Herald Times Weekly V FCT: General Overview

s8-1 General Deductions provision

Sufficient nexus

- Reliability and relevance in gaining or producing AI => in the course of

Herald Times Weekly v FCT – natural consequence of income producing activity • Taxpayer owner and publisher of an evening newspaper • Claimed deduction for damages and legal expenses to defend and sttle defamation actions • Deemed relevant – the thing which produced the assessable income was the thing which exposed the taxpayer to the liability or claim • Cannot be excluded simply because the obligation to make it is an unintended consequence which the taxpayer desired to avoid • Practical inevitable in the publication of an evening newspaper
Charles Moore & Co P/L v FCT – what is the
essential character? Cost of living or other non-income production; cost of working or other income production • Taxpayer owned department store in Perth • Every business morning the cashier, accompanied by another employee, would deposit previous day’s takings at bank • On one occasion robbed • Deductible as the loss had a sufficient connexion with the operations which more directly gain or produce AI • The ordinary course of business requires that, day by day n as soon as may be the takings deposited in the back. • Occasion of the loss or outgoin should b found in whatever is productive of the assessable income or if none produced would b expected to produce AI • Not capital

Travel to work

Travel on work is deductible but travel to work is NOT as this is a living expense
Lunney & Hayley v FCT [deductions denied for travel to work] • Not business expenditure; but rather expenditure arising as a consequence of living in one place and working in another
FCT v Payne [travel between two workplaces; s25-100] • Deer farm (also residence), employee as Qantas pilot. • He claimed deductions. Not entitled to a deduction for his travel expenditure • When travel is between two places of unrelated income derivation, the expenditure cannot be said to be incurred in the course of deriving income from either activity • NOT: s25-100 Overrules this now. However he will still not get deduction. Notice requirement that one of the places cannot be a place of residence.
However certain exceptions e.g. C of T v Vogt [taxpayer allowed D due to carrying bulky equip]
Colling’s case: • On-call worker who is responsible for a problem as soon as he or she receives phone call • Read facts! • The journeys began as a result of performance of the duties of the employment at the taxpayer’s home => D

Home office expenses

Is it a home office? Or the usage of part of the home as a place of business? The latter is deductible.
Appreciate the differences between, Handley v FCT [home office] and Swinford v FCT [home as a place of biz]

Self education

Generally it has to be an expense related to maintain or increase knowledge in the taxpayer’s current field or likely to increase taxpayer’s income from his or her current income earning activities in the future.
FCT v Hatchett [school teacher, getting teacher degree (D) n arts (ND)]
Gupta v FCT [uni student; offered positn as lab assistant; uni fees ND]

Clothing, grooming, hair care, make-up, skin protection etc
Clothing:
• Uniforms – D under s8-1; s34-15 (def’n) • Non compulsory uniforms – design registered with ATO, under s34-10 • Protective clothing – s34-20(2) defines it, under s8-1 • Occupational specific – s34-20(1) defines it, under s8-1 • Conventional – ND; see Edwards case exception.
Mansfield v FCT pg 616– flight attendant • The occasion of the expenditure is to be found in the taxpayer’s working in the cabin
FCT v Edwards pg299– secretary to the wife of the governor of qld • Expenditure was on additional clothing then that needed for ordinary life
FCT v Cooper pg227– Rugby league footballer; food; ND; even if D s32-5 • He was paid to train for and play football not to consume food and drink.

Quasi-personal expenses
FCT v Snowden & Wilson Pty Ltd [legal fees and advertising costs] • Taxpayer carried on a biz of speculative house building • Incurred legal fees in defending itself against the allegations which were made against it • Sufficient nexus – the taxpayer company could do nothing else but defend itself, if it was to sustain its business and continue carrying it on in anything like the same volume or according to the same plan • Were not of a capital nature – proceedings were not necessarily directed at the winding-up of the company or a stoppage of the business but what the taxpayer had most to fear was the embarrassments in the present and future conduct of its business

Contemporaneity principle – when is a taxpayer carrying on a business?

Preliminary expenditure
Steele v FCT – is there sufficient commitment? Contemporaneity principle not legally essential. Holding costs. Deduction was allowed • Would be expected to produce i.e. doesn’t necessarily have to produce AI now
Softwood Pulp & Paper Ltd v FCT [preliminary expenditure] • Deduction for feasibility test => too preliminary therefore not deductible • Taxpayer had not committed itself or decided to go ahead in any definite sense as was evidenced by the fact that the company capital was only 100000 whereas the estimated total cost of the project was between 14m and 15m.

