Australian Taxation Law Research

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

TAXATION LAW1
Table of Contents
Taxation 2 Assignment T1 2018:...............................................................................................2
Answer to Question 1:................................................................................................................2
Answer to A:..............................................................................................................................2
Answer to B:..............................................................................................................................2
Answer to C:..............................................................................................................................3
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................5
Answer to question 4:.................................................................................................................6
Answer to A:..............................................................................................................................6
Answer to B:..............................................................................................................................7
Answer to C:..............................................................................................................................8
Answer to question 5:.................................................................................................................8
Reference List:.........................................................................................................................10

TAXATION LAW2
Taxation 2 Assignment T1 2018:
Answer to Question 1:
Answer to A:
As stated under the “subsection 6 (1) permanent establishment refers to the business
functions that are performed by an organization of Australian resident or with the help of
fixed business premises from different nation (Woellner et al., 2016). Alternately, permanent
establishment refers to the business operations that are carried on by the company of foreign
resident through a fixed business premises.
Answer to B:
Permanent Establishment is viewed as theory that is employed in respect to the
international and domestic tax law. The conception of Permanent Establishment is mainly
used in tax treaty formed by Australia with United Kingdom which was signed in 1946
(Barkoczy, 2016). The tax treaties of permanent establishment which was used among the
other things constitute a fixed place of business from where an organization carries on the
business either entirely or wholly.
The treaty formed by Australia with United Kingdom complies with the primary
concept of Permanent Establishment under the OECD model of tax convention of income and
capital. The ITAA 1997 provided the enforcement of law to the double taxation agreement
with the United Kingdom (1946) (Cao et al., 2015). Profits generated by business that are
formed in Australia and carrying business activates in Australia through a separate branch or
with the help of permanent establishment will be liable for taxation at company tax rate of
30% on the profits generated by the company in that branch.

TAXATION LAW3
Answer to C:
A business firms of one contracting nations would not be regarded to possess a
permanent establishment in the other transacting nations (Braithwaite, 2017). The reason for
this is that, a company may be carrying out the business activities with the help of broker or
through an agent of general commission or with any other independent agent where the
person is discharging the functions of broker or agent. Nevertheless, on noticing that the
activities of the broker and agent are such that they are principally carry out the business
functions alone or an enterprise, then that individual cannot be held as agent that carries the
independent status in respect to the meaning of this paragraph.
As per the overall opinion of “OECD MC Article 5 (6)” it functions as the exception
to the article 5 (5). The article does not takes account of permanent establishment of
independent agent if the source is surrounded by contracts that made them till the agent is
acting in the ordinary business course (Davis et al., 2015). On finding that, if the independent
agents settles the agreement out of the ordinary business course, the agent shall not be
regarded as the permanent establishment of the enterprise till it is certain that there is a
contracting authority to conclude the contract. If the agent activities has the hint of auxiliary
character, it may not result an enterprise being held as permanent establishment.
Answer to question 2:
“Subsection 6-5 (1) of the ITAA 1997” states that any amount derived by a person
would be regarded as taxable under in respect to ordinary concepts. Usually, a large part of
income derived by taxpayer is held as ordinary income (Saad, 2014). As held in the case of
“Commissioner of Taxation v Scott (1935)”, a payment is referred as the product of service
or employment that is rendered by person or business. Receipts which is held taxable income
includes, allowances, salaries, wages, bonuses or signing fees associated to termination
payment, continuance of service or receipt of cash prize.