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The ATO has issued a Decision Impact Statement in relation to the Full Federal Court's decision in FCT v AXA Asia Pacific Holdings Ltd [2010] FCAFC 134; 2010 ATC 20-224; 189 FCR 204. The Commissioner was refused special leave to appeal to the High Court on 11 March 2011 - see FCT v AXA Asia Pacific Holdings Ltd [2011] HCATrans 63 (High Court, Heydon and Bell JJ, 11 March 2011).

The case concerned the application of Part IVA ITAA 1936 to the availability of partial scrip-for scrip rollover relief under Subdivision 124M of ITAA 1997 in respect of a capital gain from the disposal of a shareholding in a wholly-owned subsidiary.

The Decision Impact Statement states that the Commissioner's application for special leave to appeal to the High Court was essentially based on the notion that, in an income benefit case where there is a scheme from which a profit from a commercial endeavour has been achieved in a way that does not give rise to an assessable amount, you have the constituent elements of the phrase "the obtaining by a taxpayer of a tax benefit in connection with a scheme".

However, the Full Federal Court's decision demonstrated the criticality or primacy of the evidence in the application of Part IVA. On the basis of the evidence accepted by the trial judge, the Court held that AXA did not obtain a tax benefit.

Thus, states the Decision Impact Statement, "a clear implication of the Court's decision is the need for the Commissioner to test any evidence supporting assertions or statements by taxpayers about what would or might reasonably be expected to have happened absent the scheme. Depending on the particular facts of a case, it may be necessary to undertake a more forensic exercise in analysing all possible counterfactuals subject to the proviso that they are not speculative or have no direct relevance to the impugned scheme."

The Court's conclusion on the evidence in this case was that a different taxpayer, AXA Health, would have obtained a tax benefit if the scheme had not been entered into or carried out. The Decision Impact Statement states that this "raises implications for future cases. At least in income benefit cases, the Commissioner may need to consider raising multiple assessments."

Finally, the ATO says that it will update PS LA 2005/24: application of General Anti-Avoidance Rules.


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