Exam 14: Ethics, Tax Avoidance and Evasion

Alistair has a discretionary trust and this last year (2020); he has distributed $10,000 of the trust net income to his 8 year old son. At what rate of tax will this income distributed to the 8 year old son be taxed?

What is tax planning? Select the best answer.

Which of the following are tax benefits in accordance why s 177C(1)? Select all that apply

Why are shams legally ineffective?

Elle started a business selling books from a shop (the shop is leased) in July 2019. She tells you that she has had a very tough year and that her total sales for the year were only $18,000 and that with expenses of $26,000 the shop has in fact made a loss of $8,000 for the year. Elle estimates that the value of her trading stock and plant and equipment come to only $62,000 and that the market value of the building (out of which she operates the book shop) as at 30 June 2016 is $350,000. Elle also received bank interest of $20,000 and has no other income and expenses for the year ending 30 June 2020. What is Elle's likely taxable income?

BTO Australia Ltd, an Australian resident company, has entered into an arrangement to pay its parent company, BTO Ltd, a significant global entity company resident in the Cayman Islands, a large ($100 million) fee each year for marketing and administrative services. This arrangement will have the effect of reducing BTO Australia Ltd's tax payable and also shift large profits to the Cayman Islands, a jurisdiction with a very low tax rate. What avoidance rule is this arrangement likely to be subject to?

How is law different from ethics? Select all that apply.

Tax evasion is ?

Which of the following is not one of the eight criteria to determine purpose as set out in section 177D (2) ITAA36?

Jack maintains a bank account in a false name and omits to include the interest from this account in his income tax return. Jill, a registered tax agent, assisted Jack to set up this account. Is there likely to be a breach of the Tax Agent Code of Professional Conduct in this scenario?

John and Jim Page operate a bookshop in partnership. The partners do all the work and do not employ anybody. On the advice of their accountant they settled (created) a discretionary trust with a corporate trustee and themselves and their immediate family members as beneficiaries. It was intended that the trustee would provide management services to the bookshop for a fee and the profits of this management would be distributed to the beneficiaries in accordance with their marginal tax rates. Their accountant made journal entries into the books of the partnership and the trust to effect fees for services provided and the trustees resolved to distribute all the profits to tax advantaged beneficiaries. Comment on the effectiveness of this arrangement for tax purposes.

What is required for Part IVA to apply? Select all that apply

What are teleological ethical theories concerned with?

Chevmon Australia Ltd is a subsidiary of Chevmon Co, which is headquartered in the USA and is a significant global entity. Last financial year, Chevmon Australia paid Chevmon Co $2 billion of interest on loans that Chevmon Co provided to the Australian subsidiary. If the interest rates charged on those loans by the US parent company were 5 times the interest rate that the subsidiary could have obtained, is this arrangement likely to be affected by Australia's new diverted profits tax?

What action can the Commissioner take under Part IVA when the multinational anti-avoidance rule applies?

If Part IVA applies, what action can Commissioner take under Part IVA for most schemes?

Which of the following is not one of Australia's specific anti-avoidance tax rules?

A discretionary trust had a large amount of trust net income it needed to distribute and had recently acquired a unit trust, that had accumulated tax losses, and so the trustee of the discretionary trust sought to distribute most of the income of the discretionary trust to the unit trust. The attempted distributions of trust income were never in fact made. How is this arrangement likely to be seen by a court?

A couple (the Blarts) were advised by their financial planner to buy an investment property and to pay all their loan repayments only against the loan they had for their private property and to let the interest on the investment loan capitalise and thereby to let the balance of the loan on the investment property continue to increase as this would then provide for them additional deductions. Is this arrangement likely to be disallowed under the provisions of Part IVA of the Income Tax assessment Act 1936?

A decision to invest a large sum of capital at much lower interest rates, than can be obtained in Australia, in an overseas bank through a complicated series of transactions involving multiple countries, due to a provision that did operate at that time under Australia's domestic tax rules to treat such foreign income as tax exempt, is most likely to be viewed as tax avoidance under what set of rules?