Tax Avoidance: Causes and Solutions - Scholarly Commons Home

which is less than the whole of an arrangement or agreement may be capable of itself being
a scheme. 198 This assertion is further clarified by subsection 177A(3) as the following:
“The reference in the definition of “scheme” in subsection (1) to a scheme, plan, proposal,
action, course of action or course of conduct shall be read as including a reference to a
unilateral scheme, plan, proposal, action, course of action or course of conduct, as the case
may be.”
The definition of “scheme” clearly includes unilateral activities so the scope of the
provision is not limited by the requirement for there to be two or more parties to the
arrangement. And the Commissioner is also entitled to advance alternative schemes
including a narrower scheme within a wider scheme in support of a Part IVA
determination. 199
7.2.1.2 Tax Benefit
The definition of tax benefit is in Section 177C ITAA 1936 to include:
(a) an amount not being included in the assessable income of the taxpayer of a year of
income where that amount would have been included, or might reasonably be expected to
have been included, in the assessable income of the taxpayer of that year of income if the
scheme had not been entered into or carried out; or
(b) a deduction being allowable to the taxpayer in relation to a year of income where the
whole or a part of that deduction would not have been allowable, or might reasonably be
expected not to have been allowable, to the taxpayer in relation to that year of income if the
scheme had not been entered into or carried out;
This definition is prescriptive and covers the non-inclusion of assessable income, the
availability of deductions, capital losses and foreign tax credits where it is reasonable to
expect that, in the absence of the particular scheme, these tax characteristics would not have
occurred. This definition also provides that the tax benefit of interest occurred “in a year of
income” and this ensures that the application of the provision is not constrained by past,
current or future tax benefits.
198 Ibid per Callinan J.
199 Federal Commissioner of Taxation v. Peabody (1994) 181 CLR 359 at 382.
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