Practice of Income Tax Law in Diverse Scenarios

Discuss about the Practice of Income Tax Law in Diverse Scenarios.

Reference of Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314

The “Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314” case study reveals different facts and figures with the rules and the regulations. The case study also depicts the provision of the decision with the results that are seemed to be more crucial for the case of RIP Pty Ltd. The case study provides the significant issues regarding the membership fees of the taxpayers with the consideration made for the construction of unlimited website (Thomas, 2010). The operations that are carried out regarding the taxpayers are the Income tax Assessment with the consideration of the rule ITAA sections 6-5. The full amount of the membership fees is considered with the creation of the appropriate enhancement methods and thereby the unlimited access can be achieved with the consideration of the operation of the website. The facts regarding the taxpayers also help in the consideration of the unlimited access with determining the values of the considered laws and the regulations and thereby the enhancement of the case is seen in this case (Dykes, 2011). The application of the case provides the views and thereby if violated, the cancellation of the account tax place and the refund will also seemed to be cancelled for the case of the taxpayer. The reasons depicts of the decisions depicts the adoption requirement of the ordinary income with the consideration of the case of “Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314”. Thereby the case also focuses on the reflex actions that depicts the principles of the case of “Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314” and thereby the principles of this case depict the enhancements for the adoption of the correct method for the taxpayer (Apps, 2008).  The reflex actions are considered in this case and thereby the issues and the laws regarding the case are discussed with proving the fulfilment of the laws in order to create the reflex actions of the case. Henceforth the discussions and the findings regarding the case are made with the consideration of the Australian government laws and the regulations. The enquiries are made for the creation of appropriate discussion regarding the case with the endorsement of the case regarding the actions provided.

Advise for RIP Pty Ltd on their Taxation

With the consideration of the RIP Pty Ltd, the creation of fees are seemed to be payable at the 30 days of time with thereby helps in the creation of appropriate contract bills. The case depicts the creation of the arrangement by the 30 days with the creation of the funeral costs which must be paid by the mode of the private insurance plans which includes the Transport commissions (McGrath, 2007).Thereby the fees are seemed to be payable under the separation of the accounts that are paid under the depicting of the agreement and transportation of the Accident commission and thereby the fees are seemed to be depicted with the arrangement of the amount of $225,000. The amount seemed to be refundable with the creation of the deluxe funeral arrangement. Amount paid by the future funeral costs (Wolff, 2014). This amendment that helps in the enabling the revenue policy with foreseeing the agreement and henceforth deposit is made as per the scheduling of the forfeited account. All these payments are the outcomes of the initiation for the income generation thus, considered as assessable income and the company must pay for the income or generated revenues as per the norm of taxation law 1937. 

Implication of Arthur Murray Principle in this Case

Funeral Plan is made by the client which helps in the creation of the differed account with the amount and thereby the date of the death must be seemed to be payable with the consideration made for Deffered Income Liability Account (Solomon, 2009). The plan may be cancelled with the creation of the cancellation of the situation and thereby the explanations are credited for refunding amount. Appropriate justifications are provided with focusing on the arrangements made and thereby the case study “Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314”can be implemented in the case of RIP Pty Ltd. As the company is facing the similar situation of “Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314 thus, there will be similar types tax treatment can be applied. 

Choice of Tax Payers

The taxpayer or the commissioner does not have any choice for the prevention of tax in this case. The considerations depict the LIFO method which helps in the creation of the value against the taxpaying procedures and thereby the enabling of the revenue returns policies are made with the enhancement of the refund procedures (Barkoczy, Rider, Baring, & Bellamy, 2016). The appropriate rule of IRS 99-19 is applied in this case which helps in depicting the system of claim for the returns made and thereby the claiming for the refund procedures helps in the enabling the procedures and the structures of the amount. It thereby also helps n the creation of the appropriate claims for the purpose of receiving the appropriate amount (Woellner, R., Barkoczy, 2016). The verification process is also identified by the claimant for making the appropriate profit for the claimant.  The taxpayer may possess the right for taking his own methods of accounting tax as per the need of the tax.     

Tax Treatment for the Forfeited Paymeny

According to the case study given, it can be stated that RIP Pty Ltd is a resident private company which runs the business of the funeral director. As per the financial year that ended on June 30th 2016, the company had incurred a profit around $2.45 million. Along with the normal profit made by it, the company also received periodic payments from the clients who gave the money to the organization in the form of installments so that they can afford the cost of a funeral in the future. The easy funeral can be defined as a fixed price contract between the RIP Pty Ltd Company and its client and the conditions that they have both agreed to (Australian Master Tax Guide 2011, 2011). According to the terms and conditions of the aforesaid contract, the customers or clients of the organization are promised a deluxe funeral arrangement in the future and this is ensured to the customers by the organization at the time of payment too. The mount of money given by the clients to the organization under these terms is not refundable and also not transferable to anyone. It has also been observed that many a time, the amounts deposited by the customers are not drawn by them as a part of the Easy Funeral Plan. The reason behind this is that there are chances of a client dying abroad or the dead body not being found and as a result of this there is no funeral service is given to these particular clients (Parsons, 2011). On the date of 30th June, after examining the business transactions of the organization, it was found that the money transfers from the Easy Funeral Plan had become a matter of concern by a great extent because of defaulting members and those who are not making up arrears. These payments were given to a forfeited payment account and the balance of that account on 30th June was of $16,200. The question that has come up in this case is that whether the balance amount of $16,200 in the account is assessable or not. The main job here is to suggest an appropriate tax treatment that can be applied to the forfeited payment account. As per the rules and regulations of the Australian Taxation Office any income or payment consisting of forfeited amount needs to be taken into consideration for tax purposes as the company is legally bound to pay the taxes on that amount (Homburg, 2008). The amount of $16,200 transferred by the company therefore has to be the assessable amount on which tax can be levied. As per the ruling of ITAA97 section 6-5 the forfeited amount will be known as GST (WALLER, 2007). According to the CGT event H1 section 104-150 where there is significant information given about forfeitures of the deposit, it is required for tax to be levied on the forfeited payment account. Therefore in order to obey the legal taxation laws the company has to pay the necessary tax on that amount and it would get deducted from the ordinary income following the Australian Taxation Rules and Regulations (Woellner, 2013).

