Standing Committee on Tax and Revenue

Question: Discuss about the Standing Committee on Tax and Revenue. Answer: Tax will be imposed on both incomes from Australia and from the branches in New Zealand. Because control of the business and decisions were made in Australia. Therefore, the income is deemed to be Australian income. The partner residing in New York will be taxed on Australian tax jurisdiction since the income is deemed to be derived in Australia. The 10% income from the partnership will be taxed aggregate since the partner is considered a non resident partner and therefore is not entitled to tax privileges and the local graduated scale for taxing individuals does not apply to nonresidents. Any expenses for nonresidents may not be allowable for tax purpose. The income derived from New Zealand subsidiary will be assessable for this purpose because the Australian tax convention does not favor subsidiaries over branch operations both incomes from branches and subsidiaries are subject to taxation. In Australian tax law, this implies that resident corporations are responsible for income tax on worldwide incomes. In case the NewZealand tax authority has taxed the income derived by the subsidiary, the partners can ask for a foreign income tax offset. For the Australian resident partners capital gains tax applies to their assets worldwide. For foreign residents make a capital gain or capital loss if a capital gains tax event happens to an asset that is 'taxable on an Australian property The Australian tax act provides that capital gains or losses arising from partnerships must be disclosed in each partners returns. On the other hand the Australian regime provides that capital gains are an exemption from taxation. This applies to nonresident subsidiaries. Therefore capital gains for this partnership could not be a taxable income. In case of nonresident partner, the assessable income will include capital gains which will be taxed at a rate of 30%. Double taxation will be eliminated in case gains or loses are taxed when realized and on disposal of equity. Discount on capital gains may be determined using the apportionment of market price calculation method subject to some conditions such as disposal of Australian property. If the capital losses exceed capital gains , the balance can be carried forward and deducted against capital gains in future. References Standing Committee on Tax and Revenue, Parliament of Australia, External Scrutiny of the Australian Taxation Office (April 2016). Australian Taxation Office, Annual Report 201516, 2, 95, 118.