Tax Avoidance: Causes and Solutions - Scholarly Commons Home

operation of the section in Australia. Part IVA was intended to overcome the difficulties
with the prior law and to provide “an effective general measure against the tax avoidance
arrangements that – inexact though the words may in legal terms be – are blatant, artificial
or contrived” 196 .
Part IVA gives the Commissioner the discretion to cancel a ‘tax benefit’ that has been
obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a
scheme to which Part IVA applies. This discretion is found in subsection 177F(1).
Before the Commissioner can exercise the discretion in subsection 177F(1), there are three
basic requirements of Part IVA must be satisfied. These requirements are that:
(i) a ‘tax benefit’, as identified in section 177C, was or would, but for subsection 177F(1),
have been obtained;
(ii) the tax benefit was or would have been obtained in connection with a ‘scheme’ as
defined in section 177A; and
(iii) having regard to section 177D, the scheme is one to which Part IVA applies
7.2.1.1 Scheme
The term ‘scheme’ is defined in s 177A (1) ITAA 1936 to mean:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or
implied and whether or not enforceable, or intended to be enforceable, by legal
proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct.
This definition is very broad. It encompasses not only a series of steps which together can
be said to constitute a “scheme” or a “plan” but also the taking of but one step. 197 The use
of the singular, narrow words, proposal, action or course of action in s177A(1)(b) in
juxtaposition with, agreement or arrangement in s177A(1)(a) indicates that something done
196
Income Tax Laws Amendment Bill (No 2) 1981: Explanatory Memorandum (Canberra: AGPS,
1981) at p. 2.
197
Federal Commissioner of Taxation v. Hart [2004] HCA 26 Per Gummow and Hayne JJ.
66