• Service: Tax
  • Type: Regulatory update
  • Date: 16/04/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Brendon Lamers

Brendon Lamers
Partner, Tax Infrastructure & Property

+61 2 9335 7021

The sky is not falling - Part IVA changes 

by Brendon Lamers, Financial Services Specialist

Since 13 February 2013, when the proposed amendments to Part IVA were introduced into the House of Representatives (refer Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013), many commentators have claimed dire implications.

In essence, the changes to Part IVA were introduced to address perceived flaws exposed in recent court decisions and ensure:

  • the dominant purpose test becomes the decisive factor (that is, the fulcrum), and
  • tax benefit requires identification of a positive alternative (that is, the 'do nothing' argument no longer applies).

There is more uncertainty until the amended Part IVA is considered by the ATO and the courts. While the manner in which the courts would analyse recent cases will be different, it is likely the conclusions of the courts would be similar in most instances as under the prior law.


What this means for taxpayers is:

  • when considering proposed transactions, the commercial drivers for the shaping of a transaction must be clearly articulated early on
  • these commercial reasons should be contemporaneously documented
  • consideration must be given to potential alternatives and commercial reasons for discarding the alternatives are also documented.

In conclusion, similar doomsday assertions were made when Part IVA was introduced in 1981. Since then, the concept of tax avoidance has swung like a pendulum. The Courts are the great leveller and ultimately it is predicted that this will be the case again.



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