Australian Taxation Law Case Study: A Comprehensive Analysis

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Taxation law

Table of Contents
Introduction......................................................................................................................................3
Question 1........................................................................................................................................4
A......................................................................................................................................................4
(B)................................................................................................................................................5
Question 2........................................................................................................................................6
Question 3........................................................................................................................................7
Part 1............................................................................................................................................7
Part 2............................................................................................................................................8
Question 4........................................................................................................................................9
Question 5......................................................................................................................................10
Question 6......................................................................................................................................12
Question 7......................................................................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

Introduction
This case study will provide insight about the taxation system of Australia and this study will
also briefly explain the role of the court, parliament of Australian and Australian taxation office
in the development of Australian taxation law. The double taxation system of Australia on
manufacturing will be explained to understand the taxation system of Australia on goods
manufacturing. In this study, a capital gain will be briefly explained so that an individual can
easily get an idea about the capital gain system in Australia. In this study, the deductions also
briefly explained so that an individual can claim for deduction. This case study will briefly
explain the taxation system of Australia, It important from a business perspective to know the tax
structure of a country and tax structure of a country is also important from an individual
perspective due to the income perspective of a person.

Question 1
A
The taxation power of Australia is performed by different states and Commonwealth of
Australia. Section 51 of Australian tax structure define different power that a state cover and this
section provide power to state through which a state can enforce any new law in a particular
state. If any kind of dispute arises in between the states and commonwealth than the power to
take a decision in that situation given to commonwealth according to section 109 of the
Australian taxation system. The Commonwealth have the power to levy taxes according to
section 51(ii) of Australian taxation, the states and commonwealth both have the power to levy
taxes but after the income tax act, 1942 the power to take tax decision is only given to
Commonwealth of Australia. This is a big amendment made in the Australian tax structure but
after this act, the states lose the power to the made tax structure for the country. The income
reimbursement act, 1942 provide funding to those states that don't have a tax system on the
income of peoples but in reality, this section comes under section 96 of the Australian tax system
(Appleb and Webster, 2013). Section 90 of Australian tax structure provides commonwealth
power to enforce duties of customs and excise and this section also suggest a uniform relation in
trade with other countries.

(B)
The entire taxation system of Australian is divided into three main tax imposition institutions of
Australia namely the courts, the parliament, and the Australian taxation office. The roles and
responsibilities of tax imposition are divided among this three institution of Australia, these
institutions must work in harmony and understand their own roles and responsibility so that a
proper tax structure is followed by a citizen of Australia (Devos, 2012).
The laws and regulations of Australian are made on parliament houses which is a tax imposition
house. The parliament house has the power to bring new laws in the country and parliament
house also bring any change in existing law if they want. The bill has the power to change the
law of a country, the bill first passed by the ministers of the country and then it presents into
parliament to pass a new law.
The responsibility of collecting tax is given to the Australian taxation office and all the revenue
of tax is must collect ATO of Australia. The tax policies are framed by courts of Australia and its
court responsibility to frame proper policies for the taxation system of Australia. The court is
also providing guidance to ATO for the collection of tax revenues from citizens of Australia. The
high court of Australia has the power to overrun any decision and if the high court makes any
decision that no one can change that decision.

Question 2
A person can get income from many countries so in that case, the assessee must pay tax to both
countries. There are a lot of provisions and methods are used by different countries to calculate
the real income of assessee so that a person can pay proper taxes to every country. Australia is
also made a tax agreement among many countries to curb double taxation so that the revenue of
Australia is properly managed. A permanent establishment also plays an important role in the
taxation system, it's necessary for a person to pay tax according to PE (Eccleston and Woolley,
2014). The permanent establishment can be defined from many perspectives such as if a person
of Australian and a firm of Australia runs its business in another country than its necessary to
pay tax to another country. In both cases home country and permanent establishment it's
necessary for a person to pay tax to both countries due to a different source of income from two
different countries. In this case, a US-based person sale their goods in Australia to citizens of
Australia and work as a representative of sales. The sales representative says the sales office is
not included in PE because the office comes in purview of exception and according to the treaty
the sales representative may only pay tax in the United States, not in Australia.

