Bachelor of Business (Incorporating Graduate Diploma in Business & Graduate Certificate in Business)...

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Bachelor of Business (Incorporating Graduate Diploma in Business & Graduate Certificate in Business) Taxation for Accounting Studies XXXXXXXXXXASSIGNMENT SEMESTER XXXXXXXXXXDue date: Tuesday 24th September 2013 at 12 noon To be handed in: Hard copy with cover sheet in WF1 assessment box. It is also a requirement to submit the soft copy into Turnitin on the same day. Course Contribution: 20%. 20 marks Requirements: 1. In answering the questions, marks will be awarded for: a) Clarity of discussion and analysis; b) Correctness of content materials; c) Logical flow of the discussion involved; d) Quality of communication, e.g. correct spelling, grammar, structure, proper page numbers and referencing used. e) Adhering to the word limit. Work that has exceeded the word limit will not be marked. You are required to record the number of words at the end of each question. 2. Students are required to work in groups of four. The groups are chosen by the students themselves. 3. Any query relating to the assignment can to be directed to the discussion forum on AUT Online. 4. This assignment must be fully typed, one sided with double-line spacing using 12 font Arial. 5. References and quotations taken from other authors must be properly acknowledged at all times using the NZ Law style guide referencing (not APA style) 6. Students are to familiarise themselves with the AUT’s Rules and Regulation regarding assignment as spelt out in the study guide. Instructions: You are to work in a group of four for this assessment. You are to nominate your own group members and manage the group. Group members can be selected from any stream(s) of your choice. The cover sheet of the hard copy assignment must include each member’s name, SID, stream and their workshop lecturer’s name. Please note that since the group members have been chosen by you, it is your responsibility to manage it and to ensure that each member contributes to the assignment fairly and equitably. Any problems pertaining to the group is solely and entirely the responsibility of the group and not the teaching team. The discussion forum for the assignment will be open from week 1 for those who would like to form a group for the assignment. No individual assignment will be accepted. The mark awarded by the teaching team for the assignment will be the mark given for each group member with no variations between members. It is to your best interest to find your group members appropriately who would work to maximise the assignment mark for you. Please bear in mind that this mode of assessment is similar to those in the commercial world where team work is required to achieve a group outcome. Question 1: Fringe Benefit Tax 1. “The Fringe Benefit Tax in New Zealand was introduced in the mid 1980’s as an antiavoidance measure for employment income”. Do you agree with the statement? Discuss your answer from the perspectives of the canons of taxation and the good tax system. 10 marks Word limit: 1500 (not including references and footnotes) Question 2: Capital – Revenue Distinction 2. Income tax law by its very nature is a complex subject. The capital-revenue distinction is one area that causes this complexity. In New Zealand the capitalrevenue distinction is even more important because of the lack of a comprehensive capital gains regime. Furthermore, the term “capital” is not defined in the Income Tax Act 2007. However, there is a considerable body of case law that provides useful guidance. By examining the following two New Zealand tax cases discuss what guidance they provide to this complex area of tax law. a. Fullers Bay of Island v CIR XXXXXXXXXXNZTC 19,716 (CA) b. Case W XXXXXXXXXXNZTC 12,303 10 marks Word limit: 1500 (not including references and footnotes)

David · Accepted Answer

Answer to Question No 2 
Income Tax laws have generally been one of the most complex laws in almost all the 
countries around the globe. This is the reason that there have been numerous cases 
both by the department of tax and against the tax authorities. One of the striking 
features to be noted is that most of these cases are to identify the difference 
between what is capital expenditure and what is revenue expenditure. Going by what 
Alan Li has said all the business expenditures can be categorized under either 
revenue expenditure or capital expenditure. Expenditures which give benefits across 
multiple periods are known as capital expenditures and expenditures that benefit 
only in a single period is known as revenue expenditure. Let us now see what capital 
expenditure is and what revenue expenditure is in detail. 
Capital Expenditure 
As per Harold Averkamp,capital expenditure is the amount which is spent to either 
acquire or alternatively improve a long-term asset such as plant and equipment. This 
cost which is incurredis capitalized in the cost of Property, Plant and Equipment. This 
cost then is charged to depreciation expense over the remaining useful life of the 
asset; only the capital expenditure incurred on land is not depreciated. 
Revenue Expenditure 
Harold Averkamp has also stated that revenue expenditure is the amount which is 
expensed immediately in the statement of profit and loss against the revenues of the 
current accounting period – thereby following the matching concept. Expenditures 
relating to routine repairs are termed as revenue expenditures because these 
expenses are charged directly to the Repairs and Maintenance Expense Account. In 
http://www.accountingcoach.com/online-accounting-course/11Xpg01.html
other words, any expense which does not extend the life of an asset or does not 
improve the asset in any manner would be termed as revenue expenditure. 
Now, when we have understood the basic concepts of what revenue expenditure is 
and what capital expenditure is, let us discuss the case law of Fullers Bay Island v. 
CIR (2006). 
This case relates to the legal fees paid by Fullers to Chapman Trip. This fee is 
relating to the legal advice given and litigation which was undertaken in the High 
Courtbecause of Fullers unsuccessful participation in a tender process which was 
operated by the Auckland Regional Council. The question that needs to be answered 
here is whether this expense is of revenue in nature or it is a capital expenditure. 
Fullers has claimed that this expense is a revenue expense which is also backed by 
decision taken by the Taxation Review Authority (TRA). However, the Commissioner 
has disallowed this on the pretext that this expense was an attempt to acquire a 
capital asset and hence it was a capital expenditure. The High Court has also 
concluded that the expenditure is of a capital nature.  
Fullers is engaged in the business of providing sea and land transport services, 
tourist industry and also provides a host of services globally. In 1996 they decided to 
expand their business. They have a potential business opportunity – Devonport ferry 
service. This is a passenger ferry service to be operated between Devonport and 
Auckland City. Fullers have submitted a tender for subsidy seeking this contract 
which at the moment is run by its competitor. The RC found the tender very attractive 
and accepted the same. Prior to the results, its competitor submitted a competing 
unsubsidised bid without this being in the knowledge of Fullers.

Bachelor of Business (Incorporating Graduate Diploma in Business & Graduate Certificate in Business) Taxation for Accounting Studies XXXXXXXXXXASSIGNMENT SEMESTER XXXXXXXXXXDue date: Tuesday 24th...

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