Exercise 2.

1.) Discuss the difference between 'tax evasion', 'tax avoidance' and 'tax planning' 

The difference between the three is that tax evasion evinces a fraudulent and malicious means to reduce one's tax liability or outright elude the payment of taxes while tax avoidance entails the utilization of privileges accorded by the law to certain special transactions and business activities to reduce or avoid tax liability. Finally, tax planning involves the maximization of tax benefits under eligible provisions of the general tax framework to reduce or avoid tax liability. 

2.) What is a 'sham' and what is the effect of a sham?

A sham is a transaction or contract designed to have no legal effect whatsoever and is designed solely for the purposes of concealing the real transaction so that it will not be detected for taxation purposes. The effect of a finding that a transaction is a sham is that such sham transaction will be disregarded altogether and the real transaction between the parties will be the one that is going to be considered especially for taxation purposes. 

Bonus Work.)

My understanding of the article is that it narrates how single Australians who leave behind retirement funds after death are meted out with a heavier tax on such funds compared to Australians who are married and with dependents who may, at certain instances, not even be meted out a tax at all for their retirement funds. My reading of the article impresses upon me the view that the author is against such discriminatory tax imposition against single Australians and favor towards married Australians with dependents on the tax treatment of their retirement funds after death in that there is an increasing trend towards increase of single households in Australia thus leading to more burdens imposed upon those who would be getting the retirement benefits of a person. 

Step-by-step explanation

Exercise 2.

1.) Stated simply, the difference between the three lies in the nature of the means used to avoid or reduce taxes, as follows:

• Tax evasion evinces the use of illegal, malicious or fraudulent means to reduce or avoid payment of taxes.
• Tax avoidance evinces the use of privileges accorded to certain special transactions and business activities to reduce or avoid payment of taxes. It is legal unlike tax evasion
• Tax planning evinces the maximization of tax benefits under eligible provisions of the general tax framework to reduce or avoid tax liability. Like tax avoidance, it is a legal means to avoid or reduce taxes however, the difference is that in tax avoidance, special privileges available only to certain transactions and business activities are used to reduce or avoid tax liability while tax planning uses benefits available to all taxpayers. 

2.) Stated simply, a sham transaction is no more than a "cover up" designed to hide a transaction between the parties which have a much more greater tax burden. Thus, to counter and deter persons from engaging in sham transactions, the law enunciates that should a transaction be found to be a sham, such sham transaction will be disregarded altogether and the real transaction between the parties will be the one that is going to be considered especially for taxation purposes. 

Bonus Work.)

Stated simply, the article attached in the query is a criticism of the higher taxes imposed on the retirement benefits of single Australians compared to married Australians. In the article, the author condemns such higher tax as "unfair" on account of how there are more single households in Australia thus causing a greater burden to be imposed on those who are named to be the recipient of retirement benefits of a deceased person.