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PART IVA: FROM HERE TO ...
By Terry Murphy
This article concerns the evolution by the courts of Part IVA, especially in the context of commercial arrangements which give rise to tax benefits. In doing so, this article also considers issues relating to the objective facts which must be established as a precondition to the Commissioner's exercise of discretion and circumstances in which that discretion may be exercised in favour of a taxpayer, notwithstanding that the taxpayer has obtained a tax benefit as a consequence of a scheme to which Part IVA applies.
The general anti-avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936 ("ITAA36") were introduced in 1981 to counter the rampant tax avoidance industry which had proven itself largely immune to specific anti-avoidance measures (such as ss 82KH to 82KL) and untroubled by the general anti-avoidance provision, s 260 (which, ironically, was soon to be resuscitated by the High Court in Gulland & Ors v FC of T[1]). Since then, the Part has been legislatively extended to deal with capital gains and losses, exempt income, foreign tax credits, franking credits and, in the context of the recent capital gains reforms, the conversion of income into capital. A further amendment to permit the Commissioner to apply the Part to all the participants in a scheme has also been foreshadowed by the government. Presumably this will be of an administrative or procedural nature and will not preclude a taxpayer from establishing that, even if the Part applied to all other participants, it did not apply to him or her.
When it was introduced, the Treasurer told Parliament that the Part's focus was on "blatant, artificial and contrived" tax avoidance arrangements. These were, broadly, arrangements whereby a taxpayer could enter into an artificial transaction without any commercial basis solely for the purpose of creating deductions (or eliminating assessable income) without suffering a commensurate fiscal cost. In many cases the real cost was the fee paid to the promoters. They included arrangements involving mortgage discharge fees, trading stock and consumable supplies which were often financed by non recourse loans or for which the consideration was not payable until the distant future. The Part has been largely effective against such arrangements.
However, the Part is now being applied to arrangements which are quite clearly commercial in nature but which have been structured in such a way as to maximise any tax deductions or to reduce or defer assessable income. The difficulty is that, whilst the Part is not intended to apply to ordinary commercial arrangements, such arrangements are often shaped by tax considerations. The question then is how far can a commercial transaction be manipulated to obtain a taxation advantage without attracting the Part. In dealing with this question, the courts are likely to deal with a number of other issues which have yet to be considered.
Part IVA has now been considered by the courts in a number of cases, the most important of which are FC of T v Peabody[2] and FC of T v Spotless Services Ltd.[3] Other cases include Grollo Nominees Pty v FC of T,[4] CC (New South Wales) Pty Ltd (In Liquidation) v FC of T,[5] WD and HO Wills (Australia) Pty Ltd v FC of T,[6] FC of T v Consolidated Press Holdings Ltd,[7] Eastern Nitrogen Ltd v FC of T[8] and Metal Manufactures Ltd v FC of T.[9]
As the High Court pointed out in Spotless, the Part:
... is to be construed and applied according to its terms, not under the influence of "muffled echoes of old arguments" concerning other legislation... Part IVA is as much a part of the statute under which liability to income tax is assessed as any other provision thereof.[10]
The High Court in Spotless also stated that Part IVA operates where:
(i)there is a "scheme" as defined in s 177A; (ii) there is a "tax benefit" which, in relation to income amounts, is identified in para (a) of s 177C(1) as an amount not included in the assessable income of the taxpayer where that amount would have been included or might reasonably be expected to have been included in that assessable income for the relevant year of income if the scheme had not been entered into or carried out; (iii) having regard to the eight matters identified in para (b) of s 177D, it would be concluded that there was the necessary dominant purpose of enabling the taxpayer to obtain the tax benefit; and (iv) the Commissioner makes a determination that the whole or part of the amount of its tax benefit is to be included in the assessable income of the taxpayer (s 177F(1)(a)). The Commissioner then "shall take action as he considers necessary to give effect to that determination" s 177F(1).[11]
Importantly, as the High Court pointed out in Peabody:
Under s 177F(1), the Commissioner's discretion to cancel a tax benefit extends only to a tax benefit obtained in connexion with a scheme to which Pt IVA applies. The existence of the discretion is not made to depend upon the Commissioner's opinion or his satisfaction that there is a tax benefit or that, if there is a tax benefit, it was obtained in connexion with a Pt IVA scheme. Those are posited as objective facts.[12]