Question 3
Part 1
(a) In 1985 on 20th September the high court of Australia introduce CGT (capital gain tax)
and according to that tax, any transaction done before this act consider no any kind of tax
consequences. In the case, the assesse use that land for commercial purposes and then he
decided to divide the land and sell that land for making from the land. The land is divided
into 80 parts and then the property is sold to a developer. In the second case, the land is
again divided and sells it to the highest bidders (Harding, 2013). Both cases have liable to
pay taxes but the property is owned from 1st November 1976 than there are no tax
consequences in that case because of the law. In the third case, it's necessary for both
assessed and developer to pay GST to the government according to money received by
both developer and assessed.
(b) All the land transactions which are made after 20th September must pay CGT, in both
cases, the land was owned from a long period of time so there are no tax consequences. In the
third case, both assessed and developers are liable to pay taxes according to the taxation
system of Australia.

Part 2
When a person sale land on that time CGT is applicable on that time instead of when land is
changed into plots. When plots are sold to a developer than CGT applicable on that case. In the
above both cases it's necessary for developers and sellers to pay CGT at the end of the second
financial year. In the third case, it's necessary to pay both the ordinary tax and GST, so in the
third case, it's important to pay GST.

Question 4
In this question, the main problem arises in the interest incurred which arises on the taken loan so
whether deductions will be given in that case or not, it's a quite difficult situation. In the given
case on amity, amity is completely sold her catering business and purchase land to start a new
agriculture business. The land which is purchased by amity has taken on loan and amity paid two
loan installments and the interest occurs on the unpaid amount. The law of the Australian
taxation system is directly applied in this case but in this case, amity is making a disagreement
with another partner. Both Amity and Archie are getting some income from the cattle and
agistment sale in the last two years but both want a deduction of interest.

Question 5
An individual person Maurice was sold their asset and someone asks him to calculate the net
capital gains or loss for the previous year. The provisions of the ATO (Australian taxation
office) are applicable to Maurice because he is a permanent resident of Australia in the case of
capital gain or loss. These are some assets in which there is some part of shares from Maurice's
hand.
 Most of personal things are exempted from tax things such as furniture, car, and home, so
it's not possible to calculate CGT on these things. In this case, he purchased a house on
20th February 1989, so it's not possible to calculate the capital gain or loss in this case.
 The shares of FUL pty was purchased on 10 April 1984, as per the provisions of ATO
(Australian taxation) the taxation system of Australia is applicable on the acquired asset
until and unless these assets are exempted from the taxation system of Australia. In this
case, the asset is purchased before 1985 so the calculation of capital gain or loss is not
applicable in this case.
 Maurice has purchased furniture on 20th May 2010 at $9500. The furniture is not a part of
CGT because according to the taxation system of Australia most of the personal things
are exempted from taxation.
 Maurice purchased land on 20th June 1997 in the cost around $100,000. The capital asset
is always considering a vacant land and in this case, the CGT is applicable to land
purchase (Li, 2012). Maurice can claim for a deduction because of land cost and he can
make a claim on the CGT calculation.
The below calculation is showing CGT on vacant land.
Vacant land sold on 15 May 2018 465,000
(-) Indexed cost of purchase 168,909
(-) Additional purchase cost (Interest cost over the period) 110,000

Capital gains from the Sale 296,091
In this case, the land cannot generate any kind of income for Maurice and Maurice is not
liable to claim deductions. The interest rate is also increasing the value of the asset which
again increases the tax on the overall tax calculation and Maurice is not liable to claim a
deduction in this case. The indexation is only done when the interest is given on a yearly
basis but in this case, the interest rate is given on a periodic basis.
 The loss of last year is around $12500 and from the earlier year the loss is around $5000
and ATO cannot restrict loss carry forward from the previous year. As per ATO law, the
calculation of CGP is shown below.
Net Capital Gain for the year 2017-18
Capital gain from the sale of vacant land 296,091
(-) Brought forward capital loss 17500
Net taxable CGT 278,591

Question 6
The liberal plan provides a package of coalitions income tax which reduces the tax burden for
every class of the country. The high earners of the country will get most of the benefits because
of reducing the 4% income tax. The best taxation policy always charges more from high earners
and charges less from the middle and low group of the country.
The effect of the superannuation system on budget and changes that occur in the
superannuation system
The government gets economic benefits from a change in the superannuation system which is
initiated by labors, the GDP of Australia sharply increases from $30bn.