The Commissioner argued that the taxpayer was obliged to use a derogation method because the standard method was not fair and reasonable. The standard method did not adequately represent the extent to which goods and services were used, as the allocation was distorted by including in the same calculation the sale of vehicles with very high direct costs and very low margins in addition to financial commissions, which had very low direct costs and very high margins. The Commissioner argued that the cost of cars should be excluded from the calculation – that is, only the margin should be included in the formula. If a business makes a mixture of taxable inputs and other supplies, which is common in the financial services sector, it must determine the extent to which the acquisitions (and therefore the associated GST) relate to the supply of supplies that are before tax. This is more commonly referred to as splitting. The Commissioner argued that this method of allocation was not fair and proportionate. The Commissioner referred to his view set out in GSTR 2009/4 as to why this method was not fair and reasonable. One of the reasons was that the methodology took into account the life of the premises and not the actual use of the premises during the relevant period. In addition, the actual life of the building is too far away and arbitrary to adequately reflect the application of living spaces encompassing both the building and the land during the relevant period. The court agreed, noting that the plaintiff`s revised percentage appeared to be based on maintaining the apartments for sale for 40 years, which was an unreasonable claim. The court ruled in favour of the Ministry of Finance. The Court concluded that the taxpayer`s claim was that the mutual funds were considered five clients compared to approximately 50 persons as clients and that each additional mutual fund, regardless of the size of its capital, was only an additional client using the same services and therefore not increasing overhead costs (acquisitions to be distributed).
The General Court held that the interpretation was neither convincing nor realistic and held that, in cases where the royalty structure was based on the value of the assets, a breakdown by reference to turnover was considered to be extremely reasonable and proportionate. The taxpayer`s income and turnover depended on the value of all of his clients` assets, not on the number of clients. The court also found that the special method proposed by the taxpayer was not fair and reasonable. Indeed, the expenditure charged to taxable expenses included two very large amounts related to an outsourced issue which tended to distort an equitable distribution of unallocated expenditure. The taxable person argued that the most representative approximation of the use for which the taxable supplies of the immovable property had been used was the respective selling prices of the various resales. This resulted in an allocation of 85.28% to taxable supplies and 14.72% to exempt supplies. The Department of Revenue argued that this approach did not produce a fair and reasonable result, since the two commercial properties were sold in the same condition in which they were purchased, but the sale price of the residential apartments included the value of the building. The Ministry of Revenue argued that an allocation based on land area more accurately reflected the uses for which the land was used, resulting in an 80.94% allocation among taxable supplies. The principle of “fairness and reasonableness” was applied “interchangeably” by the High Court in Ronpibon Tin v. FC de T, 16, in the allocation of expenses relating to more than one object.17 In this case, the High Court did not apply this principle to the allocation of certain acquisitions solely for specific purposes.
or to allocate items of expenditure whose “separate and separable parts” can be identified as being intended for those specific purposes. The Commissioner considers that the principle of “fair and reasonable” conditions also applies to the choice of the method of allocation or allocation of acquisitions.18 In GSTR 2006/4, the Commissioner also considers that the basis of allocation within the framework of a corporation must be reasonable and must not lead to significant distortions. Therefore, factors that could distort the results should be excluded. These factors may include extraordinary deliveries, income items or acquisitions, or significant one-time capital acquisitions. The Commissioner accepted this method, but the applicant objected on the basis that the allocation method was based on an “effective life” of residential dwellings of 40 years (or 480 months) – the guideline for buildings under section 43 of the Income Tax Assessment Act, 1997. The non-creditable use of the apartments therefore had to be calculated on the basis of 2 months out of 480. More flexibility in the methods of sharing the GST – another case of exit with the old and in with the. However, the recent decision of the Federal Supreme Court in the Rio Tinto case shows that the question of distribution may arise for any taxable person who makes input tax supplies in the context of an enterprise that includes taxable or GST-exempt supplies. This Decision is discussed in more detail in point .
 The 1. In April 2011, new distribution rules were introduced in New Zealand by the Taxation (GST and Remedial Matters) Act 2010. Where an asset is used both for commercial purposes (so-called taxable use) and for non-taxable purposes (i.e. for private use or for the provision of exempt supplies such as financial services or residential property), the person may deduct only one percentage of the total input TAX. GST is collected for the non-taxable use of an asset by refusing to deduct a portion of the input tax. This is called GST splitting. For a general summary of current customization requirements, see a previous article on tax alerting. Management fees and directors` fees are entire amounts that probably cannot be dissected. The provisions of § 51 para. However, as has already been said, the provision of Article 1 provides for division.
The question of what expenses are incurred in obtaining or obtaining taxable income is reduced to a question of fact once the legal standard or test has been determined and understood. This is especially true if the problem is to allocate expenses that have a dual aspect, expenses that are partly due to the achievement of eligible income and partly to another purpose or activity. It may be desirable to note that there are at least two types of expenses that require a breakdown. A type consists of undivided items of expenditure for things or services, of which different and separable parts are devoted to the generation or realization of taxable revenues and different and separable parts for another cause. In such cases, it may be possible to divide expenses according to the demands made for things or services. The other type of assignable elements consists of those that involve a single effort or a single load that serves both objects indifferently. Directors` fees can be an example of this. In the latter case, the relationship between the burden and taxable income must be assessed appropriately and appropriately. It is an indiscriminate sum that is divisible, but is hardly capable of arithmetic or ratifiable division, because it is common to both objects.
Before paragraphs 9 to 80 are actually applicable, it must first be established that there is a supply that is partly taxable and partly exempt from GST. Once this determination is made, sections 9 to 80 require division. The section may be difficult to apply, but this is not a reason to reject the task or treat the offer as if it did not fall under its conditions. I note that the article refers to “value” and not to “price” or “consideration”. As Hely J. said in Kmart Australia Ltd v. Tax Commissioner (2001) 11 FCR 353, referring to a non-different section of the Sales Tax Assessment Act, 1991 (Cth) (s. 45): “The law requires that an assessment exercise be conducted. This exercise is artificial.
[which] must be undertaken in a concrete spirit of common sense.” The concept of sharing is an integral part of the GST Act.  The sign of division is “to the extent that”. More than 65 years ago, the High Court held that these words indicated that a levy was being contemplated by Parliament.  It will be important to ensure that there is a clear understanding of how the updated GST splitting system applies to your business and how your GST obligations may change as a result of these changes.