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The curious case of the consolidation counterfactual - Macquarie

Published on 01 Mar 12 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

In the context of assessable income, a taxpayer obtains a tax benefit in connection with a scheme if an amount is not included in the assessable income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income if the scheme had not been entered into or carried out. When determining what would have happened, or might reasonably be expected to have happened, but for the scheme, it is necessary to identify what has variously been referred to as the “counterfactual” or the “alternative postulate”.

This article examines the recent decision of the Federal Court in the Macquarie Bank Limited case, in which the taxpayer successfully appealed against the Commissioner’s objection decision, and which has raised a curious counterfactual problem in the context of the consolidation provisions.

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Robert Allerdice

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