Taxation Law: Permanent Establishment, Resident Status, Capital Gains and Deductible Expenses

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to A:..........................................................................................................................2
Answer to B:..........................................................................................................................2
Answer to C:..........................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to 1:...........................................................................................................................3
Answer to 2:...........................................................................................................................4
Answer to 3:...........................................................................................................................4
Answer to 4:...........................................................................................................................4
Answer to 3:...............................................................................................................................5
First Strand of Myer:..............................................................................................................5
Answer to question 4:.................................................................................................................7
Answer to question 5:.................................................................................................................8
Answer to A:..........................................................................................................................8
Answer to B:..........................................................................................................................9
Answer to C:..........................................................................................................................9
Answer to question 6:.................................................................................................................9
References:...............................................................................................................................11

2TAXATION LAW
Answer to question 1:
Answer to A:
As per the Australian Taxation Office, the word permanent establishment is explained
under in “subsection 6 (1) of the ITAA 1936”. Permanent establishment refers to carrying of
business by an Australian resident entity through the fixed place of business in another nation
(Grange et al., 2014). Permanent establishment means the business operations which is
carried on by the foreign resident entity in Australia through a fixed place of business.
Answer to B:
According to “Australian/UK DTA (Double Taxation Agreement) 1946” profits of
business of contracting nation would attract tax liability in that country only given the
enterprise is performing the business in other contracting state through the permanent
establishment situated in other country (James, 2014). Given the business is conducted in a
country in an enterprising way and the profits of that company may be held for taxation in
another country but till the extent that is attributable to that permanent establishment.
To determine the permanent establishment profits, the enterprise should be allowed to
claim an allowable deduction for expenses which is occurred from permanent establishment.
As per the explanation of “Australia/UK DTA 1946” companies that are established in UK
and performing the business in Australia then the profits should be taxed in the other country
but merely to the amount that is resultant from the permanent establishment.
Answer to C:
As per the “Article 5 (5) of the OECD” the activities of making contracts does not
lead to permanent establishment given the contracts is performed by the independent agent
that are acting on behalf of the business course.

3TAXATION LAW
Answer to question 2:
Answer to 1:
The definition of resident and resident of Australia is defined in “subsection 6 (1) of
the ITAA 1936”. According to the “subsection 6 (1)” an individual beside company that are
the resident of Australia comprises of person that have their domicile in Australia given the
commissioner is satisfied that the person has their permanent place of abode out of Australia
(Jover-Ledesma, 2014). As per the “subsection 6 (1)” an individual will be considered as the
Australian resident that is residing in Australia, either constantly or intermittently for at least
one-half of the income year, except the commissioner is satisfied that an individual’s place of
residence is out of Australia and he or she do not have any intention of taking up the
residency out of Australia.
Domicile is regarded as the legal concept which is stated in “Domicile Act 1982”.
However, the common rule is that an individual legally acquires the domicile of their origin
by virtue of their country of his or her birth. Citing the case of “Applegate v FCT (1979)” the
court of law upheld that permanent do not mean everlasting or forever and objectivity is
assessed each year (Kenny, 2013). The taxpayer in Applegate had the permanent place of
dwelling outside Australia.
As evident in the present case of Andrew it is understood that he was born in
Australia, Adelaide and travelled to America and Mexico to play leagues for 2 and 15 months
respectively. Andrew then came back to Australia to play for Adelaide. Citing the
explanation of “Domicile Act 1982” Andrew obtained the Domicile of their origin because
he was born in Adelaide, Australia. Furthermore, the stay of Andrew in America and Mexico
was transitory in nature.