Although a "scheme" is broadly defined in s 177A, the courts have yet to determine the ambit of the term and, in particular, where a scheme begins and ends. The High Court did, however, say in Peabody that:
Part IVA does not provide that a scheme includes part of a scheme and it is possible, despite the very wide definition of a scheme, to consider a set of circumstances which constitutes only a part of a scheme and not a scheme in itself. This will occur where the circumstances are incapable of standing on their own without being robbed of all practical meaning.[13]
However the Court went on to say:
The erroneous identification by the Commissioner of a scheme as one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit to such a scheme will result in the wrongful exercise of the discretion conferred by s 177F(1) only in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind however, may have that result – where, for example, it leads to the identification of the wrong taxpayer as a recipient of the tax benefit. But the question in every case must be whether a tax benefit, which the Commissioner has purported to cancel, is in fact a tax benefit obtained in connexion with a Pt IVA scheme and so susceptible to cancellation at the discretion of the Commissioner.
Of course, the Commissioner may be required to supply particulars of the scheme relied on.... But the Commissioner is entitled to put his case in alternative ways. If, within a wider scheme which has been identified, the Commissioner seeks also to rely upon a narrower scheme as meeting the requirements of Pt IVA, then in our view, there is no reason why the Commissioner should not be permitted to do so, provided it causes no undue embarrassment or surprise to the other side. If it does, the situation may be cured by amendment, provided the interest of justice allows such a course.[14]
What emerges is that a scheme is one or more events or transactions which actually occurred (rather than which might have occurred) and, importantly, must be identified independently of the tax benefit. This is clear not only from the terms of s 177A and 177C but also because, if the scheme was to be defined by reference to the tax benefit asserted, there would be a tax benefit in virtually every case. It is also possible to have a scheme within an overall commercial arrangement (Spotless).
The precise identification of the scheme will be a question of fact and it is conceivable that minor changes in a transaction could have radically different results. For example, if a taxpayer borrows money for a legitimate commercial purpose on the basis that interest is to be paid in advance, and subsequently pays that interest in advance thereby obtaining a tax deduction in a given year of income, it is unlikely that the prepayment of the interest would itself be considered to be scheme. That is because the prepayment of interest has no practical meaning other than in the context of the loan. The position is, however, different if a taxpayer borrows money with an option to prepay interest. In that case, the exercise of the option may be a scheme in itself because it constitutes a set of circumstances which is capable of standing on its own without being robbed of all meaning. Whether it is a scheme to which Part IVA applies (s 177D) is another question.
A significant difference between the decision of the High Court in Peabody and that of the Federal Court in that case was that the High Court permitted the Commissioner to put his case in alternate ways. As was demonstrated in Spotless, neither the Commissioner nor the Court is confined to the scheme originally relied upon. However, whilst the Commissioner may rely upon a narrower scheme within a scheme which he has identified, it is unclear whether he can rely on a wider scheme. The better view is that he can because, as the Court said in Peabody, errors of detail in identifying a scheme are unlikely to result in the wrongful exercise of the discretion under s 177F. In addition, the courts have made it clear that they wish to deal with the substantive issue (namely the determination of a taxpayer's taxable income) and not be distracted by procedural issues.[15]
However, the Commissioner (and the Tribunal or Court) is still limited by the need to accord procedural fairness in any review or appeal proceedings. Broadly, this requires the taxpayer being permitted an adequate opportunity to establish that the assessment is excessive. An example of a lack of procedural fairness in the context of Part IVA occurred in Fletcher v FC of T (No.1)[16] where the Full Court of the Federal Court referred the case back to a differently constituted Tribunal because the first Tribunal had made a decision based on the application of Part IVA even though Part IVA had not been argued. It follows that the Commissioner ought not be permitted to rely upon a wider scheme than that with which he has identified if, for example, the taxpayer is not given sufficient notice to enable him to adduce any relevant evidence and make the appropriate submissions.