Nature of Trading Stock

Trading stock is anything that a company acquires or manufactures produces, exchange or sell.  In the given case study, the trading stock of RIP Pty Ltd is three types of casket and accessories that should be considered for tax purpose. The company purchased the trading stock in advance and received considerable discounts for advance purchase. The increase in stock value is considered as assessable income over the period and decrease in deductions (Krever and Black, 2007). The Australian Taxation Office explains deduction for prepaid expenses and tax treatment for the prepaid amount. The trading stock would be considered for tax purposes and the prepaid amount would be treated for the tax purpose as per the Australian Taxation law. The costs that can be included are cost price, customs, delivery charges, excise duties and freight. However, the tax will be calculated on the prepaid purchase of casket and accessories (Burrell and McGinn, 2009).

  1. ii) Adjustment to the company’s reported profit
    The RIP Pty Ltd received fully franked cash dividend and it will be considered as profit for the company. The Australian Taxation law explains the tax treatment for the dividends. The double taxation system in Australia is eliminated with the help of franked dividend and it allows the investors to pay less tax on received dividend (Thomas, 2010). The file of tax return shows gross up dividend income and claims from tax credit. The rate of tax on the basis of which the company will tax would be 30% on fully franked cash dividend. Therefore, as per the law the company has to pay tax.

As on March 2016, the company has paid rent for the storage space and the financial statements shows $47,500 capitalized amount and $9,500 expense amount. The Australian Taxation Office explains the capitalization rules that the amount of debts is used to invest into operations. The deduction of debt amount is the expense that an organization incurs in relation to debt interest (Waller, 2007). The expenses incurred by an organization are excluded for the debt deductions as per the Australian Taxation law such as loss of foreign currency and rental expenses on the leases.

The long service leave as per the Australian Taxation Office is the leave that an employee gets after working for long period of time. The provision for long service leave account is debited in financial account (White, 2009). The company will not pay tax on long service leave account. The provision for the long service leave is recognized under national workplace relations legislation. Therefore, the company will not pay tax on provision of long service leave account.

Deductions
The deductions are available as per the Australian Taxation Law for the expenditure to construct a building. The preliminary expense for architectural designs is deductable as per the Australia Taxation Office.   The land cost on which the building will be constructed will also be deducted. As per the law, equipment and fitting are also deductable (Woellner, 2013). The expenditure for constructing building that can be claimed are preliminary expenses like foundation cost, architect’s fees and engineering fees, payment to carpenters, brick men and trades men, payment to retaining walls and constructing fees. The landscape of the site and onsite parking would not be deductable as per the Australian Taxation law. Moreover, from the assessable income the deduction as per the Australian taxation law would be subtracted. With claiming the expenditures, the ATO (Australian Taxation Office) deducted the tax on the expenses created by the company and thereby the expenses are provided in front of the ATO. With the consideration of the laws of Australia, the laws deducted the tax on the costing and the expenditure made during the construction of the building. Henceforth the deductions are seemed to be available in the case of expenditures created by the company.        

References 

Australian Master Tax Guide 2011. (2011). Sydney, N.S.W.

Burrell, D. and McGinn, J. (2009). Cornerstone law series. [Adelaide]: Law Society of South Australia.

Dykes, C. (2011). International tax law. Buffalo, N.Y.: William S. Hein. 

Homburg, J. (2008). Cornerstone law series. [Adelaide]: Law Society of South Australia.

Krever, R. and Black, C. (2007). Australian taxation law cases 2007. Pyrmont, N.S.W.: Thomson ATP.

McGrath, S. (2007). Cornerstone law series. [Adelaide]: Law Society of South Australia.

Parsons, R. (2011). Income taxation in Australia. Sydney: Law Book Co.

Solomon, R. (2009). Cornerstone law series. [Adelaide]: Law Society of South Australia.

Thomas, G. (2010). Cornerstone law series. [Adelaide]: Law Society of South Australia.

WALLER, V. (2007). The Challenge of Institutional Integrity in Responsive Regulation: Field Inspections by the Australian Taxation Office. Law & Policy, 29(1), 67-83.

White, R. (2009). Cornerstone law series. [Adelaide]: Law Society of South Australia.

Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016).Australian Taxation Law 2016. Oxford University Press.

Wolff, L. (2014). Litigiousness in Australia: Lessons from Comparative Law. Deakin Law Review, 18(2), p.271.

Apps, P. (2008). Comment:‘Taxation reform and income Distribution in Australia’. Australian Economic Review, 19(3), 57-59. http://dx.doi.org/10.1111/j.1467-8462.1986.tb00633.x

Barkoczy, S., Rider, C., Baring, J., & Bellamy, N. (2016). Australian tax casebook. Melbourne, A: Oxford University Press (aust).

 

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