Joshua pty ltd not entitled claim input tax credit
Answer – 1:
As per provision of ITAA, if the eligible deduction exceeds the assessable income of the relevant year than tax payer can carry forward the tax loss for being set off against the assessable income of next year.
| Particulars | Amount ($) |
|---|---|
| Assessable Income | 600,000 |
| Less: Eligible Deduction | 1,000,000 |
| Net Tax Loss to be carry forward | (400000) |
Year – 2
| Particulars | Amount ($) |
|---|---|
| Assessable Income | 200,000 |
| Less: Adjustment of remaining Tax Loss of Year – 1 | (100,000) |
| Net Assessable Income of year 2 | 100,000 |
| Less: Current year deduction | (500,000) |
| Net Tax Loss to be carry forward year – 2 | (400000) |
Year – 3
| Particulars | Amount ($) |
|---|---|
| Assessable Income | 500,000 |
| Less: Adjustment of remaining Tax Loss of Year – 2 | (200,000) |
| Net Assessable Income of year 3 | 300,000 |
| Less: Current year deduction | (200,000) |
| Net Taxable Income year 3 | 100,000 |
AS per FBT Act, if the employer waives amount to be received from employee then it is debt waiver fringe benefit.
Both loan fringe benefit and debt waiver fringe benefit are taxable and employer has to pay FBT.
In the given case as employer is liable to pay FBT on both interest FBT and debt waiver FBT.
Statement showing Taxable value of loan FBT and FBT Liability
| Particulars | Amount |
|---|---|
| Debt waived | $5000 |
| Total | $5000 |
| Grossed Up | 2.0802 |
| Taxable Value | $14010 |
| Tax Rate | 47% |
| FBT Liability | $6584.7 |
AS per FBT Act, the taxable value of FBT will not be included in the assessable income of employee.
Answer – 3:
Subdivisions 815-B to 815-D of ITAA provides rules for transfer pricing.
The main objective is to ensure that the transaction is not mispriced. In the case where the transaction took places at a price which is not the arm’s length price or at market price then tax authorities will consider its arm’s length price to tax the transaction.
This will create problem relating to assessment of profit element involved in the transaction.
However taxing revenue will not be considered as appropriate as it also involves the element of cost associated with the transaction.
Note – 1
Calculation of decline in value under prime cost method: (S 40-75)
| Asset | No of days in the year (C) |
Decline in value
|
||||
|---|---|---|---|---|---|---|
| Office Equipment | 10,000 | 366 | 365 | 100% | 10 years | |
| Furniture | 1200 | 366 | 365 | 100% | 10 Years |
Note – 2
Calculation of decline in value under diminishing value method:
In this case
Opening adjustable value of MacBook Air is $850 hence considered as low value asset.
| Step 1 |
|
$140.63 |
|---|---|---|
| Step 2 | ||
| Step 3 |
|
|
| Step 4 | Sum of amounts from steps 1, 2 and 3 equals the decline in value for 2019-20: | $2971.88 |
| Particulars | Amount ($) |
|---|---|
| Net Income | 255500 |
| Less: | |
| Interest on capital contribution | 27000 |
| Salary to Carol | 45000 |
| Superannuation to Carol | 9000 |
| Accounting Profit | 174500 |
| Share of Alastair = ($174500 / 3) | 58166 |
As per section 11-20, an entity that makes a creditable acquisition is entitled to input tax credits on the acquisition.
Entity is entitled to claim Input Tax Credit on equal to GST payable on the supply of the thing acquired.
As per law an acquisition has a creditable purpose to the extent that the acquisition relates to carrying on of the entity’s enterprise. However in the following situation acquisition will not be considered as creditable acquisition.
If the acquisition is input taxed
In this case following observations are important:
Joshua Pty Ltd is GST Registered Entity.
