Essay on Case Analysis : ' Letter
Class: Friday 16:00-19:00
Name: Yueh-ting Lai
It is my pleasure to conduct this research for our main client, Mrs. Gilling. The followings are suggestions according to the important facts you pointed out. Please let me know if any issues we could discuss further.
A. Entering into the agency contract
Issue: What is the tax consequences?
Conclusion: The contract is a CGT asset and the payment of $205,000 is capital expense to Bronx.
Even though the payment is paid to Bronx’s supplier and could be seen as an outflow from business to generate income under s8-1ITAA971, the aim of the payment is to maintain the advantage of being the unique agent; in another word, the agreement provides Bronx the right to be the sole agent in Australia. The agreement has CGT characters ($205,000 paid once for all, enduring benefit and add substantially to the turnover of Bronx and acquired by business entity) under s108-5ITAA 97.
Dixon J provides the process/structure test to examine whether the payment is capital or revenue expense, which including (a)the character of the advantage (b)the manner in which is be used and (c)the means adopted to obtain it (Sun Newspapers,1938). The fact that Bronx paid a lump sum $205,000 to ensure the sole agent promise from Alesse would fit the capital expense character as Sun Newspapers case.
1 INCOME TAX ASSESSMENT ACT 1997 B. Benefits paid by Alesse to Mrs…