Question

Each of parts (a) to (e) below contain separate statements that you are required to answer separately. For each of the statements indicate whether it is TRUE or FALSE and briefly explain your reasons with reference to legislation, case law or rulings (as appropriate).

1. A taxpayer with an Australian domicile will not always be considered a tax resident of Australia.

2. The second positive limb for the general deductions provision in section 8-1(1)(b) ITAA97 imposes a stricter nexus test than for the first positive limb in section 8-1(1)(a). This is because the word ‘necessarily’ limits deductions for business taxpayers to unavoidable expenses.

3. Although the taxpayer in Western Suburbs Cinemas Ltd was not allowed a deduction for the replacement of a ceiling using a different material to the original, there are still some instances where a taxpayer could undertake a repair using a different material and be allowed to claim a repair deduction under section 25-10 ITAA97.

4. An individual taxpayer (Chris), who is not registered for GST, is allowed a general deduction for an expense incurred of $198 (GST-inclusive). Chris can only claim $180 under section 8-1 ITAA1997, as the remaining $18 is GST.

5. Where a taxpayer sells their main residence dwelling and the CGT event from this sale results in a capital loss, the taxpayer can apply that capital loss to any capital gains that they have.

Answer 1

a) A taxpayer with an Australian domicile will not always be considered a tax resident of Australia. - FALSE
b) The second positive limb for the general deductions provision in section 8-1(1)(b) ITAA97 imposes a stricter nexus test than for the first positive limb in section 8-1(1)(a). This is because the word ‘necessarily’ limits deductions for business taxpayers to unavoidable expenses. - TRUE
c) Although the taxpayer in Western Suburbs Cinemas Ltd was not allowed a deduction for the replacement of a ceiling using a different material to the original, there are still some instances where a taxpayer could undertake a repair using a different material and be allowed to claim a repair deduction under section 25-10 ITAA97. - FALSE
d) An individual taxpayer (Chris), who is not registered for GST, is allowed a general deduction for an expense incurred of $198 (GST-inclusive). Chris can only claim $180 under section 8-1 ITAA1997, as the remaining $18 is GST. - FALSE
e) Where a taxpayer sells their main residence dwelling and the CGT event from this sale results in a capital loss, the taxpayer can apply that capital loss to any capital gains that they have - TRUE