Taxation 2 Assignment T1 2018

Question 1 (10 marks)

With reference to the UK Australia Double Tax Agreement explain:

the meaning of the term Permanent Establishment.

how the business profits of an enterprise incorporated in the UK are taxed in Australia.

whether contracts made through an independent agent would result in a Permanent Establishment

Question 2 (10 marks)

Andrew McSwington is a highly regarded MLB prospect. During the American off season he first travelled to Mexico to play in the Fall League for 2 months and then decides to come to Australia and play in the Australian Baseball League in December, January and February to play for the Adelaide Chomp. He signs the contract stipulating he is to be paid $45 000 for the 3 months in Adelaide and joins the team shortly after. The contract states he is to be paid monthly into a bank account in the Turks and Caicos Islands

Andrew is impressed with Australia and decides to purchase a home unit at Glenelg. His plan is to use it as a base during the home and away series and rent it out for the remainder of the income year.

Discuss:

Whether Andrew is liable for taxation on the $45000 for his baseball skills

Whether Andrew is liable for tax on the rental income received during the balance of the year

Question 3 (10 marks)

Explain how the principle from the Myer Emporium v FCT case is used to determine whether a receipt is assessable as ordinary income or as a capital gain. Illustrate the principle with reference to relevant case law.

Question 4 (15 marks)

With reference to Softwood Pulp and Paper v FCT 1976 explain whether a deduction is available for interest paid on a loan during the preparatory stages of a business.

In your opinion when would a business advance from a preparatory stage?

With reference to Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 explain the importance of the ‘incidental and relevant test” in determining whether interest paid on loans in deductible.

With reference to FC of T v. Brown 99 ATC 4600; (1999) 43 ATR 1 explain whether interest paid on loans can be deductible after business activities have stopped

Question 5 (15 marks)

With reference to at least three (3) different sources and the indicators of good tax policy explain whether or not you think the 50% general discount for individuals on the disposal of CGT assets is good tax policy.