Published on 01 Apr 16
by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
The penalties triggered by involvement in schemes designed to reduce tax?related liabilities are important elements of the penalty regime of the Taxation Administration Act 1953 (Cth). Both the scheme penalty applicable to taxpayers and the promoter penalty include a requirement that it is reasonable to conclude that an entity that entered into or carried out the scheme did so with the sole or dominant purpose of that entity or another entity obtaining a scheme benefit from the scheme. Although the phrasing of these tests borrows from the general anti?avoidance rule of Pt IVA of the Income Tax Assessment Act 1936 (Cth), they differ in several important respects.
This article examines the broader context and legislative history of these two scheme penalties as well as relevant court and tribunal decisions in order to determine the preferred construction of the purpose test in each case. In particular, this article considers whether these tests are, or should be, purely objective in nature or whether they admit into consideration the actual, subjective purpose of an entity taking part in the scheme.