LAW6001 Taxation Law, Laureate International Universities, Australia
Business Finance
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Question 1: Explain the:
a) Constitutional basis of the Australian taxation system, ie what section(s) of the Australian Constitution confer taxation powers?
Answer: The Constitutional basis of the Australian taxation system powers is defined under following section which is also called the Common wealth taxing Powers: -
Sources of Commonwealth taxing powers
Section 51(ii) of theAustralianTaxation: taxation power
Section 90 of the Australian Taxation: duties of customs and of excise
Section 114 of the Australian Taxation
Section 96 of the Australian Taxation: conditional Commonwealth grants
Section 53 of the Australian Taxation: Senate not amend money bills
Section 55 of the Australian Taxation: taxation bills to only deal with taxation
(Barkoczy, 2017)
b) role of the Courts, the parliament and the ATO in developing taxation law in terms of the theory of the separation of powers in government
Answer: Role of the Parliament is to ensure that the law is enact the law and structure as well as considered the most supreme, on the other hand the court leads to astatute and laws and the have to ensure that any non-constitutional is correctly and appropriately followed. It has power that the law is pronounced in right and correct manner. In connection with the ATO the terms were related to check as to have a check on the role and process of how the law and the separation of powers are managed and controlled.
Question 2: A non-resident manufacturer based in the US derives profits from sales to Australian customers. The US manufacturer has a sales representative in Australia operating out of a serviced office, and this sales representative has been instrumental in obtaining orders from Australian customers.
Required: With reference to the relevant Double Tax Agreement determine whether the profits from the Australian sales by this US manufacturer taxable in Australia?
Answer: As there is a treaty to avoid taxation between the Australia and United States of America, which explains the avoidance of taxation, henceforth as per they residential and the area where th income of source is earned such nature transactions are earned. The Article 22 clearly explains how and when the income is taxed, especially in case with the self-employment and non-employment. The return filling is also compulsory and for such transactions and persons(ATO , 2018). Though they still have to pay tax and both places the company provides a benefit of reduced tax structure along with rebates or deduction. On the more, the are exempted from the Medi levy tax and nor does they can take the benefit of such taxes. The other detail rules are mentioned in the tie - breaker rules. On the more, or on a border scale the Corporate tax rates are around 27.5 % which has a lower turnover of less than $ 50 Million. Other taxes are accordingly paid and distributed as per ownership control and revenue generation(ATO , 2018).
Question 3: Indianna is a resident individual taxpayer. She owns 22 hectares of land which has always been used for producing assessable income. She decides there is no longer the return required from owning the land and so she has decided to develop the land into residential housing.
Part 1: As Indianna's tax advisor explain the potential assessable income issues involved for each scenario if:
a) The property has been owned by Indianna since 1 November 1976
Answer: The conditions stream lines on the following manner in order to ensure the following aspects
In case where the property is owned by the Indianan Since 1st November 1986 in such case
a) Where the property is divided into 80 allots except the 2-hector plot in the family home and then sells the same to the property dealer in such a situation the in this case the property will be in context to the fact will be counted in the assessable income of the Indianan the Capital tax will be computed on each individual sell.
b) The property has been owned by Indianna since 1 November 1986
Answer: b) B) Where the property is divided into 80 allots except the 2-hector plot in the family home however, the 80 blocks are sold to the auction buyers on the highest bidders in such situation the tax will be computed under the following clauses the Capital tax will be computed on each individual sell however the date of indexation will be considered as the auction date.
C) In this condition where the land is not sub divided and the land is sold entirely along with the fact that the development company leads to 65 % as a fee for carrying out entire development fees and pays the balance in the last block in that case the amount will be computed on a lumpsum sale rather than the individual sell however the date of indexation will be spilt as per the expenses incurred.
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In case where the property is owned by the Indianan Since 1st November 1976 in such case
c) Where the property is divided into 80 allots except the 2-hector plot in the family home and then sells the same to the property dealer in such a situation the Capital Tax will becomputed as per th clauses of the residential alliances(Daley,and Coates, 2015).
B) Where the property is divided into 80 allots except the 2-hector plot in the family home however, the 80 blocks are sold to the auction buyers on the highest bidders in such situation the tax will be computed under the following clauses the capital tax will be computed on the basis of the indexation pricing. However, the valuation will be done on lumpsum basis.
C) In this condition where the land is not sub divided and the land is sold entirely along with the fact that the development company leads to 65 % as a fee for carrying out entire development fees and pays the balance in the last block in that case the amount will be: - Computed as per normal indexation process and the capital gain will be considered accordingly.
Part 2: The land development project is likely to take place over at least two financial years. Discuss when Indianna will derive any assessable income she receives from each of the three scenarios.
Answer: In a situation where the land development is undertaken in least two financial years, all the elements are irrelevant expect to the fact that the assessable income will be computed on the grounds on the fiscal year when the proceeds are received by the individual on the day the assets is sold and revenue is received on behalf (Daley, &Coates, 2015).
