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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 97
A male model was incurring expenditure on skin care, cosmecs and grooming
o
Judgment
50% of the expenditure was deducble because they were for the purposes of modelling work
The other 50% of the expenditure was incurred in maintaining his general appearance at a high
standard, which was expenditure of a personal nature
APPORTIONMENT
Expenditure is deducble only
to the extent
it is incurred in deriving gross income (
secon DA 1
)
Commissioner of Inland Revenue v Banks
(1978) 3 NZTC 61,236 (CA)
o
Facts
Banks was a part-me tutor at a university
Banks used his dining table as a place to mark papers
Banks claimed part of the costs of running his house – electricity, rates, insurance, depreciaon on
dining table etc.
o
Judgment
The focus must be on the parcular outlay for which deducon is sought
This necessarily includes considering the nature and use of the property in that income year
in order to determine whether the necessary relaonship exists between expenditure and
the carrying out of those income-related acvies on the premises
You need to look at the purpose of the expenditure when it is incurred
There was enough connecon between Banks’ income earning process and the expenditure incurred
on the home – therefore, it wasn’t expenditure of a private nature
Therefore, Banks could claim a deducon on that poron of expenditure
SPECIFIC RULES FOR PARTICULAR TYPES OF EXPENDITURE
TAXES
You generally cannot deduct as an expense (
secon DB 1
):
o
New Zealand income tax (including interest, penales, etc.)
o
Foreign income tax
o
But this does not mean you cannot claim tax credits – you are not claiming a deducon here; you are claiming
a credit
A deducon reduces assessable income to get net income, whereas a credit reduces taxable income
Credits include imputaon credits, foreign tax credits etc.
A registered person cannot deduct either (
secon DB 2
):
o
Input tax on a supply of goods or services to them or
o
GST payable by them
o
This parallels secon CX 1, where taxable income does not include GST – so income tax is calculated on a GST-
exclusive basis
FINANCING COSTS
DB 5
Transacon costs: borrowing money for use as capital
(1)
A person is allowed a deducon for expenditure incurred in borrowing money that is used as capital in deriving their
income.
(2)
This secon overrides the capital limitaon. The general permission must sll be sasfied and the other general
limitaons sll apply.
“Expenditure incurred in borrowing money” tends to be interest payments on a loan
o
You are entled to deducons for interest payments, but not for repayment of the principal amount because
you haven’t incurred any expenditure if you repay the principal amount
DB 6
Interest: not capital expenditure
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