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The role of foreign tax outcomes in defending cases under Pt IVA

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Published on 01 Feb 13 by "THE TAX SPECIALIST" JOURNAL ARTICLE

Part IVA, the general anti-avoidance provision of the Income Tax Assessment Act 1936 (Cth), applies only where a taxpayer has a sole or dominant purpose of achieving a tax benefit. A tax benefit is a reduction in Australian tax liability when the scheme undertaken by the taxpayer is compared to a reasonable counterfactual. Recent case law suggests that, where taxpayers obtain both foreign and Australian tax benefits under a transaction, the foreign tax advantages may provide a defence to both the tax benefit and purpose elements of Pt IVA.

This article examines in detail recent cases which show that, where a tax arbitrage transaction is undertaken, it is possible to argue successfully that the purpose requirement of Pt IVA is not satisfied due to the foreign tax consequences of the transaction, and that tax arbitrage transactions that generate foreign tax benefits for a related party may be more likely to be protected from Pt IVA than tax arbitrage transactions which do not.

Author profile

Gareth Redenbach
Gareth Redenbach is a barrister practising in revenue law and has over 15 years of experience in tax matters. He has advocated in all trial divisions in Victoria as well as in the High Court, Full Federal Court and Victorian Court of Appeal. He has appeared for both taxpayers and the Commissioner and including for the successful taxpayer in the Full Federal Court decision on taxation of trusts in Lewski v Commissioner of Taxation (2017) 254 FCR 145 and for the successful Commissioner in the first domicile case decided post-Harding (Handsley v Commissioner of Taxation [2019] AATA 917). Prior to joining the bar, Gareth was in-house counsel for the Macquarie Group based in New York responsible for managing transfer pricing and international tax matters across the Americas region. Gareth was previously a Senior Associate at Minter Ellison focussed on tax controversy and began his career in the international tax department of PwC. Gareth is a Senior Fellow at the University of Melbourne teaching in their LLM program and also teaches in the Victorian Bar’s Readers’ Course on taxation matters. Gareth is the former Chair of the Corporate Section and Executive Committee member of the US Committee of Banking Institutions on Taxation. Gareth also regularly participates and speaks at TIA, OECD, IFA and other conferences. - Current at 14 June 2023
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