Post – cessation expenditure
Placer Pacific Management P/L v FCT – liability arised from warranty after the business closed down. It was deemed deductible as this was in relation to the income producing activities when the business was in operation.

Is it capital?

Suns Newspaper v FCT – three tests: • The character of the advantage sought, and in this its lasting qualities may play a part [what is the advantage/asset, and how long will it last?] • The manner in which it is to be used, relied upon or enjoyed and in this and under the former head recurrence may play its part [how is the advantage used?] • The means adopted to obtain it; that is by providing periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment [how was advantage paid for?]
Broken Hill Theatres P/L v FCT [pg127; legal costs in successfully opposing an application by a potential new exhibitor; ND, K]
BP Australia Ltd v FCT [LOOK UP]
NAB v FCT [pg690; lump sum payment to secure exclusive right; D; Revenue]

Expense apportionment
Ronpibon Tin NL v FCT [management n admin expenditure incurred when part of biz closed down due to war]
Ure v FCT [acquired loan to purchase residential property, then sold loan to family trust, D reduced to the extent it produced AI, AI is ALWAYS < D]
Fletcher & Ors v FCT [complex annuity scheme, partnership]

Division 40 of ITAA97.

S40-25(1) – the section that gives the deduction
Depreciating assets s40-30. (asset with limited life and expected to decline in value but excludes land)
S40-40. When is a depreciating asset held.
S40-65 gives choice on how to calculate deductible amount. s40-75 Prime cost method
Asset’s Cost x Days Held/365 x 100%/ Asset’s effective life
S40-70 Diminishing value method
Base value x Days Held/365 x 150%/Asset’s effective life Not allowed for certain intangible assets. S40-70(2) and s40-72(2)
Cost or base value (effectively, written down value): • see sections 40-85 – meaning of adjustable value and opening adjustable value of a depreciatying asset • s40-175 – cost of depreciating asset • 40-180 – first element of cost • 40-185 – amount your are taken to have paid to hold a depreciating asset or to receive a benefit • 40-190 – 2nd element of cost • Note adjustment for car s40-230
Effective life – choice (s40-95) between Commissioner’s determination (s40-100) and self-assessment (s40-105) • Commissioner’s determination Taxation Ruling TR 2006-15 and Taxation Ruling TR 2000/18
S40-25(2) deductions are reduced to the extent that they are not used for a taxable purpose (defined in s40-25(7))

s40-830 – Project pools; s40-840 defines project amount NOTE: project amounts incurred after 9 May 06 for projects that start to operated after that time; D % increased to 200% s40-932(2) S40-845 – DV Project life Taxable purpose required s40-935 – defined in s40-25(7) S40-855 – D when project starts Dispose project – s40-830(4) and 40-832(2). AI include proceeds on disposal. S40-830(5) & 40-832(3)

S40-880 – last resort provision for deductions. Business related costs. If the expenditure form part of cost base still not deductible.

Balancing adjustments – s40-280
S40-285 – (1) Termination value > adjustable value AI (2) Termination value < adjustable value – D. NOTE subsection (3) it clears the adjustable value hence u cannot claim a deduction for it under s40-25!
S40-290 – reduction for non-taxable use
S40-295 – meaning of balancing adjustment event
Asset’s termination value – s40-300 and s40-305 • Adjustment for car s40-230, s40-320 and s40-325

Relationship to CGT
S118-24(1) if depreciating asset is held 100% for producing AI. Then any gain or loss from CGT Event A1 is disregarded in relation to a depreciating asset that had a balancing adjustment event.
How bout not 100% for producing AI • S40-25(2) – reduce the deduction by the extent it was for non taxable purpose • S40-290 – reduce deduction by non taxable purpose • CGT Event K7 – balancing adjustment event occurs and you held the depreciating asset at some time for a non taxable purpose s104-235 • Capital gain s104-240(1) • Capital loss s104-240(2) o Uses “cost” under Div 40 not reduced cost base • s118-24(2) • Personal use assets and CGT event K7 • 50% CGT Discount and CGT event K7

