Australian Taxation Law – PDF

TAXATION LAW

Table of Contents
..........................................................................................................................................................3
INTRODUCTION...........................................................................................................................4
QUESTION 1 ..................................................................................................................................4
a) Constitutional basis of Australian taxation system ................................................................4
b) Role of courts, Parliament and ATO in developing taxation system......................................4
QUESTION 2 ..................................................................................................................................5
Double tax agreement in Australia .............................................................................................5
QUESTION 3...................................................................................................................................5
Part 1 ..............................................................................................................................................5
a) The property owned by Indiana since November 1976..........................................................5
b) The property owned by Indiana since November 1986..........................................................6
Part 2 ...............................................................................................................................................6
QUESTION 4...................................................................................................................................7
a)Loan taken for acquiring land for the purpose of accommodation business – interest can be
claimed as deduction or not?.......................................................................................................7
QUESTION 5...................................................................................................................................7
a)Calculation of Net capital gain or loss.....................................................................................7
QUESTION 6...................................................................................................................................7
a)Sourcing two articles from Australian Financial Review........................................................7
QUESTION 7...................................................................................................................................8
a) Code of conduct of tax agents ................................................................................................8
CONCLUSION................................................................................................................................9

INTRODUCTION
Tax law is that field of legal study which deals with the common, constitutional, statutory
, tax treaties & conventions and regulatory rules that constitute the legislation for the taxation
(Woellner, R & et.al., 2016). Taxation law involves understanding, executing and defending the
payment or non payment of taxes to government. The present report is about the constitutional
basis of Australian taxation system, role of courts, parliament and ATO in developing taxation
law. Further, report will show the obligations and professional responsibilities of tax agents
under the law.
QUESTION 1
)a Constitutional basis of Australian taxation system
There are different articles and provisions in the Australian Constitution from which the
Australian Taxation system finds its basis. Different sections of the constitution are described in
brief below:
 Section 51 (ii) : This section mentions the area of commonwealth power to enact tax laws
but it should not be such that discriminates between states or any part of states.
 Section 90 : This section provides the exclusive powers to commonwealth to impose
duties of excise and customs.
 Section 114 : The mentioned section states that commonwealth cannot levy tax on the
property of state nor on states commonwealth property without the permission of each
other.
 Section 53 : This section prohibits the Senate to amend or introduce any bill which is
related to taxation, appropriation or revenues.
 Section 55 : This section states that legislation that is concerned with imposing tax shall
deal only with the imposing tax and the other supposed provision in the taxation
legislation shall be inoperative (Sadiq, K. 2019).

)b Role of courts, Parliament and ATO in developing taxation system
The segregation of powers in a democratic country is necessary for avoiding the
maltreatment of power and to protect the freedom of citizens of country. This is the reason why
different levels are formed for effective legal system. These are Legislature, Judiciary, and
Executive.
 Legislature of the country is concerned with forming of the laws for the nation. Every
bill must be passed by the Parliament and must have assent of Queen to be termed as a
enacted law.
 Executive level is responsible for implementing the law formed by the Parliament. ATO
is the statutory body of Australia which is responsible for collection of revenue on the
behalf of the Australian government.
 Judiciary or courts of the Australia is the institution that performs the duty of
interpreting the enacted law (McBarnet, 2019).
QUESTION 2
Double tax agreement in Australia
The term double taxation means imposing tax on a person by two or more jurisdictions
on the same declared income. In general, an Australian resident is liable to pay taxes on all
worldwide income whereas a non Australian resident is liable only on those which has been
generated in the Australia. However, to avoid this regime of double taxation, the country has
entered into Double Taxation Avoidance Agreements (DTAs) with more than 40 countries.
As per the case study, the US manufacturer's income generated in the Australia will be
taxable and will be liable to file a tax return. The manufacturer would be also be eligible for
exemptions if Australia has entered into a double taxation treaty with US. Since there is a treaty
between US and Australia for avoiding double taxation, the US manufacturer will be liable to
pay taxes on lower rate and will be eligible for the credit for the taxes paid in foreign country.
This has been provided in US- Australia convention where in the article 22 , it has been provided
that resident or citizen of us shall be allowed credit as to the amount paid to Australia in the form
for tax for avoiding the double taxation effect (double taxation taxes on income convention
between the united states of America and Australia, 2018).