Question 4: With reference to applicable legislation and case law determine whether Amity is entitled to claim the interest on the loan as a deduction over the three year period?
Answer: As per the given condition it is very evident that the loan is provided or taken by the Amity for business purposes and the same is used to buy a land on which the Amity wishes to runs the business. In context to the Australian Taxation Office and the Interest on loans can be claimed if the loan is taken in order or lieu to generate some business transactions and not for any personal perspective. The government provides a detail explanation in the Taxation Determination TD 2012/1. There are various taxation ruling activities which ensure that how correctly the tax need to allocated. As a matter of fact, the interest which is unpaid on the loan deals with an assurance which leads to the business purpose. Further, it is essential to understand that the loan arrangement must be recognised in such a manner which are not meant for any disallowed. Considering the situation here as per various tax ruling and analysis it is evident that the Amity has purchased a land and taken a loan to do so for understating a business and business activity. On the larger scale it clearly provides that the work undertakes work on a business perspective and undertakes the loan mainly for the uses and purpose of the taxation aspects. Further, the loan was taken three years back and only two instalments were pending and therefore, the limit till the time Amity shows the property in books of account it is valid to claim the deduction on interest paid under tax returns. Once he sells the right and receives the money it is evident that becomes personal and therefore, any money which is used for personal purpose cannot be claimed as per deduction under the tax laws.
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Question 5: With reference to relevant legislation and cases calculate the net capital gain or loss as applicable for Maurice for the 2017/18 income year.
Answer: To Compute the tax law following details are provided: -
Personal home = $ 140000, Purchase Date - 20 Feb 1989
Market Value = $ 3,10,000 On March 2018.
Shares in FUL Pty acquired on 10 April 1984 at a cost of $15 000.
The FUL Shares were sold on 15 March 2018 for $19 000
Furniture acquired on 20 May 2010 for $9 500.
The furniture was sold on 1 May 2018 for $5, 000
Block of Vacant Land = 20 June 1997 $1,00 ,000
Estimated Market Value = $ 4,75,000
Vacant land block = $ 1,10, 000
Carry forward long term capital loss = $ 12500
Carry forward short term capital loss = $5 000
Capital Tax Will be Calculated as follows: -
1) Personal Home Sold =
Indexation Method will be applied accordingly
A is the CPI for quarter ending 30 September 1999
B is the CPI for quarter in which expenditure was incurred
C is the indexation factor
A/ B =C
(Barkoczy, 2017)
For estimating the Maurice is an individual tax resident of Australia for tax purposes the method applied for computing taxation laws is the indexation method where the individual tax is computed as per the Australian tax law and its rules and regulations.
Question 6: Source two articles from the Australian Financial review or similar resource.
Answer: The articles can be listed as below -
1) The first article selected is the Federal Budget 2019: Coalition tax cuts swell Labour's war chest- It explains that the government has made an initiative to reduce taxes that to the level of the $ 158 Billion. This ensures that the labour classa freedom of an extra $ 95 Billion which will lead to better tax relief for the low- and middle-income earners. This article mainly helps in understanding which tax needs to be cut and also explains the new federal budget and the other tax clauses. It also provides an outset which will lead to a provision where it defines various other tax rates and exemptions. This article provides an overview as to how the government structure exists and will work for 2019.
2) The selected second article explains the Federal budget 2019: Super contributions rules streamlined: - The article helps in providing an outlook about the super contributions, it deals with retirement accounts and government analysis. It helps in explaining about the tax policies and nature. It details about the superannuation fund analysis as well as the tax-free analysis, it provides and saving and investment analysis which provides low rate on taxation as well as the saving and investment as well as the tax incentives. It deals with a tax effective and analysis segments and tax pension and phase analysis. Thus, the articles provide and a system of the better future retirement system and analysis.
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Question 7: Comment, with reference to the Tax Agent Code of Conduct, on the role the tax advisor has in ensuring their client's compliance with all relevant taxation laws.
Answer: Tax Agent Code of Conduct can be explained through a Tax Agent Service Act which deals in ensuring that the agents must perform the Australian professional code of conduct. It is a preamble which set out the five major category of the principles and the underlying rules, which are honesty and integrity which helps in establishing the personal affairs and conduct, the other is the Independence and the freedom to act and react in a certain set manner. It deals with ensuring that the confidentiality id ensured in correct and right manner so that the fair and the un biased altitude is maintained and managed correctly. The other level is the Competence where the tax agent ensures that the reasonable care is maintained and the application on the rules is done correctly and in appropriate manner. Further, it also deals in explaining that the obligations are rolled correctly and the client rights are managed in a correct manner. Tax Agent Code of conduct provides an aspect where the tax agent and the services will be provided in an a correct registered and a taxed manner. On the more, the tax code explains the other responsibilities are maintained and provided rightfully and correctly, as well as manged the professional indemnity and materials are guided and reflected in a correct manner.
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