Division 43 of ITAA97

S43-10 allow deduction for capital works if conditions are satisfied.
S43-20 sets out the capital works for which this division applies • s43-20(1) Building, or an extension, alteration or improvement to a building. • Structural improvements s43-20(2) and list s43-20(3)
S43-10(2)(a) construction expenditure area • S43-70(1) exclusions in s43-70(2)
S43-10(2)(b) pool of construction expenditure for that area • S43-75
S43-20(2)(c) use your area as set out in Table 43-140
What is the amount of the deduction? S43-25 – The rate of deduction • Either 2.5% or 4% of the construction expenditure over a 25 or 40 year period. • Assumed that most expenditure on K works are at 2.5% per annum over 40 years. o However must consider relevant apportionment issues.
S43-15 – Amount you can deduct; HOW MUCH. • S43-210 or s43-215 o 4% manner s43-145
S43-30 no deduction until construction is complete
S40-45(2) and 43-50 giving precedence to Div 43 over Div 40.
Plant not deductible under Div 43 – s43-70(2)(e), 43-10, 43-15
Plant defined as s45-40 inclusive definition Common law Wangaratta Woolen Mills v FCT – whether the item is just part of the setting or is used in the production on income. Carpentaria Transport P/L v FCT
Div 40, Div 43 and CGT • Div 40 will prevail over Div 43 if it’s a plant. Important in balancing adjustments. • Div 43, if capital works expenditure forms part of the cost base (4th element if incurred, or 1st element if you purchased it), then cost base need to be reduced by the deductions s110-45 (n.b. if the CGT asset was acquired after 7.30pm on 13 May 1997). • S110-45(4), S110-55(4), s 110-55(9) reducing the amount in reduced cost base • There may also be need to separated an asset. S108-55. s108-60.

Repairs • S25-10 • It has to be incurred i.e. it cannot be notional. • Nexus to income producing activity. • Cannot be a capital repair. ▪ Improvement. • FCT v Western Suburbs Cinema Ltd ▪ Initial Repairs • W Thomas & Co P/L v FCT • S25-10(2) apportionment requirement

OTHERS • Tax related expenses s25-5 • Amount paid for lease obligation to repair s25-15 • Lease document expenses s25-20 • Borrowing expenses s25-25 • Expenses of discharging a mortgage s25-30 • Bad debts s25-35 • Loss from profit making undertaking or plan s25-40 • Loss by theft etc.. s25-45 • Travel between workplaces s25-100 • Gifts s30-15 • Tax losses Div 36 • Project amounts s40-830 • S40-880

Deduction denial provisions • Penalties s26-5 • Leave payments s26-10 • HECS and student assistance s26-20 • Relative’s travel expenses s26-30 • Bribes to foreign public officials s26-52 • Bribes to public officials s26-53 • Expenditure relating to illegal activities s26-54 • Limit on deductions e.g. gifts, certain super contributions s26-55 • Entertainment expenditure Div 32 • Deferral of deductions for non-commercial business activities of indivs s35-10 • Amounts paid to related entities s26-35 • S51AH ITAA36 – no deduction allowed where expenses incurred by an employee are reimbursed

Tax Accounting

Cash or Accrual basis for AI Carden’s case pg 342 – correct method is that which gives ‘a substantially correct reflex of the taxpayer’s true income’
Factors that points accruals: Large amount of employees Trading stock substantial part of business Credit sales as opposed cash sales Capital equipment Reliance on circulating capital – income derived from the turning over of revenue assets The larger the size of business Sole profession use cash basis
When is income earned? On accruals basis, when its derived not when payment is made. When recoverable debt is created paragraphs 9-11 Taxation Ruling TR 98/1 Arthur Murray NSW P/L v FCT pg 41– income was recognized as the services are provided and not as lump sum upfront even though the dance studio did not have to refund it; its basically the characteristic that the is a contingency event if refund might be appropriated if the services were not eventually provided
Following are accounted on cash basis Salary and wages Rent Interest Non-business income derived from the provision of knowledge or the exercise of skill by the taxpayer
Change of tax accounting method Note: the implication for double taxation and no taxation. Henderson v FCT pg 456 – the amount was taxfree, cash to accruals basis. Facts necessitated that outcome it was not a choice per se.

Deductions – concept of incurred Taxation Ruling TR 97/7 You incur an outgoing at the time you owe a present money debt that you cannot escape. No requirement that it has to have been paid. BUT definitively committed. Must be a presently existing liability to pay a pecuniary sum May be defeasible Whitaker v FCT pg 1077 Reasonable estimation When payment is made in absence of presently existing liability then it is incurred when it is paid.
The outgoing must also be properly referable to the year of income Coles Myer Finance P/L v FCT pg194 Basically the advantages of the payments were spread out over the 2 year period and consequently since we include deductions on the basis that it in conjunction with AI we will need to spread the deduction over the period.