In determining whether a taxpayer has obtained a tax benefit under s 177C it is necessary to hypothesise what would otherwise have happened. In Peabody, the Court said that:
... a reasonable expectation requires more than a possibility. It involves a prediction as to events which would have taken place if the relevant scheme had not been entered into or carried out and the prediction must be sufficiently reliable for it to be regarded as reasonable.[17]
Ultimately, this will be question of fact as will be the existence of the required nexus between the scheme and the tax benefit. If the Commissioner relies upon a wide scheme, especially one in which the taxpayer has a number of options, he may face difficulties in making a prediction which is "sufficiently reliable for it to be regarded as reasonable". In Peabody, the scheme originally identified by the Commissioner was Mr Peabody's conduct commencing with the purchase of the minority shareholder's shares and ending with the transfer of those shares to the company to be floated, Pozzolonic Industries Limited. As the Court pointed out, the difficulty faced by the Commissioner was not in establishing that a tax benefit was obtained but in identifying the taxpayer who obtained that benefit. That taxpayer was, if anybody, Loftway Pty Ltd and not Mrs Peabody (as a beneficiary of the Peabody Family Trust) because an essential element of the scheme was the method of financing the purchase of the shares which, using rebateable dividends rather than interest, was not open to a trust.
The schemes to which Part IVA applies are schemes entered into for the purpose, or dominant purpose, having regard only to the matters set out in s 177D, of obtaining a tax benefit. In this regard, in Spotless the High Court said that the conclusion required by s 177D(b) was that of a reasonable person and that the dominant purpose, in its ordinary meaning, indicates:
That purpose which was the ruling, prevailing, most influential purpose...[18]
Furthermore:
... those criteria would be met if the dominant purpose was to achieve a result whereby there was not included in the assessable income an amount that might reasonably be expected to have been included if the scheme was not entered into or carried out.[19]
In Peabody, the Full Court of the Federal Court said that, in determining the dominant purpose of a scheme or part of a scheme, s 177D required a balance between the commercial and tax elements of an arrangement.[20] As the High Court pointed out in Spotless, a particular course of action may be both "tax driven" and bear the character of a rational commercial decision and the presence of the later characteristic does not determine the answer to the question whether, within the meaning of Part IVA, a person entered into or carried out a "scheme" for the dominant purpose of enabling the taxpayer to obtain a tax benefit.[21] Thus, where, as in most commercial transactions, the shape of the transaction is determined to some extent by taxation factors the question is still whether the dominant purpose of a person who enters into or carries out the scheme or part of the scheme is to obtain a tax benefit. If the tax benefit is merely incidental, it will not attract the operation of the Part. The difficulty in determining a dominant purpose is discussed in Part 3 below.
It should also be noted that the purpose need not be that of the taxpayer or any other party to the scheme or part thereof directly. In Consolidated Press, it was held that the purpose of the taxpayer's taxation advisors could be imputed to the taxpayer (though that does not necessarily mean it would be the taxpayer's dominant purpose).
The exercise of the discretion depends upon the establishment of a scheme (s 177A), to which Part IVA applies (s 177D) as a consequence of which a taxpayer obtains a tax benefit (s 177C).
These are all preconditions to the exercise of the discretion to make a determination, for example, to include an amount in the taxpayer's assessable income.[22] These issues are developed in Part 4.2 below.
