Taxation Law: Permanent Establishment, Income, Deductions and CGT Discount Rule

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

2TAXATION LAW
Answer to question 1:
Answer to question A:
The taxation of TR 2002/5 provides the commissioner of taxation with the
interpretation of the meaning of the term permanent establishment as the place through which
an individual carries on any form of business activities (Barkoczy, 2014). As stated under the
definition of the term Permanent Establishment of the “subsection 6 (1) of the ITAA 1997”
as the place through which an individual performs any form of business activities with
reference to the place that is used for carrying the business activities of that person.
Answer to question B:
According to “subsection 6 (1) of the ITAA 1997” the definition of permanent
establishment does not have any form of specific territorial limit. Based on the context of the
definition of the permanent establishment it is applicable to both business activities that are
carried in Australia or out of Australia (Belloc, 2017). The concept of permanent
establishment is applied relating to the tax treaties that is signed between UK and Australia in
1946. According to the treaty of permanent establishment it constitute a fixed place of
business that results in income and value added tax liability for a specific jurisdiction from
the place where the business is performed.
In regard to the context where the definition originated it is evident that the subsection
6 (1) of the definition of Permanent Establishment under the ITAA 1936 continued the earlier
approach that was based on the sense of permanent establishment of 1946 UK double
taxation agreement (Brokelind, 2014). The major impression for the two tax treaties is the
fixed place of business. The profits of business established in UK and executing the business
functions in Australia through alternative branches or through permanent establishment shall

3TAXATION LAW
be held accountable for taxation. A UK company making profits in UK shall be liable for
assessment at a rate of 30%.
Answer to question C:
A commercial entity of a contracting country shall not be held as the permanent
establishment of the other contracting nation. Business agents performing the functions
through agent or broker or through any other agent having the status of independent agent are
originally acting in the ordinary course of business namely as the broker or agent (Coleman
& Sadiq, 2013). On the other hand, on finding that business the broker or agent are carrying
on the business on behalf of the enterprise, an individual is disregarded from being
considered as agent. If the independent agent settles with agreement beyond business
boundaries the agent shall not be regarded permanent establishment unless there is an
adequate authority of that would conclude the contract.
Answer to question 2:
As defined under the “subsection 6-5 (1) of the ITAA 1997” any form of income
generated from the personal source shall be held accountable for taxation in respect of
ordinary concept. Most of the income possess the nature of personal income shall be held as
ordinary income (Grange et al., 2014). The federal court in “Commissioner of Taxation v
Scott (1935)” stated that payments through product or employment or business shall be held
assessable. As evident in the situation of Andrew McSwington who is viewed as MLB
prospect agreed to sign a contract of $45,000 to play for Adelaide Chomps. As per “section
6-5 of the ITAA 1997” an item having the nature of income is earned when it comes for the
taxpayer (James, 2014). The court of law in “Commissioner of State Revenue v. Fitzroy
Football Club Ltd (2016)” an individual engaged in the sporting activities earns income
based on the sporting contract that governs the sporting involvement. Sporting actions