Taxation Law: Taxation Agreements and Case Studies - UK and Australia

This report provides a detailed analysis of taxation laws in the UK and Australia, focusing on the intricacies of double tax agreements. It explores key concepts such as permanent establishments, income tax, and corporate tax, highlighting the roles of legal authorities like HMRC and ATO in each country. The report examines the implications of these agreements on businesses and individuals, including scenarios involving residency and property ownership. Furthermore, it delves into relevant case studies, such as Myer Emporium Ltd v FCT, Softwood Pulp and Paper v FCT, and FC of T v. Brown, to illustrate the practical application of tax principles. The report also discusses the impact of capital gains tax legislations and proposes potential modifications to enhance the efficiency of tax policies. By examining these aspects, the report aims to provide a comprehensive understanding of the taxation landscape in both countries and the benefits of the double tax agreements.

Taxation Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1.........................................................................................................................1
QUESTION 2.........................................................................................................................2
QUESTION 3.........................................................................................................................3
QUESTION 4.........................................................................................................................3
QUESTION 5.........................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Taxation in UK and Australia have the slight difference but are mainly reflected the same
methods to charge taxes over individual, corporations etc. in the present assessments there will
be discussion based on double tax agreements between Australia and UK on the basis of
permanent establishments, taxation and other relevant terms. The report will also highlight main
cases held in Australian territory as well as jurisdiction awarded to them. There will be
discussion over the income tax or corporate taxes levied over individual or businesses.
QUESTION 1
In accordance with the DTA1 agreements between UK and Australia it can be said that
such agreements were based on various legal or authenticated issues such as residency, income
tax, corporate tax, custom duties etc. hence, in terms with UK there are legal authorities who
have access over individual income gathering, corporate transactions and revenue generated by
them. Thus, the legislation were enacted by HMRC2, central, local or state government which in
turn helps in making the fair jurisdiction in the country (Berg and Davidson, 2016).
However, in terms with Australia the taxes were levied by legal authority in country such
as ATO3 and federal registrar of legislation which in turn have all the norms, rule and regulation
facilitated to the citizens in the country (Woellner and et.al., 2016).
Hence, it will be fruitful to have the adequate information about the agreements of both the
nations on the various terms such as:
Permanent Establishment:
It means that a firm or enterprise seeks to have the permanent establishment in the
country it could be a branch, franchise, office, factory, gas plant, mines, workshop, agricultural,
forestry, pastoral property as well as place for management. However, it can be said that, there
has been various terms and conditions over having the permanent establishment in Australia and
UK (UK/ AUSTRALIA DOUBLE TAXATION CONVENTION, 2003). Hence, the agreement lies
over the conditions that the business will be operated by the agent of managers which have the
citizenship with the country of the resident of such nation (Kennedy and et.al., 2017).
1 Double tax agreements
2 Her majesty revenue and customs
3 Australian taxation authority
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Business profit of an enterprise incorporated in UK and taxed in Australia:
In terms with if an enterprise has the permanent establishment in the contracting country
or state and have earned the revenue or profit through such business than it will be paid in such
state only. Hence, there will be payments of such taxes over the profits in the state on which the
permanent residence of the person or origin of the such business then it will be come under
Attributable tax payments (Gordon, 2016). Thus, it can be said that if a corporation or
organisation has the business or trading UK which is a contracting state than he will be liable to
tax over there but if in some conditions the profits are being brought them to the residential state
such as Australia than it will be come under Attributable payments of taxes.
Contract made by independent agent in permanent establishment:
In accordance with such conditions it can be helpful is the person or agent who is running
the organisation in the contractual country. Hence, can be able to make the contract on behalf of
the industry but only if the firm has the permanent establishment in such state (Avi-Yonah,
2016). However, there will be taxes levied over the profit or revenue generated through such
contract or activities.
QUESTION 2
By considering the case scenario where Andrew McSwington has visited Australia in
accordance with participating in Australian Baseball League. Hence, has collaborated with the
base ball club Adelaide Chomp and play behalf of them. Thus, the agreements was signed
between them on the basis of $45000 will be paid by club to Andrew fro 3 months of his
employment with them. Thus, after completion of his contract period he than decided to purchase
a house in Australia and rented it. Hence, there will be some taxation decisions which are need to
be evaluated such as:
Andrew will pay tax over $45000 or not:
Andrew is the American residents and he visited Australia to participate in the matches
for Australian Baseball league. Thus, he has gathered the revenue over contract with Adelaide
Chomp which in turn pay him $45000 on the 3 months of agreements. In accordance with the
ITAA364 section 6, A person can be denoted as resident as if he has completed 183 days test in
4 Income tax assessment act, 1936
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the national boundaries whether permanently of whether making regular travelling (Income Tax
Assessment Act 1936, 2017). Here in this case Andrew has just completed 90 days so he will not
being liable to make the payments for taxes (McClure, Lanis and Govendir, 2016).
