Anti-avoidance tax rule (Part IVA): changes on the horizon

The general anti-avoidance rules in the income tax law, commonly referred to as Part IVA, are to be rewritten in 2012.

The Government's decision, announced by then Senator Mark Arbib on 1 March 2012, followed a series of court cases lost by the Commissioner of Taxation in attempting to apply Part IVA.

Part IVA-the existing law

Part IVA gives the Commissioner the power to cancel a 'tax benefit' received by a taxpayer in certain circumstances.

For Part IVA to apply:

• there must be a scheme within the meaning of the legislation;
• there must be a tax benefit in connection with the scheme; and
• the dominant purpose of the taxpayer must have been to obtain a tax benefit.