As a general principle the Part ought not apply to a transaction which is entered into for a commercial (ie non tax) purpose but affords an incidental tax benefit. Thus, for example, in WD and HO Wills, Sackville J allowed the taxpayer's appeal against the Commissioner's decision to apply the Part to disallow a deduction for what were essentially insurance premiums paid to a captive insurer established by the group of which the taxpayer was a member. His Honour allowed the taxpayer's appeal because he found that the commercial benefits, namely the indemnity in respect of claims which may be made as a consequence of cigarette smoking, access to reinsurance and, for the group, underwriting profits and better risk management, outweighed the incidental tax benefit. Importantly, in reaching his decision, his Honour took into account the commercial benefit which would accrue to the group but which would not benefit the taxpayer directly (eg underwriting profits). This is consistent with s 177D, which requires consideration of the effect of the arrangement on persons other than the taxpayer and only applies if the dominant purpose is to enable the taxpayer to obtain a tax benefit.
The difficulty in determining the dominant purpose of a party to a transaction is illustrated by the recent decisions of the Federal Court in Eastern Nitrogen and in Metal Manufactures. In each case the taxpayer claimed a deduction for lease payments made to a financier under a sale and leaseback arrangement. In the first case, Drummond J found that the payments were not deductible (because the plant was a fixture and the payments were not made for the possession of the plant or to preclude the financier exercising any rights to take possession) and hence were not incurred for the purpose of producing assessable income. Whilst unnecessary to do so, he considered the application of Part IVA. In a very detailed analysis of the matrix of facts surrounding the transaction, his Honour concluded that the Commissioner could rely on the Part because the dominant purpose of the parties was to obtain a tax benefit. In particular, he found that the taxpayer had not needed to rearrange its financing, the sale price was referable to the taxpayer's financial constraints rather than to the real value of the plant involved (which was substantially less) and it was never envisaged that the financier would ever take possession of the complex even when the lease ended. Most importantly, his Honour noted that the proposal had originated with a bank and, essentially, the taxpayer had merely acquired one of its financial products rather than adopt a transaction to meet an identified concern of its business.
The same issues were subsequently considered by Emmett J in Metal Manufactures which also concerned a sale and leaseback transaction. In this case, the Court held that the transaction was implemented so as to enable the taxpayer to replace short term debt with medium to long term debt and that, although the obtaining of the deduction may have been a purpose of the transaction, it was not the dominant purpose. Both decisions are now on appeal to the Full Court.
The more difficult issue is the shaping or manipulation of a transaction to obtain or to maximise a tax benefit. As the High Court pointed out in Spotless, revenue considerations may "shape" a transaction or determine which of a number of alternative forms of the transaction will be adopted.[23] What needs to be borne in mind is that, in each case, the question is whether a person entered into a scheme or part of a scheme for the dominant purpose of obtaining a tax benefit.
Spotless illustrates the issue. There can be no doubt that the transaction, namely the lending of money, was a legitimate commercial transaction into which the taxpayer entered for commercial reasons. However, the Part was attracted by the taking of those steps which ensured that the interest was derived and taxed off shore without creating any undue risks that the funds might be lost. In particular, the Court identified the scheme as being the particular means adopted to obtain the maximum return of the money after payment of all applicable costs, including tax and found that the taxpayer's dominant purpose in the adoption of the particular scheme was the obtaining of a tax benefit. This was because it was the obtaining of a tax benefit which directed the taxpayers to take steps which they otherwise would not have taken by entering into the scheme.[24] It follows that the result may well have been different had, for example, the taxpayer's funds already been offshore and had the Australian bank bill interest rate not been 4.5% more than that available offshore.
A similar result was arrived at by the Court at first instance and on appeal in Consolidated Press. There, as part of its involvement in a syndicate formed to take over a United Kingdom company, BAT Industries Plc, the taxpayer incorporated non resident United Kingdom companies (of which it was the sole beneficial shareholder) which would use funds borrowed by the taxpayer and subscribed for redeemable preference shares in an interposed company which, in turn, subscribed foreshores in the non resident United Kingdom companies which, in turn lent the money to the takeover vehicle via a Singaporean company. The relevant scheme was the acquisition of the redeemable preference shares in an interposed company and the acquisition by that interposed company of redeemable preference shares in the non resident United Kingdom companies. The relevant tax benefit was the deductibility of interest on the monies borrowed by the taxpayer (which would otherwise have been precluded by s 79D). The Court found that the purposes for the entry into the scheme were to obtain the deduction for interest on the borrowed funds which s 79D would otherwise have precluded and to adopt a structure which did not detract from tax credit relief. Of the two purposes, the Court found that the obtaining of the interest deduction was the more immediate.
