Source: The Tax Specialist Journal Article
Published Date: 1 Jun 2012
Section 177EA, the specific rule in Pt IVA directed at franking credit trading and dividend streaming, is renowned and feared for its wide reach and low purpose threshold, which ensure that it is frustratingly easy for taxpayers to become entangled in its net. That being so, a capacity to recognise opportunities to challenge s 177EA determinations on judicial review or administrative law grounds can prove valuable, and an awareness of the key issues in the area and recent developments is essential knowledge for the tax adviser.
Part 1 of this article outlines some of the technical issues that can arise in challenging the exercise of the so-called “discretion” of the Commissioner to make a s 177EA determination. Part 2 of the article adds colour and meaning to Pt 1 by reviewing the terse and cryptic commentary in Mills v FCT on the discretionary aspects of s 177EA, and attempts to unpick some of the ciphers and codes woven into the first-instance judgment.
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