Anti-avoidance Miscellaneous 2021

The new principal purpose test in anti-avoidance rules

Source: The Tax Specialist Journal Article

Published Date: 1 Jun 2021


The principal purpose test (PPT) is a relatively new concept that is found in the Multilateral Instrument (MLI), multinational anti-avoidance law (MAAL), diverted profits tax (DPT) and hybrid integrity rule. The ATO has previously indicated its approach to this test in LCR 2015/2 (MAAL) and LCR 2018/6 (DPT), and more recently in PS LA 2020/2 (MLI) and LCR 2021/1 (hybrid integrity rule). This article compares and contrasts the PPT in its various forms within these rules. The test is also compared to the
general anti-avoidance provisions of Pt IVA of the Income Tax Assessment Act 1936 (Cth). The authors explore how a court might approach a case requiring it to assess the PPT and offer an approach for taxpayers, in light of Pt IVA cases, to establish objective purpose to discharge the taxpayer's onus of proof on the balance of probabilities, and steps to mitigate the risks of being caught by a PPT.

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Anti-avoidance Miscellaneous 2021

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