There are a number of other issues, which have yet to be resolved by the courts. These are discussed below.
Whilst the High Court in Peabody and Spotless did not expressly consider the relevance of the subjective intention of a person or persons in determining dominant purpose under s 177D(b), the issue was considered by Sackville J in CC (NSW)[25] and by Drummond J in Eastern Nitrogen.[26] Sackville J concluded that subjective intention was irrelevant whilst Drummond J considered that it was relevant to the proof of the matter or issue the subject of s 177D(b)(i) namely "the manner in which the scheme was entered into or carried out".
The view of Sackville J is to be preferred because:
(i) section 177D uses the word "purpose", a word which in other contexts has been frequently distinguished from motive (see, for example, Ure v FC of T[27]);
(ii) whilst Parliament chose to list eight separate matters set out in s 177D(b), it did not include "motive";
(iii) if motive was to be a criterion, it is difficult to see the need for many of the matters set out in the subsection; and
(iv) Parliament chose the structure of s 177D(b) over that of, for example, a tax avoidance agreement, which it has previously used in s 82KH.
Once the three preconditions (namely that there be a scheme, a tax benefit and the scheme be a scheme to which the Part applies) have been established, the Commissioner has a discretion under s 177F to make a determination. The very existence of the discretion means that there are some circumstances in which the Commissioner may decline to apply the Part notwithstanding that a taxpayer has obtained a tax benefit as a consequence of a scheme to which Part IVA applies. There are no legislative guidelines for the exercise of the discretion but circumstances in which that discretion might be exercised in favour of the taxpayer include:
(i) where the obtaining by the taxpayer of a deduction (or of the exemption for income) is in circumstances expressly provided for by the Act such as deductions under s 73B of ITAA36 for research and development expenditure and deductions for film expenditure under Div 10B or 10BA of ITAA36. That is not to say that it cannot reply to every such deduction. Clearly the Part may apply if the transaction is excessively manipulated to obtain a deduction or to increase the deduction which would otherwise have been allowable;
(ii) where another anti-avoidance provision applies to another taxpayer. Whilst the operation of the Part is not limited by any other provision of the Act (s 177B(1)) specific provisions disallowing a deduction must be applied before the Part is applied (s 177B(3)). There are, however, a number of cases where anti-avoidance provisions apply to tax a person other than the taxpayer who might be assessed under Part IVA. One example is the trust stripping provisions in s 100A in which an amount is assessed to the trustee under s 99A. There would be many circumstances where the Commissioner could apply Part IVA to such a transaction and assess the beneficiary. However, the application of both s 100A and Part IVA would amount, in effect, to double taxation (albeit of different taxpayers);
(iii) where the taxpayer assessed has not obtained any fiscal benefit as a result of the scheme. One such case may have been Peabody because there, the profit made on the sale of the shares by the Peabody Family Trust would have been of a capital nature to which Mrs Peabody, if she had not been entitled to a distribution of that capital, would not have obtained the benefit. Another such case is where the trustee of a discretionary trust diverts an income stream to another person. This was essentially the case (albeit in a far more complex structure of trusts) in Grollo but, for various reasons, the issue was not relevant. In such a case, the relevant taxpayer may be an object of the trust who has no control over its activities but who, by being presently entitled to a share of the income of the trust, is assessable in respect of all or part of the amount included in the net income of the trust as a consequence of the application of Part IVA even though he or she does not obtain any fiscal benefit. Other factors including the relationship of the object to those who actually benefited from the scheme will of course be relevant;
(iv) where there is no loss to the revenue. In the context of income tax this could arise for a number of reasons such as, in the case of an assignment of income, the assignee being liable to pay the same amount of tax as the assignor would otherwise have been liable to pay. Another circumstance is where a taxpayer
