Tax & ATO News Australia

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Federal Government amends Part IVA restrospectively

In the last two years, the ATO has lost nine out of the fifteen Part IVA cases. In a number of cases including Futuris, RCI and AXA, the Court held that Part IVA did not apply because the taxpayer had demonstrated that if the scheme has not been entered into or carried out, it was a reasonable assumption that the taxpayer would not have proceeded with the transaction and therefore did not obtain a “tax benefit”.

In response, the ATO has pressured the Federal Government to amend Part IVA. On 1 March 2012, the Federal Government announced that Part IVA will be amended retrospective from 1 March 2012. In making the announcement, Senator Arbib stated that, “The Government amendments will confirm 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.”

Given that the details of the amendments are yet to be determined, it seems outrageous that the amendments will be enacted retrospectively. Taxpayers will just have to wait until the Federal Government introduces the amendments in Parliament. The Federal Government has indicated that it intends to introduce the amendments in Parliament in Spring 2012, yet it will be interesting to see whether the Federal Government meets this deadline.

Posted in: Tax & ATO News Australia at 17 September 12