Taxation Theory, Practice & Law Assignment: Analysis and Calculations

This assignment delves into various aspects of Australian taxation law. It begins with an analysis of Pablo's tax liability in Australia based on his salary, considering non-resident taxation rules. The assignment then examines the case of Californian Copper Syndicate Ltd v Harris, outlining the court's decision and its implications. Further, it explores the GST consequences for companies in a given arrangement, detailing the impact on both Surf Up P/L and Billapong P/L. The assignment continues with a calculation of the net payable tax for Melbourne Awesome Ltd, including the computation of taxable income and tax liability. It also discusses the ATO's Test Case Litigation Program, explaining its purpose, funding criteria, and application process. Finally, the assignment concludes with a calculation of the net income of a partnership, including the allocation of income to each partner, along with relevant legislation or case law.

Taxation Theory,
Practice & Law

Table of Contents
QUESTION 1...................................................................................................................................1
Tac liability of Pablo in Australia on his salary...........................................................................1
QUESTION 2...................................................................................................................................1
The respective outcome reached by the courts in the case of Californian Copper Syndicate Ltd
V Harris........................................................................................................................................1
QUESTION 3...................................................................................................................................3
GST consequences of the arrangement for the companies..........................................................3
QUESTION 4...................................................................................................................................4
Calculation of the net payable tax by the Melbourne Awesome Ltd for the year ended 30th
June 2019.....................................................................................................................................4
QUESTION 5...................................................................................................................................4
Discussion of ATO's Test Case Litigation Program....................................................................4
QUESTION 6...................................................................................................................................5
Calculate the net income of the partnership.................................................................................5
Allocation of net income to each of the three partner..................................................................6
Discuss relevant legislation or case law.......................................................................................6