structures an arrangement to make it tax neutral by ensuring that it does not itself give rise to assessable income which would not have otherwise arisen. It may also arise in the context of other taxes such as fringe benefits tax if, for example, the Commissioner were to disallow a deduction in circumstances where the transaction gave rise to a liability to fringe benefits tax (which, not being income or a deduction, cannot be mitigated under the compensating adjustment provisions of s 177F(3));
(v) where the making of the determination (and any consequential assessment) would not give rise to an increase in the tax actually payable. This may be because the taxpayer is a bankrupt. It is also possible to envisage some circumstances in which the revenue might suffer because of the requirement in s 177F(3) that the Commissioner make compensating adjustments. This would be the case if the taxpayer was bankrupt and the person in respect of whom the compensating adjustment was to be made would, as a consequence of the scheme, derive assessable income or not be entitled to a deduction; and
(vi) where the taxpayer has acted in accordance with a previously accepted practice, or with the knowledge and implicit agreement, of the Commissioner.
Once the Commissioner has made a determination he is required by s 177F(1) to "take such action as he considers necessary to give effect to that determination".
Two questions arise: the first is what the range of such action is and, in particular, whether the Commissioner is required to issue an assessment (there being no express requirement to do so) and the second is whether the Commissioner can issue an assessment to one taxpayer based on a determination made in respect of the income of another taxpayer.
The first question was considered in Fletcher v FC of T (No.2);[28] and FC of T v Jackson[29] In Fletcher, the Court held that the Tribunal could exercise the discretion (but in the circumstances of that case, had not accorded the taxpayer procedural fairness) and having made a determination, the Commissioner could exercise his power to disallow an objection[30]. In Jackson, the Commissioner sought to rely on Part IVA after disallowing the taxpayer's objection without issuing an amended assessment. After pointing out that the Court in Fletcher had not addressed how the Tribunal should give effect to the determination, the Court held that, because in the circumstances of that case the Commissioner would have to amend a particular of the taxpayer's assessment, he needed to amend the assessment. That is, in the circumstances of that case, a determination could only be given effect by the making of an assessment.
In allowing the taxpayer's appeal on this point, the Court was not therefore required to consider generally whether an assessment was required in every case. Similarly, the Court was not required to consider whether the Tribunal could make an assessment itself (though, given its power to refer the matter back to the Commissioner with directions, this is likely to be academic) or what other action s 177F might authorise the Commissioner to take. Clearly, the requirement that "he shall take such action as he considers necessary to give effect to that determination" does not of itself limit him to the making of an assessment. Nonetheless, one would expect that in the vast majority of cases he would do so.
The second question arose in Grollo where the Commissioner determined to include an amount in the assessable income of Grofam Pty Ltd as trustee of the Grofam Unit Trust and to amend the assessments of the ultimate beneficiaries. After some deliberation, the Court found that Part IVA applied to schemes whereby the net income of a trust estate was reduced and that such assessments (of the beneficiaries who may have had no part or even been aware of the scheme) were permitted. There can be little doubt that the Part applies to a scheme which reduces the amount assessed to a beneficiary under ss 97 or 98 or to a trustee under ss 99 or 99A without reducing the net income of the trust (although in the case of discretionary trust there may be some issue as to the tax benefit). In some cases, it may be also appropriate for the Commissioner to exercise his discretion (see Part 4.2(iii) above).
Once the Commissioner has made a determination he may make a compensating adjustment under s 177F(3) to the income or deductions of the same or another taxpayer. Even though the subsection uses the term "may" which ordinarily implies a discretion, the better view is that the Commissioner does not have a discretion and that the word “may” should be read as "must" (see, for example, in the context of the reasonably analogous circumstances of the allowance of a rebate under s 46(3) of ITAA36, Finance Facilities Pty Ltd v FC of T).[31] Such an interpretation is consistent with the structure of the Part read as a whole, the purpose of which is to neutralise tax avoidance schemes rather than to impose double tax.
