The Tax Adviser's Guide to Part IVA - A practical guide to the application of the general anti-avoidance rule
This new title from The Tax Institute is out now. Divided into five key sections, you can discover what each covers below.
Section 1: A practical approach to Pt IVA
The Tax Adviser’s Guide to Part IVA provides a practical approach to the understanding and application of Pt IVA. The focus is on the key elements – scheme, tax benefit and purpose – with each being considered in a structured way:
- a worksheet and accompanying instructions are provided in the book to assist in identifying the Pt IVA scheme;
- a series of flowcharts can be used to navigate through the process of determining the tax benefit; and
- a checklist of questions drawn from the case law is provided to enable an analysis of purpose to be undertaken and documented.
Also included in The Tax Adviser's Guide to Part IVA are two additional checklists:
- "red flags" drawn from the case law that may indicate a higher risk of Pt IVA applying; and
- "established positions" drawn from the case law and ATO rulings that can provide clearer direction on how Pt IVA may be applied.
Finally, commentary is provided on steps that can be taken to assist in mitigating the risk of Pt IVA being applied to deny a tax benefit.
Section 2: Part IVA in practice
This section provides a series of discussions and case studies on transactions and issues that affect SME taxpayers.
In some instances, for example, personal services income and wash sale transactions, there is already significant guidance from the courts and/or the ATO about how Pt IVA applies.
This existing guidance is used as the basis for the examples and discussions in this section. In other instances, most notably in respect of the CGT small business concessions, there is very limited existing guidance.
In the case studies contained in The Tax Adviser’s Guide to Part IVA, the examples have been constructed around hypothetical transactions that are reflective of the types of decisions and actions that SME taxpayers need to consider. The objective of each case study is to highlight a particular point or issue that will then be of assistance when assessing the application of Pt IVA to a real-life example.
This section covers:
- Personal services income
- CGT small business concessions
- Tax planning
- Wash sale-type transactions.
Section 3: The key legislative concepts
The correct way to apply Pt IVA is based on the words of the legislation itself. As tempting as it is to substitute another test, for example, does an arrangement pass a “smell test” or “bare the stamp of tax avoidance”, ignoring the actual words of Pt IVA risks reaching the wrong conclusion.
Shorthand ways of expressing the general anti-avoidance rule have their place, but the better the words of the legislation are understood, the better the shorthand/practical ways of approaching Pt IVA work.
This section of The Tax Adviser’s Guide to Part IVA is focused on providing an analysis of the key provisions of Pt IVA – essentially building your base knowledge of Pt IVA so that you are better equipped to make an informed and accurate assessment of the application of Pt IVA to particular circumstances.
The focus of this guide is on the general anti-avoidance provision in Pt IVA, rather than the various specific anti-avoidance provisions contained in Pt IVA and elsewhere in the tax law.
Section 4: The case law
This section of The Tax Adviser’s Guide to Part IVA includes a summary of each of the main cases decided in respect of Pt IVA.
The summaries include an outline of the core facts and an explanation of the main reasons that Pt IVA was held to apply or not apply. Where the case contributes significantly to the interpretation and understanding of Pt IVA, the key points (takeaways) from that case are discussed.
Understanding the case law is important in being able to interpret and apply Pt IVA. It is the case law which has provided the “meat” to the “bones” of the words of the legislation.
The four foundation cases that form the core of the interpretation of Pt IVA are Peabody, Spotless, Consolidated Press and Hart and are discussed in detail in terms of the Pt IVA trigger and the key takeaways from each case.
The remaining cases can be divided between other Federal Court decisions (including: Eastern Nitrogen; Zoffanies; Cumins; McCutcheon; News; Trail Bros; Citigroup; AXA; British American Tobacco; Ashwick; RCI; Futuris; and Macquarie Bank) and those dealing with tax-effective investment schemes (including: Vincent; Puzey; Cooke; Sleight; Calder; and Lenzo). The discussion of these cases is grouped on this basis and presented in chronological order.
Section 5: Other important elements
The final section of The Tax Adviser’s Guide to Part IVA covers:
- Issues when seeking a ruling on Pt IVA
- ATO guidelines on private rulings and Pt IVA
The role of the GAAR Panel
Part IVA determinations
- The legislation
- Usual process
- What is in a Pt IVA determination?
- Challenging a Pt IVA determination
- Is the issue of a Pt IVA determination subject to additional conditions?
- Multiple determinations
- What determinations will the Commissioner generally issue?
- Compensating adjustments.
Find out more about The Tax Adviser's Guide to Part IVA here.