Tax Avoidance: Causes and Solutions - Scholarly Commons Home

“Whatever difficulties there may be in interpreting s.260, one thing at least is clear: the
section intends only to protect the general provisions of the Act from frustration, and not to
deny to taxpayers any right of choice between alternatives which the Act itself lays open to
them. It is therefore important to consider whether the result of treating the section as
applying in a case such as the present would be to render ineffectual an attempt to defeat
etc a liability imposed by the Act or to render ineffectual an attempt to give a company an
advantage which the Act intended that it might be given.”
In Casuarina Pty Ltd 160 the court also approved the view that the section was not intended
to deny taxpayers any right of choice between alternatives provided under the Act, and the
intention of section 260 was to protect the general provisions of the Act from frustration.
The choice principle was gradually extended, in Slutzkin 161 the taxpayer had the right to
choose the form of transaction which will not subject him to tax.
In Challenge 162 the appellant argued that section 99 cannot be used to defeat other
provisions such as section 191 of the Income Tax Act 1976 or to prevent a result which any
of them contemplate, i.e.: the choice principle. Richardson J considered the “choice
principle” and stated “Clearly the Legislature could not have intended that sec 99 should
override all other provisions of the Act so as to deprive the tax paying community of
structural choices, economic incentives, exemptions and allowances provided for by the
Act itself. …. .Again seeking and taking advantage of incentives provided through the tax
system designed to encourage particular economic activities could not be rejected out of
hand as contravening the section. Yet in many cases, but for the anticipated availability of
the tax benefit, the taxpayer would never have entered into the activity or transaction…. It
[section 99], too, is specific in the sense of being specifically directed against tax avoidance
and it is inherent in the section that but for its provisions the imputed arrangements would
meet all the specific requirements of the income tax legislation. In some cases, then, the
section imposes an additional requirement. In others, and this is a common application of
the section in cases where trusts and companies are employed for planning purposes, while
160 Casuarina Pty Ltd v FCT (1971) 127 CLR 62 (Full HCA).
161 Slutzkin v FCT (1977) 140 CLR 314.
162 CIR v Challenge Corporation Ltd (1986) 8 NZTC 5219.
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