Tax Avoidance: Causes and Solutions - Scholarly Commons Home

“It was the tax benefit so obtained, and applied in reduction of the home loan, that was the
wealth optimising aspect of the structure. It was the wealth optimising aspect of the
structure, not divorced from the borrowing, but giving the borrowing its distinctive
character, that constituted the scheme.”
The Australian Courts recognised that although schemes must be able to stand on their own,
they may also attribute a dominant purpose to a scheme on the basis of the particular aspect
of the scheme that gives the relevant taxpayer a tax benefit
In Hart 210 , the court also demonstrated that Part IVA of the ITAA 1936 applied to parts of
schemes rather than to a scheme as a whole:
“Far from the Part requiring reference only to the purpose of those who carry out all of
whatever is identified as the scheme, s 177D(b) specifically refers to it being concluded
'that the person, or one of the persons, who entered into or carried out ... any part of the
scheme' did so for the purpose of enabling the relevant taxpayer (alone or with others) to
obtain a tax benefit in connection with the scheme.”
7.2.1.5 Cancellation of Tax Benefit
In Australia, s 177F ITAA 1936 gives the Commissioner power to cancel the particular tax
benefit. In relation to assessable income, the Commissioner may:
(a) in the case of a tax benefit that is referable to an amount not being included in the
assessable income of the taxpayer of a year of income - determine that the whole or a part
of that amount shall be included in the assessable income of the taxpayer of that year of
income.
Section 177F(1)(b), (c), and (d) enable the Commissioner to adjust tax benefits refer to
allowable deductions, capital losses and foreign tax credits. Section 177F(3) provide that
under the s 177F(1) the Commissioner has included an amount of assessable income in the
income of a taxpayer who derived a tax benefit as the result of a scheme, then the same
assessable income should not be included in the assessable income of another taxpayer. The
consequential adjustments should adjust the tax position of other affected taxpayers.
210 Ibid.
72