Unitary Taxation and Formulary Apportionment MyAssignmenthelp.com

Question: Discuss about the Unitary Taxation and Formulary Apportionment. Answer: Introduction: The current is case study is based on the determination of the allowable deductions for Danny incurred during his engagement in the self-education course. The issue considered here is relevant expenditure incurred by the taxpayer whether or not should be allowed as deduced in his assessable income. Arthur Murray (N.S.W.) PTY. LTD. v. Federal Commissioner OF Taxation Scott v. Federal Commissioner OF Taxation Section 8-1 Income Tax Assessment Act 1997 Section 40-25 of the Income Tax Assessment Act 1997 Subsection 82 (A) of the ITAA 1997 Fletcher Ors v. FC of T (1991) Hayley v. FC of T (1958) FC of T v. Finn (1961) The following case study highlights that Danny was a professional electrical technician Management however he resigned from the company in which he worked so that he could undertake self-education three year course in Charles Sturt University to upgrade his certificate in electronics to a degree in electrical engineering (Barkoczy, 2016). As stated under subsection 82 (A) of the ITAA 1997, the taxation rulings TR 98/9 defines self-education expenditure as the cost that is incurred by a person in undertaking a course of study in school, collate, university or any other identified place of education. The rulings provide that if an individual work, study, and incurs a self-educating expenditure the individual will be eligible for tax deductions (Woellner et al., 2016). As defined under the rulings an individual shall be eligible to claim deduction if their current employment and the course they undertake has adequate connection with their self-education expenditure to qualify in the for m of work related tax deductions. Furthermore, if a taxpayer undertakes course that is very general in relation to their current income earnings actions then there shall be no necessary association amid the self-education expenditure and the income earning capacity does not exist. As evident in the case study, it is found that Dannys self-education course and his profession possess sufficient connection with his self education expenditure to qualify for the work related tax deduction. As stated in section 8-1 Income Tax Assessment Act 1997 self education expenses is considered for deduction where it possess relevant connection to the ability of the taxpayers present income earning capacity (Morgan et al., 2016). Though Danny is currently not employed with Robin Pty Ltd however, his employer had verbally stated that he could return to his position on completing his course. Section 8-1 of the Income Tax Assessment Act 1997 if the activities of the taxpayer constitute income earning capacity and based on the use of their skills or definite knowledge self education expenditure shall be considered as allowable deduction (Barkoczy et al., 2016). In the current case study, it is noticed that Danny is upgrading his qualification for his current employment from bachelor qualification to a masters qualification. It is understood that Danny is improving his specific skill or knowledge that was used in his current employment. However, Dannys employer has not specifically mentioned any kind of increment on his successful completion of course (Braithwaite Braithwaite, 2016). Nevertheless, it is assumed that Danny can represent by showing that at the time while he was studying his course can lead or likely lead to an increase in his employment. The fact that course he has undertaken will enable him to open up a fresh income generating activity and the expenditure that was incurred will be allowed for deductions under section 8-1 of the ITAA 1997 since it possess the characteristics of income producing expenditure (James, 2016). The essential character of the expenditure is determined by an objective From the case study, it is found that Danny had incurred certain self-educations expenses on items for which he can claim allowable deductions if he meets the criteria of eligibility claim. As evident, Danny incurred Air Ticket cost of $1,500 for his overseas study tours for attending the educational institutional. As defined under Para 23 under section 8-1 of the ITAA 1997 airfares incurred in the abroad study tours, seminars or educational institutions forms the part of essential cost of taking part in the tour (Tran-Nam Walpole, 2016). Therefore, Danny can claim deduction for the cost incurred on air ticket since it was associated for attending his educational institutional. Danny also incurs expenses of $800 on his books and study material. Subject to general test specified under section 8-1 of the Income Tax Assessment Act 1997 the cost of professional trade journals, textbooks and stationary shall be allowed for deductions (Long et al., 2016). Cost incurred on books and study material incurred by Danny meets the criteria of general test specified under section 8-1 of the ITAA and can be claimed as allowable deductions. The intention or the purpose that is involved in incurring the expenditure may turn out to be an element in the determination whether the expenditure incurred by the taxpayer will be considered as allowable expenses. As held under section 8-1 expenditure is deductible when the necessary character represents an income yielding expenses (Russell, 2016). As held in the case of FC of T v. Hatchett (1971) 125 CLR expenditure incurred by the teacher in attaining advanced degree diploma will be considered allowable. The court held that the certificate expenditure were associated with actually attaining of income as ownership of diploma allowed Mr Hatchett to shift to higher pay scale in order to generate more money in future (Bond Wright, 2017). As stated in section 40-25 of the Income Tax Assessment Act 1997, an individual can claim deductions Management on the sum for the declining value of a depreciating asset that is held by the taxpayer in an income year or had installed the asset for use or taxable purpose (Kiprotich, 2016). Danny had purchased a laptop for $1,800, which is associated