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The tax benefit pickle – making hindsight prophecies


Problems recently faced by the Commissioner of Taxation in establishing a “tax benefit” within Pt IVA (the general anti-avoidance provision) of the Income Tax Assessment Act 1936 (Cth) (ITAA36) threaten to undermine its efficacy. They are the result of the approach of the Federal Court to the construction and
application of s 177C(1) ITAA36. After unsuccessful attempts by the Commissioner to challenge this approach in the High Court, the government has announced changes to Pt IVA designed to address this.

This article explores the approach of the Federal Court and considers an alternative interpretation that has been advanced. It then considers whether the approach of the Federal Court accords with the tax benefit jurisprudence of the High Court in FCT v Spotless Services Ltd ((1996) 186 CLR 404), concluding that conformity with this jurisprudence might have made the changes announced by the government unnecessary.

Author profile:

David Babovic
David is a Barrister with Victorian Bar. He practises in taxation, constitutional and administrative law. David is also a sessional tutor in Taxation Law at the Melbourne Law School at The University of Melbourne. Current at 14 November 2011 Click here to expand/collapse more articles by David BABOVIC.
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