Taxation Theory, Practice & Law

Explore the topics of tax liability assessment, land case outcomes, GST consequences, net tax calculation, ATO's test case litigation program, and partnership income calculation in this study material. Get comprehensive resources for Taxation Theory, Practice & Law at Desklib.

Taxation Theory,
Practice & Law

Table of Contents
Question 1 - Week 2........................................................................................................................1
Assessing the tax liability of Pablo in Australia according to Australian taxation law...............1
Question 2 - Week 3 .......................................................................................................................1
Respective outcomes of land case: Californian Copper Syndicate Ltd v Harris.........................1
Question 3 - Week 9........................................................................................................................2
GST consequences for all the organisations that are involved in transaction of surfboards.......2
Question 4 - Week 10......................................................................................................................2
Calculation of net tax payable for the organisation ....................................................................2
Question 5 - Week 11......................................................................................................................3
Discussing ATO's test Case Litigation Program..........................................................................3
Question 6- Week 12.......................................................................................................................4
A. Calculation of net income of the partnership..........................................................................4
B. Allocation of net income to each of the three partners...........................................................4

Question 1 - Week 2
Assessing the tax liability of Pablo in Australia according to Australian taxation law
Pablo is an employee of a Portuguese corporation. In Australia, Pablo sent to work
on shorter-term project to finance the creation of an Australian branch office. For just one month,
he has been employed in Australia. Pablo salaries were deposited on Portuguese bank account
during this time. He received A$ 120,000 through his work over the course of year. In given case
Pablo’s income is deposited in Portuguese bank and company paid his salary for working in
branch for one month only. As per the provision of IT rules Pablo is not resident and he will be
required to make the payment of tax on the income generated in Australia at the rate which is
decided by the legal authorities for non residents in the country. The tax rate at which all the non
residents have to make payment of tax in Australia is 32.5% so Pablo will also have to pay tax on
the salary generated in Australia. As 120000 are received by him for the year so for one month's
salary will be 10000 (120000 / 12) so the tax which will be required to be paid by Pablo will be
3250 (10000 * 32.5%). If appropriate payment of tax will not be made by him then it may result
in legal action of Australian government.
Question 2 - Week 3
Respective outcomes of land case: Californian Copper Syndicate Ltd v Harris
Result/Outcomes: Californian Copper Syndicate v Harris lawsuit explored whether the
selling benefit of a land for use of their minerals was beneficial as ordinary profits or as
capital nature or whether this was necessary to gain benefit through it. But profit – whether profit
– was claimed to have not been realised and, consequently, taxable. The advantage was
understood, I suppose. When vendor gets amount he has negotiated, profit is realized. There's
really no question that price takes form of completely paying shares, however, since no
advantage can be made, the shares should have been noticed and might have converted into cash
because Appellants had been prepared to do this in cash. This can not assume or not because
if income tax is based on the way that the profit-maker wants to interact with it. Assume a
vendor made profit on trading contract, but left price (including profit) too much in buyer's
pocket. That he does this would not change the sales argument for the benefit tax instead of
placing cash inside his own pockets. This no longer influences the responsibility for tax
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that appellants left their earnings in hands of corporation to which they transferred and
received shares of company as their vouchers.
Question 3 - Week 9
GST consequences for all the organisations that are involved in transaction of surfboards
GST is a value added tax which is required to be paid by the consumers on domestic
purchase of goods and services. It is charged from consumer and paid to the governmental bodies
by the seller of the product or facility. In given scenario both companies are substantially
interested in each other hence related party. In GST, associate is described by sec. 318 of Income
Tax Assessment Act, as being of same meaning. This clause is based on associations between
similar persons, including a linear descendent or an stake in a business , for example by
possessing majority of securities or by influencing the corporation enough. It is presumed that
dealings between associated parties can not take place on same grounds as those between the
parties if they were genuinely independent, that means that they deal independently. Division 72
of GST Act dealing with such trade between associate parties finds it meaningless whether the
delivery is made or not among associate partners at market value unless the purchaser is eligible
to full input tax credits on an acquisition. Only where receiver is unregistered does inequity exist
because, although supply manufacturer has previously received income tax deductions, the sum
of GST on every benefit added is zero, if the following factor is smaller than actual value
for supply. This is not the architecture of GST system. This is a layout characteristic which in
Australia is widespread in contrast to other VAT schemes worldwide because, whatever the
arrangement between the partners, market value laws prevail in other regimes.
Question 4 - Week 10
Calculation of net tax payable for the organisation
An organisation named Melbourne Awesome Ltd is supplying folding bicycles in
Australia. It has received different types of incomes from different sources. In order to determine
the actual income of the organisation adjustments regarding all the incomes will be required to
be made. The calculation of taxable income as well as net tax payable for the organisation is as
follows:
Particulars Amount
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Net income from trading $ 80000
Add: Franked distribution from public companies (less credit
of $ 12000)
$ 16000
Add: Unfranked distributions from resident private companies $ 25000
