Australia Tax Alert - 2 March 2012
Changes proposed to strengthen general anti-avoidance rule
By Peter Madden, Alyson Rodi, Mark Hadassin, Vik Khanna, Claudio Cimetta and David Watkins
The Australian government announced on 1 March 2012 that it would strengthen the general anti‑avoidance rule, known as Part IVA, to ensure that the provision "continued to be effective in countering tax avoidance schemes that are carried out as part of broader commercial transactions." The amendments will apply to schemes entered into or carried out after 1 March 2012.
The announcement reflects in part the outcome of recent litigation where "some taxpayers have argued successfully that they did not get a 'tax benefit' because, without the scheme, they would not have entered into an arrangement that attracted tax." The government is concerned by taxpayer arguments that "they could have entered into another scheme that also avoided tax, deferred their arrangements indefinitely or done nothing at all. Such an outcome can potentially undermine the overall effectiveness of Part IVA and so the Government will act to ensure such arguments will no longer be successful."
The announcement is also intended to clarify that "Part IVA always intended to apply to commercial arrangements which have been implemented in a particular way to avoid tax. This also includes steps within broader commercial arrangements."
The government has stated that it will consult extensively as it is mindful that any amendments should not interfere with genuine commercial transactions and activities of taxpayers. The necessary amendments are intended to be introduced into Parliament in the second half of 2012.