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The world according to GAAR

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Published on 01 Dec 12 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

Australia’s current general anti-avoidance rule, which defines tax avoidance as a scheme entered into with the dominant purpose of obtaining a tax benefit, has been criticised for creating too much taxpayer uncertainty, with the main object of such criticism being the test to determine the taxpayer’s dominant purpose. To determine whether the taxpayer has such a dominant purpose, in principle the courts and the Commissioner of Taxation consider eight specific factors, although how much consideration is to be given to each factor is left to the court’s determination. Based on a sample of 95 cases, this paper uses logistic regression to infer the direction and impact of these factors, as well as additional issues such as whether the scheme resulted in a tax benefit, on the probability of an outcome favouring the Commissioner.

The suggestive inferences should be extremely useful to litigants within Australia’s taxation system and in those jurisdictions considering implementing a general anti-avoidance rule. The inferences also cast a spotlight on deficiencies within Australia’s current general anti-avoidance rule. These deficiencies raise various policy issues including whether Part IVA is operating as intended, whether it is helping to create a more equitable tax system, and whether the government or the judiciary controls the boundaries of tax avoidance. The inferences also raise issues with respect to the administration of tax avoidance under the cooperative compliance model. In addition, the inferences highlight issues with the use of specific anti-avoidance rules instead of, or in concert with, a general anti-avoidance rule. These policy issues are discussed.

Author profiles

Dr Robert Whait CTA
Dr Rob Whait, CTA is a Senior Lecturer in Taxation at Adelaide University. He is the Founder and Director of Adelaide University Tax Clinic which is part of the National Tax Clinic Program and provides free assistance and representation to those who cannot afford a tax agent and cannot complete their tax by themselves. His research is directed toward making the tax system fairer and easier to negotiate by removing legal and administrative barriers, improving consistency in ATO decision making and ensuring that taxpayers’ rights are protected, especially for the vulnerable. His research also focuses on tax and superannuation reforms for workers participating in the Pacific Australia Labour Mobility Scheme. Prior to becoming an academic, Rob was employed for several years in the tax profession in small and large firms, including one of the ‘Big 4’. - Current at 16 February 2026
Click here to expand/collapse more articles by Robert Brenton Whait.
Gerald E. WHITTENBURG
Geralds works at the Charles W. Lambden School of Accountancy, College of Business Administration, San Diego State University, San Diego, CA.
Ira Horowitz
Ian works at the Management Information Systems, College of Business Administration, San Diego State University and Informations Systems and Operations.

 

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