Add: Rental Income $5500
Less: Deductions $ 55000
Taxable income $ 71500
Net Tax Payable (71500 * 30 %) $ 21450
From the above calculations it has been analysed that the organisation which is supplying
folding bicycles will have total income of 71500 which will be taxable according to Australian
taxation law. The tax which will be paid by the organisation on the income will be around 21450
as the tax rate for the businesses in Australia is 30%. If the entity will get failed in making
appropriate payment of tax then it may result in legal actions against the enterprise.
Question 5 - Week 11
Discussing ATO's test Case Litigation Program
Test Case Litigation program offers taxpayers with financial support to enable them
cover certain or all of appropriate costs of lawsuits for cases relating to ATO-law which cover
clear financing requirements and standards. In order that case for funding is accepted, the case
have to:
 Add concerns as uncertainty or conflicts are posed as to the way the law works.
 To be challenged in court in public interest.
The ambiguity or contend about the application of the law implies that the statute is vague or
disagrees on what statute implies or how this function with little or no legal clarity on the matter.
There are no conflicts which rely exclusively on factual issues.
Besides following funding requirements, the event must also:
- Value for a wide public portion.
- Serious business effects for the sector.
That implies that number of contributions must be impacted or that issue is unclear or
controversial, as regards business or culture.
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- One must be able to advance the conflict in good time by collaborating in order to
eliminate delays. Any suggestion that such a failure can not take place (based on previous
or present conduct) is taken into consideration prior to approval of the application.
- As a theory of law, the case would possibly is being considered to create legal precedents
to allow taxpayers to determine other issues in the manner of similar evidence.
- A fiscal avoidance strategy does not apply in case because it checks the correct
interpretation of anti-avoidance provisions within legal context.
- Your situation must not seem to be windfall or result that defeats the intention of the law
and public policies.
Question 6- Week 12
A. Calculation of net income of the partnership
Richard who is a retired solicitor and his wife Tracy who is a school teacher running a
gift shop as a partnership business. The whole shop is managed by Alice who is their daughter
and 35 years old. The name of their business is Alice's Gift Shop. In order to analyse actual
profitability of the firm it is very important for all the partners to be aware of all the income for
the whole year. For this purpose, income statement is required to be prepared which is as
follows:
The net income for the Partnership is calculated below:
Particulars Amount
Sales 2,40,000
Less:Cost of sales 1,30,000
Gross profit or income 1,10,000
Less: Expenditures
Payment of interest made to Tracy and Richard (8,000)
Payment of superannuation to Alice (6,000)
Payment of salary to Alice (25,000)
Payments regarding lease (7,000)
Payment of operating expenditures (14,000)
Total or net income 50000
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From the above table it could be analysed that the gross income of the firm will be
around 110000 and at the end the net income of the firm will be around 50000. it will be the
profit which will be allocated among all the partners of the firm.
B. Allocation of net income to each of the three partners
When the net income for the whole firm will be calculated then the profit is required to
be distributed among all the partners. As the profits were 50000 so the total value of it will be
allocated to all the partners equally as no specific information is provided in context of
distribution of profits. If their capital or profit distributing ratio would have been provided then
the amount of 1000 would have been distributed in this proportion. The allocation of the profits
among all the partners of Alice's Gift Shop is as follows:
Particulars Richard Tracy Alice
Net income (Distributed equally) 16,666.67 16,666.67 16,666.67
Add: Incomes of partners
Interest on Capital 4,000 4,000 Nil
Salary Nil Nil 25,000
Superannuation Nil Nil 6,000
Allocation of net income 20,666.67 20,666.67 47,666.67
From the above calculations it has been analysed that the profit which will be received by
Richard as a partner of business will be around 20666.67. The proportion of income generated by
Tracy will be around 20666.67 and Alice will receive 47666.67 as total income. The incomes
generated by Richard and Tracy will be same as they have not received any salary and
superannuation. The proportion of Alice is higher as compared to other two partners as she is
receiving 25000 for salary and 6000 for superannuation as she is managing the whole business.
The law which is focused while calculating the net income and the profit proportion of each
partner is partnership law. The discussion of the law is as follows:
In Australia all the partnership firms have to focused with Partnership Act 1895.
According to this law all the partners within the business are responsible for management of the
whole business and the profit will be distributed by all of them on a predetermined rate or
equally if the rate is not decided earlier. Apart from this, risk and losses are also allocated to all
of the partners in the same ration in which they distribute profits and incomes. It is the
responsibility of all the partners to be responsible and accountable for all the actions that are
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taken by them or the whole firm as it will leave impact upon business. All the partners have
unlimited liability for the debts and they have to formulate decisions for betterment of business.
According to Australian law partnership is not a separate legal entity within the country. All the
firms that are owned by more than one person are governed by contract, common and Australian
State laws. The three main elements that are focused by partners before commencing the
business. These are common interest, viewpoint of generating profits, carrying out business.
While calculating the income for all the partners at Alice's Gift Shop all the key aspects of the
partnership law are focused. According to the act a partnership firm may consist any number of
partners but it should not exceed 20 as it is the maximum number of individuals in a firm. If one
of the owners of the firm will not be able to make payments of debts then others will be
responsible for clearing the debt. This act states that in case of death of one of the partners and
the debts remaining unpaid rest of the partners will be responsible for make the payments of the
same as it will be their liability to clear all the owed amount.
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