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Is it a “scheme”?


Section 177EA, which is within Pt IVA (the general anti-avoidance provision) of the Income Tax Assessment Act 1936, enables the Commissioner of Taxation to make a determination denying imputation benefits to taxpayers resulting from franked distributions. The section centres around the existence of a “scheme for a disposition of membership interests, or an interest in membership interests, in a corporate tax entity”. Recently, the Commissioner has shown, through various ATO announcements, a tendency to use the section to attack various aspects of the dividend imputation system.

This article argues that the Commissioner’s interpretation of s 177EA is too broad, and might catch arrangements and transactions which the section was not designed to cover. The article analyses the intended operation of section 177EA and its historical context. The authors then pose a basic scenario, and ask the reader to consider whether it would be regarded as falling within s 177EA.

Author profiles

Andrew Sinclair CTA
Andrew Sinclair, CTA is a partner in Cowell Clarke's Tax & Revenue practice group. As a tax and superannuation specialist with over 25 years experience, his qualifications are in law and as a Chartered Accountant. With a broad knowledge of corporate and business law, Andrew has specialist expertise in private client scenarios. This usually involves discretionary trusts, private companies and the diversity of views that family dynamics deliver. - Current at 22 January 2018
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Phillip White
Phil is an Associate in DMAW Lawyers’ Business Transactions and Advice team. Phil specialises in Federal and State taxes including income tax (including CGT), stamp duty, GST and land tax. Phil provides advice on commercial and taxation issues to a range of clients including large companies, family groups, private individuals and not-for-profit organisations. He has practised taxation law for over five years and has expertise in areas such as asset acquisitions and disposals, taxation planning and structuring, restructures, disputes with revenue authorities and trusts. - Current at 25 September 2019
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