Prepayments
STS taxpayers, and indivs with non-business expenditure S82KZM Immediate deductibility is denied. If: The eligible services period is longer than 12 mths The eligible services period is 12mths or less but ends after the last day of the year of income after the one in which the expenditure was incurred. If not satisfied. Then deduction is: Period in year/eligible services period (s82KZL) x expenditure
Other situations Expenditure is apportioned over the eligible services period as set out in the above formula.
Exceptions
Prepayment rules set out above will not operate where: The amount of the expenditure is less than $1000; or The expenditure is for salary or wages; or The prepayment is required by a court order; or The expenditure is of a capital, private or domestic nature.

Trading stock – defined s70-10

Purchases of trading stock are deductible under s8-1. s70-25 specifically states that TS is not capital S70-35(1)-(3) how to include TS as AI or D S70-40(1) – value of TS at end on Y yr must equal beg value next yr 3 methods to valuing closing TS s70-45(1): cost market selling value replacement value Note s70-50 for obsolete stock FIFO, Average Cost or Standard Costing When is trading stock on hand? S70-35 FCT v Raymore pg789 ⇨ s70-15 cost of TS can only be deducted in the year in which it is incurred if it becomes TS on hand in the same year All States Frozen Foods P/L v FCT pg 18 When is TS on hand? Basically when you have the right to dispose it. Commissioner’s view – when taxpayer is in a position to dispose of the stock on its own behalf – Income Tax Ruling IT 2670 Which year? S70-15 Non-arm’s length transactions s70-20 Disposals of TS outside the ordinary course of biz s70-90 and s70-95 Stop holding an item as TS but still own it s70-110

Taxation of partnerships

S995-1 def’n of partnership 1st limb – association of persons (other than a co, or ltd partnership) carrying on biz as partners 2nd limb – in receipt of OI or statutory income jointly Implication: First limb income/loss are divided by partnership rules. Second limb equally. FCT v McDonald pg 598 Liability of partnerships s91 Net income and partnership loss definition in s90 Liability of partners s92 Application of Item 7 of s40-40 Partnership holds depreciating A not indiv partners S26-35 but partners within a partnership are not related entities

Transactions between partners in partnership and partnership Salary paid to a partner Case S75 85 ATC p.g.1131 TR 2005/7 Deductions for interest FCT v Beville pg100

Taxation of trusts

Underhill – equitable obligation, binding a person (trustee) to deal with property over which he has control (which is called trust property), for the benefit of persons (who are called the beneficiaries) of whom he may himself be one [but not the only one], and any of whom may enforce the obligation.
S95 def’n of net income
S96 trustee is not assessable as trustee outside division 6
S97(1)
Presently entitled (under general law or s101) FCT v Whiting (pg1085), Taylor v FCT (pg972) – absolute and indefeasible vested interest in possession n that share and: The beneficiary must b able to demand immediate payment (Whit) The beneficiary has an immediate right to obtain payment or Would have such a right but for a legal disability Indefeasible – cannot be brought to an end Vested interest in possession – present right of present enjoyment of right Vested interest – present right of future enjoyment – NOT presently entitled (Whiting) S101 – When trustee exercises discretion then the beneficiary is deemed to be presently entitled at that time S97(2)(a) does not include s95A deemed present entitlement S95A – incl. where the beneficiary’s entitlement has been paid; vested and indefeasible without present entitlement. Not under a legal disability Taylor v FCT
S98(1) and (2) Under a legal disability but is presently entitled. 1) – for presently entitled under general law or s101 2) for s95A deemed present entitlement Also trustees pay tax in representative capacity (i.e. the money comes out of the beneficiary’s fun)
S99 or 99A Residual amount that is not taxed under s97 or 98 Difference is the applicable tax rates.
Trust losses – carried forward within trust not available as deduction to beneficiaries.
Anti-splitting provisions – Div 6AA ITAA36 Prescribed and excepted person (s102AC(2)) Excepted income – s102AE(2)
Discretionary trust and present entitlement – s101
The discrepancy between income of trust estate (trust law) and net Y of trust (tax law) Zeta Force P/L pg1106 Proportionate approach – beneficiary calculates his or her proportionate share of distributable Y (as a %) and then applies this % to the TI figure.