Andrew is liable to pay tax over rented property:
In accordance with the property purchase by Andrew in Australia in consideration with
his permanent base and visits. He has rented his property for the rest of the time when he is not
using such property (Income Tax Assessment Act 1997, 2017). Thus, he will be liable to make
payment for the rent hi has collected from such property because it lies the concrete reason that
the property situated in Australia as well as the revenue gathered by him which are relevant with
nation sources (Ismer and Jescheck, 2017). Hence, such property is known as investment
property and Andrew is liable to make payments of taxes over it.
QUESTION 3
By considering the case of Myer Emporium Ltd v FCT5 where the tax practitioner
preposed that the income generated by them as the Isolated transaction and the income will be
denoted as the ordinary income in the case of carrying the business for tax payer (THE
HISTORICAL SIGNIFICANCE OF THE HIGH COURT’S DECISION IN FEDERAL
COMMISSIONER OF TAXATION V THE MYER EMPORIUM LT, 2017). However, the profit
generated by such tax practitioners will be denoted as the ordinary income. Hence, in accordance
with the section 25A and division 6A of FCT which in turn presented the ruling that says that
such revenue must be considered as the Capital gains due to business of tax payer (Grubert and
Altshuler, 2016). Thus, in context with the principles of such case which are relevant with the
cases such as Scott v FCT(1996)6 which is relevant with the issue of a widow who has gifted the
unsolicited gift to solicited gift. FCT V Dixon(1952)7 as well as Harris v FCT8 are some
examples of the isolated transactions (ASSESSABLE INCOME, 2017).
QUESTION 4
Softwood Pulp and Paper v FCT 1976:
5 Federal commissioner of taxation
6 117 CLR 514
7 86CLR 540
8 80 ATC 4238
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In accordance with such case it can be said that the business is amount get launch or
introduces in the market than they will not being liable to make any tax payments in respect with
loans or interest. Thus, it can be said that the business is about to get launched in the market and
did not earn any profit as well as did not perform the business operations than there is no income
generated by the organisation. However, such interests over loan are fully exempted and will not
be payable by the owner (Jacob, 2016). Hence, in accordance with the section 51(1)9 says that
the assessable income will not necessary that it should be generated by the business operations it
can e from other sources as well as owner's have to make payments of such revenue (Russell,
2016). Thus, in this case the interest is being payable over the loan taken by owner than there is
no need to make payment for such transactions as well as are fully deductible for tax purposes.
Ronpibon Tin NL v. FCT:
By considering the case it can be said that, the interest on loan must be deductible under
tax returns made on the forgoing business. Hence, the expenses are allowable as deduction which
are depends over the allotments and commissioner of Eastern staff. Hence, the remaining amount
of expenditure must be attributable in context with gaining the assessment revenue (Avi-Yonah,
2016). However, it can be said that such interest which are levied over the loan and the revenue
generated by the Easter staff need to be paid and disallowed due to the business is having the
adequate sources of generating the income.
FC of T v. Brown 99 ATC 4600; (1999)10:
In accordance with the case it presented the conclusion of judgement that the business is
not being allowed to have any deductions over the interest incurred over the loan. Thus, it can be
said that there is need to make payments for such interest because after cessation of the business
they will not go to pay the amount of loan, rent and mortgage (McClure, Lanis and Govendir,
2016). Thus, during the operational period it will be easy for the government to collect such
interest as well as make the adequate payments. However, in terms with section 8(1)11 the
business is liable to make tax payments over interest and it cannot be deductible (ATO
Interpretative Decision, 2017).
9 Income tax assessment act
10 43 ATR 1
11 Income tax assessment act, 1997
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QUESTION 5
By considering the capital gain tax legislations in Australia it can be said that there is
need to make adequate modification to the tax policies of the business. Thus, such taxes are
levied over the purchase and sale of any asset or goods for the business purposes as well as for
any personal mean of an individual. Therefore, if there is reduction for 50% of the taxes levied
over such translations than it will become more profitable for the parties which are dealing in
such transactions (Vann, 2016). Thus, with the help of such policies the citizens in the country
will be beneficial in making the adequate transactions as well as in generating the adequate
income. It will help in making the changes in such operational activities as well as motivating
individuals in making such dealings. Thus, the taxation rates will be lower down and the
individuals will not being liable to make many payments of the taxes (Russell, 2016).
