Taxation Law: Permanent Establishment, Residency Status, Capital Gains Tax, Deductions, and Reformation in Australia

Running head: TAXATION LAW
Taxation Law
Name of the Student
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1TAXATION LAW
Table of Contents
Answer to question 1..................................................................................................................2
Answer A:..............................................................................................................................2
Answer B:...............................................................................................................................2
Answer C:...............................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................4
Answer to question 4:.................................................................................................................6
Answer A:..............................................................................................................................6
Answer B:...............................................................................................................................6
Answer C:...............................................................................................................................7
Answer to question 5:.................................................................................................................7
References..................................................................................................................................9

2TAXATION LAW
Answer to question 1
Answer A:
“Subsection 6 (1) of the ITAA 1936” provides a statutory definition of permanent
establishment. The term permanent establishment in respect to a person including the
commonwealth or state represents a place through which an individual performs any business
(Barkoczy, 2014). The definition does not restrict the generality of foregoing which includes
the place from where a business performs the business with the help of agent.
Answer B:
The UK/Australia Double Taxation Convention explains that profit of the company of
a contracting state wold be considered for taxation purpose in that nation only except it is
noticed that the company is performing the business activities in the contracting state through
the permanent establishment located in the other nation. With the respect of the provision
stated in paragraph 3 of “Double Taxation Agreement 1946” where a company of the
contracting nation performs the business in the other contracting nations through the
permanent establishment located in other state would be subjected to taxation of 30% at a
company tax rate (Coleman & Sadiq, 2013). A company that is incorporated in United
Kingdom carries on the business in Australia through a branch or through the permanent
establishment would be liable for Australian company tax at the present rate of 30% relating
to the profits that is attributable to that branch.
Answer C:
“Article 5 (5) of the OECD” states that independent agent that are acting on behalf
of the enterprise by routinely concluding the agreements, or negotiating the materials
essentials of the conventions in the name of the enterprise may be held sufficient to create the
Permanent Establishment (Grange et al., 2014). The decisive commitment is that the

3TAXATION LAW
authority should be exercised habitually instead of once or twice. Additionally, most of the
negotiation, drafting or signing of the contracts should have taken place in the host nation.
Answer to question 2:
The “taxation ruling of TR 98/17” discusses regarding the residency status of an
individual for income tax purpose. The status of residence is regarded as the question of fact
and the main element in determining the tax liability of a person for Australian income tax
(James, 2014). The feature and the character of a person’s behaviour while present in
Australia aids in establishing whether the individual resides here or not. Whether the
considerable amount of time has elapsed reflects the behaviour of a person that needed
continuity, routine or habit represents the question of fact.
The taxation commissioner in respect of the law states that period of six months forms
a substantial period in deciding whether the behaviour of the person is constant with staying
in Australia. When the behaviour is in compliance with the staying in Australia is reflected
over the period of time, the person is treated as the resident from the time the behaviour
originates (Jover-Ledesma, 2014). Similarly, Andrew McSwington who arrived to Australia
to play for a baseball league team signed a contract that stipulated him to a pay of $45,000 for
three months. On being impressed with Australia he also bought a house in Glenelg and used
it as base while playing for home and away series.
The period of physical presence for Andrew demonstrates his behaviour of Australian
resident since it reflected continuity or habit of staying in Australia. With respect to statutory
definition of “section 995-1 of the ITAA 1997” Andrew would be treated as Australian
occupant for taxation purpose.
The “taxation ruling of TR 1999/17” explains the tax liability of a person that are
involved in sports. In respect to commissioner’s view of law amount received from sporting