QUESTION 1
Tac liability of Pablo in Australia on his salary
Taxation is the total amount which is required to be paid by the individuals as well as
businesses on the income which is generated during the year. The legal authorities of the
countries are responsible for imposing the taxation rules on the entities and persons so that they
can pay the appropriate amount of tax on their income. If they will not be able to pay the
accurate value of taxation then it may result in punishment by law. Pablo is a Portuguese who
worked in Australia for one month and received salary fro the working. He was sent by the
company for this short period in Australia to the he can assist the project with establishment of a
branch office in the country. Salary of Pablo was credited in Portuguese bank account. During
the year total earning of Pablo was around 120000 Australian dollars. He will be responsible for
making payment of income tax on the Australian sourced income. According to the Australian
Taxation law, if a person is receiving salary for working within the country then the generated
income will be taxable within the nation. Apart from this, there is another rule related to interest,
unfranked dividend and royalty. According to this rule, these incomes will not be taxable in
Australian as these are already been taxed correctly within the country.
The taxation rate at which Pablo will be required to pay tax on the salary which was
generated by working in Australia will be 32.5%. It is the rate at which all the non-residents pay
tax in Australia on the income which is generated in Australia. It will be very important for Pablo
to pay tax on the non-resident withholding rats on the part of income which is generated in
Australia. For example, as total yearly income of Pablo is 120000 and if it will be divided in
months then for one month it will be (120000 / 12) 10000. So the taxable salary of Pablo in
Australia will be 10000. The amount of tax which will be required to be paid on this income will
be (10000 * 32.5%) 3250. It will be the total tax which tax which will be required to be paid by
Pablo on the salary. Rest of the salary will be taxable according to Portuguese taxation laws.
QUESTION 2
The respective outcome reached by the courts in the case of Californian Copper Syndicate Ltd V
Harris
The opinion which was provided by Lord Justioce Clerk uin the case of Californian
Copper Syndicate Ltd was that the principle in dealing with the questions in the assessment
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process of income tax was focused with obtaining greater price by owner which was higher than
the value of acquisition. According to the Schedule D of p. 166 which is related to income tax act
1842 the increased price is not the profit. Apart from this, the increased value was obtained from
the conversion of the securities which could be assessable where all the activities that are
performed are not change or realisation of investment. Additionally, it was also mentioned by
Clerk that a person or a firm which is buying or selling properties speculatively for the purpose
of making profits and dealing in this type of investment as the business and looking to make
profits. The syndicate was formed with the capital of 30000 so that the copper and other mines
could be acquired. Main purpose of it was to carry on the commercial, trading, mercantile and
financing business. There are various purposes of the entity that are pointing at the highly
speculative execution of business. The shares which were subscribed at 24000 were realised at
28332 which were invested in the copper bearing field of US. The entity was successful in
selling property to Frensco company and cost of it was around 30000 and its payment was made
in fully paid up shares. It was the turning investment to the account which was not to be
incidental merely but it was, as the Lord President concludes that the main means of the
company for selling the property for higher cost was for the purpose of speculation. Apart from
this, it was also mentioned by Clerk that all the findings of commissioners were right.
Lord Trayner said that the aspects that were determined by commissioners were right.
Apart from this, it was also said by the Lord that it was neither the case of company selling its
property for a higher price than the price which was paid by it nor the case of changing the
investment of the capital for the purpose of attaining pecuniary advantage. Trayner said that the
sale on which advantage was gained in relation to the income tax which was required to be paid
on the same was a transaction which was related to proper trading. Apart from this, he is also
satisfied that the Appellant Company was formulated for the purpose of acquiring specific
mineral working not to work for benefit of the business. It was focused with reselling the
property at a higher profit. The purchasing price of property was 24000 and the selling value of it
was 28332. It is analysed that the entity was commenced the business shortly right after its
formulation in the year 1901 in month of February. In opinion of Trayner dos it leave impart
upon liability fro taxation that the Appellant company left its profit in hands of the entity it sold
to and took the shares of the entity as the voucher.
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QUESTION 3
GST consequences of the arrangement for the companies
GST (Goods and Service tax) could be defined as the value added tax which is levied on
all the items and facilities that are sold for national consumption. The customers who are buying
the goods and services pay it and all the rules of it are formulated by the legal authorities. The
consequences that could be faced by the entities while making arrangements of it could be
understood with the case of Surfs Up P / L and Billapong P / L. The discussion of the GST
consequences of the arrangements for both the entities are as follows:
GST consequences for Surf Up P / L:
 As in the month of October 370 surfboards were purchased by Surf Up P / L from
Billapong P / L and then it applied the GST input tax for the same. While returning the
faulty surfboards it will be required to make adjustment for the GST liability of the
organisation.
 As 14 of the surfboards were faulty so Surf Up P / L decided to return them to Billapong
P / L so the adjustments that are made for purchasing them will be required to be
removed from the output GST liability of the entity as they are returned.
GST consequences for Billapong P / L are listed below:
 When goods will be sold by Billapong P / L to Surfs Up P / L in the month of October
then this transaction will include the GST in the liability. When faulty surfboards will be
returned in December then the amount paid for GST for the same will be deducted from
total paid amount.
 As Surf Up P / L will return all the surfboards to Billapong then the entity will be
required to issue the credit note. When it will be received by another entity then total
value of GST liability will be deducted from the total amount of tax which is required to
be paid in context of GST.
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QUESTION 4
Calculation of the net payable tax by the Melbourne Awesome Ltd for the year ended 30th June
2019
Wide range of folding bicycles are sold by Melbourne Awesome Ltd. The organisation is
required to pay tax in Australia on the income which is generated within the country. The
computation of the income for the year is as follows:
Provided information:
Rental income = 5500
Total deductions = 55000
Unranked distributions from resident private companies = 25000
Franked distribution from public companies = 28000
Net income from trading = 80000
Particulars Amount
Total income from trading activities 80000
Franked distribution from public companies 28000
Imputation credit 12000
Total unranked distribution from resident
private companies
25000
Income received from different sources 150500
Less: Imputation credit 12000
Total or taxable income 138500
Less: Taxation @ 30% 41550
Income after taxation 96950
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QUESTION 5
Discussion of ATO's Test Case Litigation Program
Test case litigation program is designed to provide financial assistance to the individuals
who are paying tax so that they can meet all the reasonable costs of litigation for al the cases that
are related to ATO law. Apart from this, it also makes sure that all the cases are able to meet
specific funding criteria and expectations or not. A case which requires approval for funding
must be in the interest of public so that it could be litigated. Apart from this, it should also
involve issues where there is contention and uncertainty about the way in which law operates. It
demonstrates that law is ambiguous with no or little judicial clarification on the problem or issue.
It do not focuses upon the disputes that are solely dependent on questions.
There are various expectations of meeting criteria and it includes significance of
commercial implications for the industry and for a substantial section of the public. It
demonstrates that there should be different types of taxpayers affected or there are industry or
community views that the issue is contentious or it is uncertain. While planning to acquire
funding it will be very important for the individuals to demonstrate the willingness to progress in
proper and timely manner so that all the delays could be cooperated and avoided. The case which
is related to the individuals should provide legal precedent as the principle of law so that the
decision of providing funding could be taken. The case for which funding is required should be
focused with avoidance of tax scheme. Apart from this the case should not appear to be an
attempt to gain a windfall.
If the applicant is confident about the funding requirements and criteria then test case
funding could be applied. For this purpose test case funding application form could be used. The
applications are taken in to consideration by a panel that consist two senior executives of ATO
and three external experts. The details of next meeting of panel is mentioned in the test case
litigation register and the examples of them could be analyse from the currently funded cases and
the decisions that are passed by panel on the test cases
QUESTION 6
Calculate the net income of the partnership
Particulars Amount
Sales $ 240,000
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Less: Expenses
Cost of goods sold $ 130,000
Interest on capital paid to Richard and Tracy $ 8,000
Salary to Alice $ 25,000
Superannuation to Alice $ 6,000
Lease payments $ 7,000
Operating expenses $ 14,000
Net Incomes $ 50,000
Allocation of net income to each of the three partner
Particulars Richard Tracy Alice
Profit distributed equally $ 16666.66 $ 16666.66 $ 16666.66
Add: Interest on Capital $ 4000 $ 4000 -
Salary - - $ 25,000
Superannuation - - $ 6000
Allocation of net income $ 20,666.66 $ 20,666.66 $ 47,666.66
Discuss relevant legislation or case law
Partnership law: Partnerships are regulated by the Partnership Act 1895 in Western
Australia. There have been two forms of partnerships: "general" and "limited." The general
partnership is one in which all the participants are liable for the performance of the organisation.
Eachpartner has unlimited liability for the debts and responsibilities of the company. From the
other hand, a limited partnership is one where the responsibility of one or more members for the
debts and responsibilities of the company is limited. Partnerships can indeed be created with
absolute and at times; disturbing ease (this can lead in partnerships becoming formed
unintentionally with potential adverse effects). There have been three required elements for a
partnership to be formed between two or more individuals, including the conduct of a business,
both in common with a view to profit.
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