However, such changes will help in provoking individual to have the adequate income by
making sales of such assets as well as they will be fruitful for having the good amount. Thus, as
per deduction ns in the capital gains tax there will be increase in such kinds of transaction in the
country and that will helps in lowering down the prices of such property, assets, goods and
services (Jacob, 2016). Thus, it can be said that such transaction will be fruitful for citizens in
Australia in terms of making the adequate changes in such business operations. It will be idle
policy as there has been changes in such policies for capital gain tax. It will be helpful for
various small scale organisations to make the fewer payments of CGT while making tax returns
for corporate tax (Jones, 2016). However, in terms of individual tax returns over the income tax
payments they will be benefited with such deductions in the assessable income generated
through purchase and sale of assets.
CONCLUSION
In consideration with the above report it can be said that there has been various laws, rule
and regulations which in turn helps in making the adequate tax returns by the individuals over
the income generated by them. There has been various cased which are relevant with the
Corporate issues such as Preparatory and Cessation stages of business and the discussion over
interest payable to them. However, with the help of such UK and Australian double tax
agreement which in turn beneficial for the citizens in such nations to take the tax advantages as
well as their liability to make payments of taxes were determined.
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REFERENCES
Books and Journals
Avi-Yonah, R. S., 2016. Three steps forward, one step back? Reflections on “google taxes” and
the destination-based corporate tax. Nordic Tax Journal. 2016(2). pp.69-76.
Berg, C. and Davidson, S., 2016. Submission to the House of Representatives Standing
Committee on Tax and Revenue Inquiry into the External Scrutiny of the Australian
Taxation Office.
Gordon, R., 2016. Increasing use of tax-transparent entities by private groups due to BEPS. Tax
Specialist. 19(4). p.136.
Grubert, H. and Altshuler, R., 2016. Shifting the Burden of taxation from the Corporate to the
perSonal level and getting the Corporate tax rate down to 15 perCent.
Ismer, R. and Jescheck, C., 2017. The Substantive Scope of Tax Treaties in a Post-BEPS World:
Article 2 OECD MC (Taxes Covered) and the Rise of New Taxes. Intertax. 45(5). pp.382-
390.
Jacob, M., 2016. Tax regimes and capital gains realizations. European Accounting Review, pp.1-
21.
Jones, D., 2016. Capital gains tax: The rise of market value?. Taxation in Australia. 51(2). p.67.
Kennedy, T. and et.al., 2017. Does income inequality hinder economic growth? New evidence
using Australian taxation statistics. Economic Modelling.
McClure, R., Lanis, R. and Govendir, B., 2016. Analysis of Tax Avoidance Strategies of Top
Foreign Multinationals Operating in Australia: An Expose.
Russell, T., 2016. Trust beneficiaries and exemptions from CGT: Reflections on the Oswal
litigation. Taxation in Australia. 51(6). p.296.
Vann, R. J., 2016. Hybrid Entities in Australia: Resource Capital Fund III LP Case.
Woellner, R. and et.al., 2016. Australian Taxation Law 2016. OUP Catalogue.
Online
ASSESSABLE INCOME. 2017. [Online]. Available through
:<https://www.studocu.com/en/document/rmit/taxation-1/summaries/summary-lectures-
assessable-income/304431/view?has_flashcards=1>.
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ATO Interpretative Decision. 2017. [Online]. Available through
:<http://law.ato.gov.au/atolaw/view.htm?
rank=find&criteria=AND~rent~basic~exact&target=J%20JA&style=html&sdocid=AID/
AID20021092/00001&recStart=41&PiT=99991231235958&recnum=42&tot=4799&pn=
ALL:::ALL>.
Income Tax Assessment Act 1936. 2017. [Online]. Available through
:<https://www.legislation.gov.au/Details/C2017C00242>.
Income Tax Assessment Act 1997. 2017. [Online]. Available through
:<https://www.legislation.gov.au/Details/C2017C00336>.
PDF
THE HISTORICAL SIGNIFICANCE OF THE HIGH COURT’S DECISION IN FEDERAL
COMMISSIONER OF TAXATION V THE MYER EMPORIUM LT. 2017. [PDF]. Available
through :<http://law.unimelb.edu.au/__data/assets/pdf_file/0007/1585987/2006-
Young1.pdf>.
UK/ AUSTRALIA DOUBLE TAXATION CONVENTION. 2003. [PDF]. Available
though :<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/
496636/uk-australia-dtc_-_in_force.pdf>.
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