QUESTION 3
Part 1
)a The property owned by Indiana since November 1976
When the property is owned by an individual resident of Australia, it is considered as Pre
Capital Gain Asset, which means that property of Indian is not subject to CGT when the asset is
disposed off and any gain or loss has generated.
However, this exemption is withdrawn when any substantial changes has been made in
the pre CGT asset, for example major additions to asset.
)b The property owned by Indiana since November 1986
The current tax law of Australia provides that if the land is held for the purpose of
producing assessable income, then such income is taxable. However, the taxpayer is eligible for
claiming the cost of holding such land as per the Exposure Draft Legislation in 2018.
The capital gain tax will be imposed on the Indiana when she dispose of the land in the
year in which she sells it. If the land is held for at least 1 year, then the net capital gain is
discounted by 50 % for the individual taxpayer (Barkoczy, 2016).
The CGT was introduced in the year 1985 so the land owned by the Indiana and sold
after the year 1985 will be subject to the capital gain tax. It is calculated by considering
Consumer Price Index (CPI) so that gain that generated because of inflation does not taxed.
Thus, land hold by Indiana since 1986 will be chargeable under the head Capital Gain tax on
discount base method.
Part 2
Receiving Assessable income
 In first scenario, Indiana will receive assessable income when Indiana sells 80 blocks to
property developer in the financial year in which she actually receives the amount . When
the amount is great than purchase cost after indexation then it will be charged as CGT.
Indiana who is an individual resident when keeps the land for domestic purpose
for upto 2 hectares of land, then resident will be eligible for the exemption from CGT.

 In second scenario, when Indiana disposes off the asset by the way of auction, then the
sales proceeds which it receives will be assessed in the financial year, in which the
income was received.
 In third scenario, when the land is sell entirely to development and 65% of net proceeds
is given development authority on her behalf for the purpose of development, the income
will be assessed in the year in which it was received. The balance of sale proceed will be
assessed in the second financial year in which Indiana will receive the amount of sale
proceeds (Sakurai & Braithwaite, 2019)).
QUESTION 4
)aLoan taken for acquiring land for the purpose of accommodation business – interest can be
claimed as deduction or not?
As per the Australian tax regime, any vacant land acquired for the purpose of personal
use or as investment, it will be treated as a capital asset of Australian resident. But if the land is
acquired for the purpose of business or for making profit then it will not be considered as a
capital asset. Any income derived from sale of such asset is taken as ordinary income for which
GST is imposed.
Claiming deduction : As per the provisions of Australian Tax Law, any vacant land purchased
for the purposed of building rental building, then expenses or interest on loan can be claimed as
deduction for holding that land.
Since, the land acquired by Amity for personal business , the intention of the buyer was
not to build a rental property , there it cannot claim the deduction for the interest paid by it for
acquisition of land.
The provisions of taxation law of Australian says that property should for be purchased
only for the purpose of renting it to the people. In absence of which, no deduction can be claimed
(Morse & Deutsch, 2015).
QUESTION 5
Calculation of Net capital gain or loss
Acquired on 20 February 1989 for $140 000

(Indexation method will be applied as the land was purchased before 1999.)
COST OF LAND ACQUIRED = 140000/ 51.7*112.6 = 304912.95
Shares in FUL NIL
( as it was purcashed be4fore 1985 )
Furniture sold
(50% as it was purchased after 1999) 2500
Market value of value of block on 2018 475000
sale of vacant land (465000)
Expenses will not be claimed as deduction NIL
as it is allowed only on rental property
Sale of home (325000)
Capital gain/loss ( 20087+2500-10000) 12587
QUESTION 6
)aSourcing two articles from Australian Financial Review
Australian Financial Review is an Australian finance and business newspaper which is
published by Nine , six days a week.
“The documents Glencore doesn't want the ATO to keep”
Relevant facts : Glencore is a British Swiss which wanted that ATO should not keep certain
documents. These documents showed how the company moved its significant assets from
Australian tax bracket to out-shores in the year 2014.
The cmpany said to the newspaper that ATO had the knowledge about the Project Everest
and has also approved.
Glencore has taken action against the ATO to return the copies of the Project Everest
(The documents Glencore doesn't want the ATO to keep, 2019).
Explanation of Taxation concept : ATO has the right to inspect the documents related
to the revenue department and no one can deny this fact. If any susceptible thing is observed by

