activities while they were at the second place.Travel between two places is not travel between workplaces if one of the places the individual is travelling between is a place at which they reside: s25-100(3)No deduction for capital expenditure,University of Adelaide,22,Other s

43、pecific deductions in Div 25,Losses by theft: s25-45You can deduct a loss if the loss was caused by theft, stealing, embezzlement, larceny, defalcation or misappropriation by your employee or agent (other than an individual you employ solely for private purposes) provided that the money was included

44、 in your assessable income.Misappropriation where a balancing adjustment event occurs: s25-47A deduction is available if a balancing adjustment event occurs for a depreciating asset held by a taxpayer and the taxpayers employee or agent misappropriated the amount (whether by theft, embezzlement, lar

45、ceny or otherwise).Payments of pensions, gratuities or retiring allowances25-50You can deduct a payment of a pension, gratuity or retiring allowance that you make to an employee or a former employee or a dependant of an employee or a former employee, to the extent that it is made in good faith in co

46、nsideration of the past services of the employee, or former employee, in any business that you carried on for the purpose of gaining or producing assessable income. These payments will also usually be deductible under s8-1. If they are then s25-50 would not apply (s25-50(3): see Magna Alloys, althou

47、gh see also Union Trustee Co of Australia Ltd below.Payments to associations: s25-55You can deduct a payment you make for membership of a trade, business or professional association up to a maximum of $42. But this section will have a limited operation as there is no limit if the payment is deductib

48、le under s8-1. For example, s25-55 will apply where a retired person continues their professional body membership and it is not deductible under s8-1 because the retired person is not producing assessable income from that professional activity.,University of Adelaide,23,Other specific deductions in

49、Div 25 cont.,Election expenses: ss25-60, 25-65, 25-70You can deduct expenditure you incur in contesting an election for membership of the Parliament of the Commonwealth or the Parliament of a state or the Legislative Assembly for the Australian Capital Territory or the Legislative Assembly of the No

50、rthern Territory of Australia. Local government candidates can deduct up to $1000: s25-65.Rates and taxes mutual receipts: s25-75Rates and taxes on premises used to produce mutual receipts or to produce amounts to which s59-35 applies are deductible.Deduction foreign non-assessable non-exempt income

51、: s25-90Section 25-90 provides deductions for Australian entities in respect to devising certain foreign non-assessable non-exempt income.Work in progress payments: s25-95Payments made to acquire work in progress (other than goods) are deductible under s25-95.Deductions United Medical Protection: s25-105Section 25-105 provides deductions for contributions to United Medical Protection support payments.Capital expenditure to terminate lease: s25-110Capital expenditure incurred to terminate a lease or licence is deductible over five years (20 per cent per annum).,