Understanding Australian Constitution and Taxation Laws

Contents
QUESTION 1:..........................................................................................................................................2
PART A...............................................................................................................................................2
PART B:..............................................................................................................................................2
QUESTION 2:..........................................................................................................................................2
Business Profits..................................................................................................................................3
QUESTION 3:..........................................................................................................................................3
PART A...................................................................................................................................................3
Scenario 1..........................................................................................................................................3
Scenario 2..........................................................................................................................................4
Scenario 3..........................................................................................................................................4
QUESTION 4:..........................................................................................................................................4
QUESTION 5:..........................................................................................................................................5
QUESTION 6:..........................................................................................................................................6
QUESTION 7:..........................................................................................................................................6

QUESTION 1:
PART A:
The Australian constitution is a written constitution and was pen down on 09-07-1900 and is
in force from 01-01-1901. The constitution provides powers to the parliament to tax in
terms of section 51 section (ii), Section 53, Section 55, Section 90 and Section 96 of the
Australian constitution. In addition, Australia being a federal country wherein the power to
levy tax has been handed over to both the states and the centre i.e common wealth.
(Constitutional provisions, 2019)
Section 51(ii): This section provides areas where the commonwealth have an upper hand in
deliberating the matters. There are 39 articles contained in the section under which the
powers of the commonwealth shall be supreme and commonwealth shall frame laws.
In addition in terms of section 53 & 55 of the constitution, basic requirement of tax
legislation has been prescribed. In terms of section 53 of the constitution, the senate is
prohibited to make any changes in the bill which relates to revenue and taxation. However,
the scope of section is restricted and does not apply to late fees, levy of penalty, fines etc.
(Constitutional provisions, 2019)
Section 55 states that the law in relation to imposition of taxation shall deal with only
imposition of taxation and furthermore the legislation shall deal with only one subject to
taxation (Constitutional provisions, 2019)
Further, Section 90 of the constitution grants power to the parliament to regulate trade and
manufacturing the country through levy of custom duty and excise duty.
Also, in terms of Section 96, which is not in direct relation to tax, harps on areas and
condition under which central or the commonwealth can grant any financial help to the
different states of the country.
PART B:
In the constitution of Australia, power has been divided in three wings mainly Judiciary, Legislature
i.e. Parliament and Executive. The division of powers among these wings is known as separation of
power. The said distribution has been carried out to maintain balance of power in the country. Also,
work of one wing shall/may be cross verified by the other wing in order to maintain a check and
misuse of power. ( Commonwealth of Australia, 2019)
The role of the Parliament, the Executive and the Judiciary has been stated here-in-below:
(a) Parliament is the legislating body empowered to frame laws for the country. The composition of
the parliament is (a) Queen of the Country (b) Members of Senate and (c) the elected House of
Representatives.
(b) Executive: The executive is enforcing body of the country entitled with the role of enforcing the
laws set up the legislating body in a proper manner. The members of the executive body is
generally the Queen of Country, the elected ministers and Prime Minister of Country.

(c) Judiciary: Judiciary is justice seeking body where in the laws framed by legislature, enforced by
judiciary are analysed, amended and negated if required. The members of judiciary comprise
High courts and federal courts.
QUESTION 2:
Double Tax Avoidance Agreement or Treaty is a mutual agreement between the revenue authorities
of two countries regarding tax implication of a particular transaction. The agreement is entered in
order to avoid multiple tax dispute and promote ease of doing business between the concerned
countries. One of the major objective of such agreements is to avoid double taxation of a same
transaction. For instance, if Mr. Sagar is a tax resident of Australia and has receipt of income from
USA. Under, such circumstance tax shall be levied in USA and credit of taxes shall be available in
Australia for taxes paid in USA.
The benefit of operation of treaty has been detailed here-in-below:
 Reduces the impact of double taxation
 Transparency of tax rules and reduced litigation;
 Promotes business and cross border transactions;
 Prevents tax avoidance and evasion.
Business Profits
In terms of Article 5 of Double Tax Avoidance Agreement between India and Australia, any business
income shall be taxable in the source state only when the entity has permanent establishment in
that country. Further, the article states that only those portion of the business income shall be
taxable in the source state which can be attributable to Permanent Establishment. Thus, in terms of
Double Tax Avoidance Agreement for taxability of income under the head business income,
permanent establishment shall be present.
Further, in case the income is taxed in the source country, the said income shall be eligible for credit
in the home country
In the present scenario, the US Resident manufactures its income based on its operation in Australia.
Also, the service agents of the company procuring orders in Australia are dependent agents and not
independent. Thus, the company shall said to have a permanent establishment in Australia.
Accordingly, the income earned in Australia shall be charged to tax in Australia and credit of taxes
paid in Australia in terms of DTAA.
QUESTION 3:
PART A
The present case pertains to Indianna who is an Australian Tax resident. She has been residing in
Australia and owns 22 hectares of land in Australia which has always been used by the assesse for
the purpose of producing income which is assessable to tax. The assesse is now proposing to use the