for his self-education purpose. As specified under section 40-25 of the Income Tax Assessment Act 1997 if the subject matter of self-education provides the taxpayer with the ability to uphold or advance is probably to result a rise in the earnings from the present earnings activity. Therefore, the taxpayer can subtract the sum for the declining value of the depreciating asset that is used for the self-education purpose (Jones Rhoades, 2013). In the current case, Danny can deduct the amount of laptop as the declining value of depreciating asset used by him for self-education purpose. In the Books of Danny Statement showing Taxable income Particulars Reference Amount Allowable deductions Air fare Section 8-1 of ITAA 97 $ 1,500.00 Books and Study Materials Section 8-1 of ITAA 97 $ 800.00 Purchase of Laptop Section 40-25 of ITAA 97 $ 2,500.00 There are certain types of expenditure that are not allowed for deduction under Section 8-1 of the ITAA 1997. As defined under Section 8-1 of the ITAA 1997 expenditure incurred on meal and accommodation where a taxpayer has toured to another place for the purpose of self-education and has established a new residence shall not be considered as allowable deduction (Chan, 2013). Danny had incur expenditure on meal and accommodation at the time of attending the educational institution away from his home and such expenditure will not be allowed for deductions. Danny further purchase a motor vehicle however that vehicle was used for only five months and it is not associated with the self-education purpose. Therefore, the amount of $8000 incurred by Danny will be not be allowed for deductions under section 8-1 of the ITAA 1997. During his stay in Singapore for self-educational purpose, Danny undertook the activity of working as a casual tutor in the university and the Nanyang University paid him $4,000. As held in the case of Arthur Murray (N.S.W.) PTY. LTD. v. Federal Commissioner OF Taxation the commissioner under this case has made the noteworthy assessment on the views that fees received in advance of tuition possessed the characteristics of assessable income (Miller Oats, 2016). The income received by Danny forms the part of casual income from service of tuitions possesses the character of assessable income and will be included in the assessment income for assessment. As held in Scott v. Federal Commissioner OF Taxation the income earned by the solicitor formed the part of the taxpayers taxable earnings within the ordinary concept on which the tax is charged or it was brought into charge under Section 26 of the ITAA 1997. It was further argued that separately of the rest of the act it should be considered as brought into the charge under the definition of the earnings from the private exertion (Nayak Shome, 2014). As pointed out in Scott v. Federal Commissioner OF Taxation (1935), the expression income appears on both the sides of the equation. The taxable earnings of the taxpayer will consists of the value paid to the taxpayer including the value of allowance, gratuities, compensations, benefits, and premium granted either directly or indirectly (Sadiq, 2015). Receipt of $4000 by Danny will be included in the assessable income within the general concept of taxable earnings and it will be brought into the charge under Section 26 of the ITAA 1997. Expression of self-education stated under Subsection 82 A (2) of the ITAA 1936 describes the compulsory and unavoidable expenditure together with the needs that can be represented in relation to the fulfilment of the course (Santhanam, 2015). Therefore, the self-education expenditure is regarded as being necessarily occurred in association with the agreed course of teachings. The general doctrines of deductibility defined under section 8-1 of the ITAA 1997 expenditure occurred on self-education falls under the considerations of section 8-1 (Acemoglu Robinson, 2015). As large number of self-education expenditure is voluntarily incurred to produce income the taxation commissioner believes that it is not obligatory to consider the ruling to take into the considerations the second positive limb of section 8-1. As held in the case of Fletcher Ors v. FC of T (1991) to qualify for the allowable deduction under the first limb of section 8-1 expenses must possess the characteristics of having occurred in acquiring or producing the taxable earnings (Berg Davidson, 2016). The high court of Australia referring to the case of Hayley v. FC of T (1958) has highlighted that the expenses should possess the necessary characteristics of an outgoing that is occurred in acquiring the taxable earnings or in other words income producing expenditure (Cao et al., 2014). There should always be relation between the outgoing and the taxable earnings so that the outgoing forms incidental and significant in gaining taxable earnings. Deduction on air ticket, books and study materials and purchase of laptop is allowable for deductions by Danny. This is because the expenditure is incurred for self-educative purpose and the activities of Danny are based on exercising skills and definite information. The subject matte r of self-education provides Danny to maintain or get better that expertise or knowledge. Referring to FC of T v. Finn (1961) expenses incurred on the overseas tour devoted to the study of engineering will be considered as allowable deductions under section 8-1 of the ITAA 1997. Conclusion: To conclude with the current case study, a deduction is permissible for self-education expenditure given the subject matter of self-education leads to or results an rise in Dannys income from the present income earning activity. Reference List: Acemoglu, D., Robinson, J. A. (2015). The rise and decline of general laws of capitalism Management.The Journal of Economic Perspectives,29(1), 3-28. Barkoczy, S. (2016). Foundations of Taxation Law 2016.OUP Catalogue. Barkoczy, S., Nethercott, L., Devos, K., Richardson, G. (2016).Foundations Student Tax Pack 3 2016. Oxford University Press Australia New Zealand. Berg, C., Davidson, S. (2016). 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