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.