Whilst significant penalties may be levied as a consequence of the application of Part IVA (see s 226 of ITAA36), those penalties may be significantly remitted under s 227. Thus, in Grollo the Court upheld that determination by Olney J sitting in the Administrative Appeals Tribunal that the appropriate penalty should be 5% and not 45% as would have been levied but for an agreement between the parties (the effect of which was to reduce the actual penalty to less than 20% of the tax avoided). This was because the taxpayers (and their advisors) had made an honest mistake in respect of a contentious item. Section 226 has now been amended to provide for penalties of 50% or 25% if it is reasonably arguable that Part IVA does not apply. Hence, in similar circumstances the penalty is likely to be 25% but it may still be remitted to a lower rate under s 227.
The Commissioner has recently adopted a "carrot and stick" approach to tax avoidance involving what would appear to be commercial arrangements such as afforestation, film and viticulture investments. The "carrot" has taken the form of product rulings whilst the "stick" has taken the form of the pursuit of taxpayers who have entered into arrangements which the Commissioner considers to be too aggressive. Whilst it is likely that the "carrot" will, as a matter
of practice, prove to be more effective in dealing with arrangements which are structured to maximise any income tax benefits, the principles underlying the application of the Part to commercial arrangements will be developed as a consequence of the "stick" approach. In this regard, it is fortunate that the same Full Court will hear the appeals in Eastern Nitrogen and Metal Manufactures and that the High Court will consider Consolidated Press. However, it must be remembered that s 177D requires any scheme to be evaluated by reference to the eight specified matters and does not prescribe with any precision those schemes to which the Part applies. These matters inevitably involve questions of degree. For this reason these appeals are important not only because they will develop the principles underlying the application of the section but also because they will give further guidance in identifying the circumstances in which the Part is to be applied to commercial arrangements.
Terry Murphy B Com LLM is a Barrister practising in Melbourne. He has recently become a member of the Advisory Board to the Journal of Australian Taxation.
[1] 85 ATC 4765.
[2] 94 ATC 4663 ("Peabody").
[3] 96 ATC 5201 ("Spotless").
[4] 97 ATC 4585 ("Grollo").
[5] 97 ATC 4123 ("CC (NSW)").
[6] 96 ATC 2023 ("WD and HO Wills").
[7] 99 ATC 4945 ("Consolidated Press").
[8] 99 ATC 5163 ("Eastern Nitrogen").
[9] 99 ATC 5229 ("Metal Manufactures").
[10] 96 ATC 5201, 5205.
[11] 96 ATC 5201, 5204-5205.
[12] 94 ATC 4663, 4669.
[13] 96 ATC 4663, 4670.
[14] 96 ATC 4663, 4669
[15] See, for example, FC of T v Australia and New Zealand Savings Bank Limited 94 ATC 4844 in which the Court permitted the Commissioner to change his grounds for disallowing an objection and FC of T v Richard Walter Pty Ltd 98 ATC 4067 in which the Court sanctioned the making of alternative assessments.
[16] 88 ATC 4834.
[17] 94 ATC 4663, 4671.
[18] 96 ATC 5201, 5210.
[19] 96 ATC 5201, 5206.
[20] 96 ATC 4104, 4117
[21] 96 ATC 5201, 5206.
[22] Peabody 94 ATC 4663, 4669.
[23] 96 ATC 5201, 5206.
[24] 95 ATC 5201, 5211
[25] 97 ATC 4123, 4146-4147.
[26] 99 ATC 5163, 5179.
[27] 81 ATC 4100
[28] 88 ATC 4834 ("Fletcher").
[29] 90 ATC 4990 ("Jackson").
[30] 88 ATC 4834, 4846.
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