Address by Logan J to TTI - "Mission accomplished? - a perspective on Part IVA"
26 Sep 2012
On 6 September 2012, Justice Logan, a judge of the Federal Court, gave an address entitled "Mission accomplished? - a perspective on Part IVA of the Income Tax Assessment Act 1936" to The Tax Institute's Queensland Corporate Tax Retreat, held at Hyatt Regency, Sanctuary Cove, Gold Coast.
His Honour's address included remarks on the Government's proposed amendments to Part IVA and, in particular, amendments to the concept of tax benefit to eliminate the "do nothing" counterfactual or alternative postulate. He said:
"In business, doing nothing is always an opportunity cost. Not to do nothing may, in given circumstances, entail a breach of a director's duties. In cases involving schemes to which corporations are a party and as Part IVA presently stands, both in examining whether there is a tax benefit and in examining purpose actions which would manifestly entail a breach of a director's duties under s 180 of the Corporations Act are, I suggest, unlikely to give rise to a reasonable expectation that they would occur. Modifying s 177C in a way which would eliminate a "do nothing" postulate would be therefore be a major change to the present anti-avoidance regime.
Whether or not so to do is a matter for the value judgment of Parliament. It would be unfortunate if that value judgment were based on the flawed premise that cases in which the Commissioner's use of Part IVA failed inevitably point to a deficiency in the legislation, as opposed, perhaps, to a deficiency in case selection. At least in hindsight, Peabody and Eastern Nitrogen are examples of that."