Anti-avoidance 2011

Dominant purpose: The Holy Grail of tax advisers

Source: Taxation In Australia Journal Article

Published Date: 1 Oct 2011


Having a clear, concise and unequivocal test for determining whether or not a client will have entered into a transaction for the dominant purpose of obtaining a tax benefit (for the purposes of Pt IVA of the Income Tax Assessment Act 1936) is very important to the successful practice of taxation law in a transactional context.

In this article, the author examines the philosophical nature of the enquiry into a person's "dominant purpose" for entry into, or carrying out of, a scheme. In the author's view, there is a statutory basis for the requirement for a comparison between the scheme as carried out and the counterfactual when assessing the dominant purpose of those who entered into or carried out the scheme, for reasons which are explored in the article.

The article concludes by examining several fundamental matters which taxpayers and their advisers should bear in mind when considering the application of Pt IVA to the facts of transactions.

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Anti-avoidance 2011

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