TLAW303 Taxation Law Assignment Solution

TLAW303 Taxation Law Assignment Solution

TLAW303 Taxation Law Assignment Solution

Answer to question 2:

As defined in the “section 8-1, ITA Act 1997”, a taxpayer is permitted to claim the income tax deductions relating to the outgoings or losses up to the sum that they have occurred in the course of producing the taxable income (Woellner et al. 2016). Nevertheless, the taxpayer are denied deductions when the outgoings that is reported by the taxpayer is incurred in the derivation of the exempted income, or incurred in expenses that are private, domestic or having capital budgeting characteristics.

The court in “FCT v Herald Weekly Times Ltd (1932)” usually legal expenditure are allowed as deductions for the taxpayer if it is noticed that the legal expenses are occurred as the outcome of the taxpayer revenue producing act except when the legal expenses are not in the nature of the capital, domestic or private in nature. Similarly in “FC of T v Magna Alloys & Research Pty Ltd (1980)” permitted the company to claim a deductions on the legal expenditure incurred in defending its agents and directors for the alleged claims of receiving secret commissions (Robin 2017). The legal expenses were occurred in generating assessable income. Therefore, the character of legal expenses were occurred on revenue account.

In the present situation of Brent, he reported an instance of legal expense of $25,000 that were incurred for defending the suits of medical negligent. The expenses were incurred by Brent while producing assessable income and was incurred on revenue account. Citing “FC of T v Magna Alloys & Business Research Pty Ltd (1980)” Brent can claim deductions for the legal expenses since it is incurred in the derivation of taxable income.

References:

1. Robin, H., 2017. Australian Taxation Law 2017. Oxford University Press.
2. Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.