the authority, it can raid and keep the documents. In fact, ATO audit a major corporation which
were named in the Paradise Paper for examining the accounting treatment of such corporation.
“Coalition savours income tax victory, now for company tax”
Relevant facts : Passage of income tax cuts. Providing relief to people earning above $
90000.
Explanation : Cutting off the passage of income tax means cutting the rate of tax on the
personal income of the differently categorised people in Australia. This reduction mainly
provided relied t the people who are earning above 90000 dollars per year. Along with this, the
Senate also voted for cutting the tax rate for firms with turnover of $50 million. The rate would
cut from 30 % to 25 % for all types of companies by 2026.
Connection : Such a tax cut is necessary because high tax rate is welcomed by anyone.
This often increases the burden on people and firms in paying out their tax liabilities. Relieving
them from such high rate would result into decrease in the amount of tax evasion in the country
(Coalition savours income tax victory, now for company tax, 2019).
QUESTION 7
)a Code of conduct of tax agents
The Tax Agent Services Act (TASA) was introduced 2009 which provides the code of
conduct for the tax agents in Australia. The act lays down 14 ethical and professional standards
that are organised in 5 different categories. These are applicable on BAS, tax agents and
financial advisors (Brown, Ed.,2017).
 Honestly and integrity, complying with the provisions of tax laws, and depositing money
received by tax agent by clients to tax authority.
 Acting lawfully in the most appropriate manner that favours clients' interests.
 Managing conflicts of interest adequately
 Not disclosing the information of client unless it is required by the law.
 Providing the best competent tax advisory services to clients
 maintaining due diligence in dealing with client's affairs
 making sure that taxation laws aptly applied (Tan, Braithwaite & Reinhart, 2016).

CONCLUSION
From the above project report, it can be summarised that taxation law is that legislation
which is concerned with the imposition and collection of revenues in the country for funding the
government. In the report, it was seen that taxation law of Australia derives its base from its
constitutional sections such as 53, 55, 114,90. Further, it was concluded that for avoiding the
double taxation agreement, Australia has entered into treaty with 40 countries. The documents
Glencore doesn't want the ATO to keep. 2019

REFERENCES
Books and Journals
Barkoczy, S. (2016). Foundations of taxation law 2016. OUP Catalogue.
Brown, K. B. (Ed.). (2017). Taxation and development-A comparative study (Vol. 21). Springer.
McBarnet, D. (2019). When compliance is not the solution but the problem: From changes in law to
changes in attitude. Centre for Tax System Integrity (CTSI), Research School of Social Sciences,
The Australian National University.
Morse, S. C., & Deutsch, R. (2015). Tax Anti-Avoidance Law in Australia and the United States. The
International Lawyer, 49(2). 111-148.
Sadiq, K. (2019). Australian Taxation Law Cases 2019. Thomson Reuters.
Sakurai, Y., & Braithwaite, V. (2019). Taxpayers' perceptions of the ideal tax adviser: Playing safe or
saving dollars?. Centre for Tax System Integrity (CTSI), Research School of Social Sciences, The
Australian National University.
Tan, L. M., Braithwaite, V., & Reinhart, M. (2016). Why do small business taxpayers stay with their
practitioners? Trust, competence and aggressive advice. International Small Business
Journal, 34(3), 329-344.
Woellner, R & et.al., (2016). Australian Taxation Law 2016. OUP Catalogue.
Online
Coalition savours income tax victory, now for company tax.2019. [Online]. Available through
<https://www.afr.com/news/politics/gov-savours-income-tax-victory-now-for-company-
tax-20180621-h11nd1>
double taxation taxes on income convention between the united states of America and Australia.
2018. [Online]. Available through <https://www.irs.gov/pub/irs-trty/aus.pdf>
The documents Glencore doesn't want the ATO to keep. 2019. [Online]. Available through
<https://www.afr.com/business/mining/the-documents-glencore-doesnt-want-the-ato-to-
see-20181008-h16c8v>\