Taxation of companies

S995-1 def’n of co, entity, partnership and person
Private vs companies s103A and def’n in 97 act
S108 and s109 different tax treatment for private companies
Calculation of co’s TI or tax loss Tax losses [s36-10, s36-17] are available subject to: Same owners test s165-12 – continuity of persons who have more than 50% of the voting power, rights to dividends and rights to K distributions in the ownership test period Note. 165-150, 165-155, 165-160 Same business test – [available under s165-13(1)] but test is in s165-210 – compare the business that is being conducted in the Y yr that a D for a prior year tax loss is being claimed with the biz that the co was conducting immediately before the disqualifying change in ownership or control: see sections 165-13(1) to (3) One positive: s165-210(1) Negative: new business test s165-210(2)(a) Negative: new transactions test s165-210(2)(b)

Dividend Imputation System

Franking account s205-10 Track tax paid by a company that has not yet been imputed to shareholders Rolling balance account S205-15 – what constitutes a franking credit Instalment of PAYG or income tax, receives a franked distribution, incurs liability for franking deficit tax S205-30 – what constitutes a franking debit Makes a franked distribution, refund of income tax, underfranks a distribution
Franking deficit tax s205-45(2) – imposed by another legislation S205-70 – company receives a tax offset equal to the amount of tax
Who can frank? Company that is a resident at the time distribution is made, s202-5,202-15,202-30
Which distributions can be franked? Generally, distributions out of realized profits. S202-30 Unless specified as unfrankable under s202-45 e.g. dividend under s109 Need for distribution statement s202-75
Maximum franking credit? Maximum amount of income tax that the company making the distribution could have paid. S202-55 Worked out under s202-60(2)

[pic]

Amount of franking credit on a distribution? That stated in distribution statement. Unless it exceeds max franking credit. S202-65 In that situation issues to consider: Co’s franking debit on making distribution s205-30 Item 1 – same amount as the franking credit Amt of any franking credit rec’ed by shareholders s207-20 – same as the amount on franking credit Franking percentage on distribution? S203-35(2)
Benchmark rule? Distirbutions within a particular period (ie the franking period) must all be franked to the same extent. S203-5(1) S203-25 – the benchmark rule Does not apply to certain companies s203-20(1)(a) S203-30 setting a franking percentage, the percentage of the first distributn with the period Franking percentage – s203-35(1) formula; max is 100% s203-35(2)
Over franking: Franking % is > Benchmark % Liable to pay over-franking tax s203-50(1)(a) Shareholder will still be entitled to imputation credits equal to over franked amount provided that it does not exceed maximum franking amount. No franking Cr for the company if it incurs a liability to pay over-franking tax.
Under franking: Franking % is < Benchmark % Penalty debit to the co’s franking account arises s203-50(1)(b) and Item 3 s205-30 Additional amount only. s203-50(2) – franking % differential x amount of frankable distribution x 3/7
Franking period S203-45 for private co same as the income year S203-40 for public co. if Y year is 12 mths, 2 franking periods. 6 mth each.
Order of tax offsets s205-70(3) S207-20(2) tax offset for imputation credit – cant b carried forward or refunded S205-70(2) – franking deficit tax offset – can b carried forward but not refunded S65-25(1), s205-70(1)(c), 205-70(3) Refundable tax rule s67-25(1) Only to Div 207 or Subdiv 210-H
S36-17 – companies are allowed to choose the amount of any prior yr tax losses however, the choice canot generate or increase the size of any excess franking tax offsets. Subsection 5.
S36-55 – able to convert the excess franking tax offset into an equivalent amount of a tax loss. Tax loss to carry forward = Excess tax offsets/co. tax rate Method statement is in subsection 2.

Distinguishing tax evasion; tax avoidance and tax planning
Tax evasion – deliberately not pay tax; deliberately and intentionally denying government revenue e.g. not declaring GST; or tips, fraud
Tax avoidance – implementing strategies to minimize tax in ways that are blatant, artifical and contrived see: Spotless Services
Tax planning – implementing strategies to minimize tax in ways that are NOT blatant, artificial and contrived i.e. within tax rules e.g. prime cost vs diminishing value; cost vs marker value etc…

Legislative responses to tax avoidance:

Income splitting Div 6AA

Non-cash benefits FCT v Cooke & Sherden Convertibility issues n s21A FBT Act and s15-2 (valuation issues)

Payments to associated persons S108 – private companies S26-35 for related entities

