ARTICLE · 12 APRIL 2023

Section 100A Reimbursement Agreements: The ATO finalises its views…for now

McCullough Robertson

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The meaning of the phrase ‘ordinary family or commercial dealing' has been the subject of much attention from the ATO.

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Adria Askin

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The recent explosion of interest in the taxation of discretionary trust distributions would suggest that there has been a radical amendment of the Australian law. Nothing could be further from the truth.

What has occurred, particularly over the last eighteen months, is the culmination of multi-year campaign by the Australian Tax Office (ATO) to re-purpose a trust tax avoidance provision - section 100A of the Income Tax Assessment Act 1936 (ITAA36) - that was enacted in 1979, just prior to the introduction of the now familiar general anti-avoidance rules in Part IVA ITAA36.

Unlike Part IVA, section 100A is specifically constrained from acting where something was done in the course of an 'ordinary family or commercial dealing'. This phrase derives from a famous judgment of Lord Denning in the Judicial Committee of the Privy Council on the operation of section 260, the predecessor to Part IVA.¹

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