Deduction deferral provisions Prepayments: s82KZL – 82KZMD

Part IVA of 1936 ACT ▪ s177D defines the scheme (s177A) to which this Act apply to. ▪ Requirement of a tax benefit s177C ▪ Relevant purpose: s177D, s177A(5) – dominant purpose, s177D(b) relevant factors ▪ Cancellation of tax benefits s177F at commissioner’s discretion ▪ Other issues o Compensating adjustments – s177F(3) – the section that adjusts the assessable income or deduction of a relevant tax payer i.e. the other side of the transaction o Amendment of assessments – s177G – nothing in section 170 prevents the amendment of an assessment at any time if the amendment is for the purpose of giving effect to subsection 177F(3). o Interest and penalties – I don’t think they are included. ▪ FCT v Spotless Services Ltd

Goods and Services Tax

S9-5 Taxable Supply Supply for consideration Course or furtherance of an enterprise being carries on s9-20 Connect with Australia You are registered or required to be registered; s23-5, s23-10, s23-15 Not a GST-free supply or an input taxed supply Liability for GST on taxable supplies s9-40 Amount of GST on taxable supplies s9-70 n 9-75

Input tax Credits s11-5, s11-15 Credible acquisition if: Acquire anything solely or partly for a creditable purpose (i.e.
to the extent that u acquire it in carrying on ur enterprise) The supply of the thing to you is a taxable supply You provide, or r liable to provide, consideration for the supply Registered or required to be

GST – free supplies No GST payable but the supplier is entitled to claim input tax credits. Examples: Food GST free except food consumed on premises where it is supplied, hot food for consumption away from the premises, confectionary, ice cream, biscuits etc… Health and Medical care Edu Child care

Input taxed supplies No GST is payable on supply but the supplier can not claim input tax credits for the GST paid on the inputs to the supply
Examples: Financial services Residential rent

Interaction between GST and Other taxes

• Company Tax – not separate tax; special tax rules e.g. dividend imputation system; Franking Deficit Tax Offset etc. • CGT – form part of ITAA; net K gain is included as statutory income • Income tax and FBT o Employer pay the FBT o RB in employee NANE; exempt FB – Exempt Y ▪ Influences how to apply tax losses; must first be applied to net exempt Y o S8-1 ▪ Otherwise deductible rule ▪ In calculating the taxable value of certain FB the employer will need to consider the extent of the benefit that is ODR to employee ▪ S51AH if an amount has been reimbursed then the employee cannot claim a tax deduction for it o S15-2 ▪ Contains a note referring to s23L o Reportable FB ▪ If the reportable FB is > threshold (currently $2000); the FB must be reported on employee group certificate • Does NOT mean the employee pay tax on it ▪ Due to Medicare Levi Surcharge • Need to pay on the FB ▪ Also HECS payment • Income Tax and GST o Amount is split into s8-1 deduction and s27-5 (denies deduction for ITC), for it to be ITC – creditable acquisition s11-5 o Taxable income is accounted for on a GST exclusive basis generally o CGT + GST ▪ S103-30 – reduce amount included in the calculation of an entity’s K gain or lose by amount of any net ITC of the entity in relation to amount ▪ S116-20(5) disregard amount of your net GST if any on the supply o Depreciation and GST [both of these sections do not apply if you did market value adjustment] ▪ S27-80 – adjusting cost or opening adjustable value by the amount of the ITC ▪ s27-95 – Reducing the termination value of DA if the balancing adjustment event is a taxable supply (s9-5) • GST and FBT o Type 1 – allowed to claim GST ITC o Type 2 – not allowed to claim GST ITC o S9-10(4) ▪ Supply does not include supply of money unless the money is provided as consideration (s9-15) for a supply e.g. reimbursements are not GST in the hands of employer however section below overcomes it. o S111-5 ▪ Can the employer get input tax credit for reimbursements? But the taxable supply was made to employee. This section overcomes this problem. ▪ Deems the reimbursement as consideration for an acquisition that you make from the employee, associate, agent, officer or partner o S81-5 – payments of taxes etc. can constitute consideration ▪ E.g. council rates o Recipient of the FB makes a contribution towards the FB ▪ Recipient contribution rule ▪ S9-75(3) – GST; pretty much changes the “price” paid for the benefit to exclude GST on the supply (is it a taxable supply s9-5) ▪ Might result in GST ▪ In general; where the cost providing included GST the FBT rule take the GST charged into account in valuing the benefit • TR 2001/02