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Tax Avoidance in Australia: Results and Prospects

Published online by Cambridge University Press:  24 January 2025

John Passant
John Passant*
Affiliation:
Faculty of Law, Australian National University
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Extract

The recent High Court decision of FCT v Peabody has raised once again the question of tax avoidance and how to deal with it. This article is a contribution to the discussion. The first part of the paper looks at the history of the judicial treatment of s 260, the old general anti-avoidance provision in the Income Tax Assessment Act 1936 (Cth) (the Assessment Act). There is then an analysis of Part IV A, s 260's bastard child, and the Peabody decision. I apply some of the historical lessons that come from the examination of s 260 to Part IV A. I am, if you like, looking back to look forward.

Type
Research Article
Information
Federal Law Review , Volume 22 , Issue 3 , September 1994 , pp. 493 - 525
Copyright
Copyright © 1994 The Australian National University

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References

1 (1994) 94 ATC 4663.

2 G Cooper, R Deutsch and R Krever, Income Taxation: Commentary and Materials (2nd ed 1993) at 25-28.

3 John Howard, Treasurer, H Reps Deb 1981 Vol 123 at 2683.

4 Dividend stripping involves a company cashing up its assets and then selling its shares to a share trader for a price that includes the would-be dividend. It disguises an income payment (the dividend) in the form of a capital receipt (the payment for the shares).

5 (1958) 98 CLR 1.

6 Ibid at 8-9.

7 (1961) 108 CLR 66.

8 (1964) 111 CLR 443.

9 Ibid at 469.

10 (1921) 29 CLR 464.

11 Ibid at 473.

12 (1957) 100 CLR 66.

13 Ibid at 93.

14 (1971) 71 ATC 4068.

15 (1958) 98 CLR 1 at 9.

16 (1971) 71 ATC 4068 at 4080.

17 Ibid at 4081.

18 (1964) 111 CLR 430.

19 Ibid at 439.

20 Ibid.

21 (1989) 89 ATC 4101.

22 Ibid at 4109.

23 Ibid.

24 (1976) 76 ATC 4288.

25 (1977) 77 ATC 4076.

26 (1977) 77 ATC 4538.

27 (1976) 76 ATC 4288.

28 Ibid at 4292.

29 Ibid at 4297.

30 Ibid at 4303.

31 Ibid.

32 Ibid at 4303-4304.

33 (1977) 77 ATC 4076.

34 Ibid at 4079.

35 Ibid.

36 Ibid at 4081.

37 Ibid at 4084.

38 (1977) 77 ATC 4538.

39 Ibid at 4542.

40 Ibid.

41 (1979) 79 ATC 4667.

42 Ibid at 4680.

43 IF C Spry, Section 260 of the Income Tax Assessment Act (2nd ed 1978) at 37-38.

44 Reicher, H, “Tax Avoidance in 1977– The Decline and Fall of Section 260” (1978)Google Scholar 12 Taxation in Australia 680 at 682.

45 (1977) 77 ATC 4538 at 4541.

46 Phillips v FCT (1977) 77 ATC 4169.

47 FCT v Everett (1980) 80 ATC 4076.

48 FCT v llbery (1981) 81 ATC 4661.

49 FCT v Walker (1984) 84 ATC 4553.

50 FCT v Gulland, Watson v FCT, Pincus v FCT (1985) 85 ATC 4765.

51 Ibid at 4771.

52 Ibid at 4773.

53 Ibid at 4774.

54 Ibid.

55 Ibid at 4778.

56 Ibid at 4779.

57 Ibid at 4794.

58 Ibid.

59 Ibid.

60 Jacques v FCT (1924) 34 CLR 328, Clarke v FCT (1932) 48 CLR 56 and Bell v FCT (1953) 87 CLR 548.

61 (1985) 85 ATC 4765 at 4795.

62 Ibid at 4796.

63 Ibid at 4803.

64 Ibid.

65 Ibid at 4784.

66 Ibid at 4787.

67 (1987)87 ATC 4988.

68 Ibid at 4996.

69 (1988) 88 ATC 4582.

70 Ibid at 4594.

71 (1990) 90 ATC 4124. Ibid at 4126.

73 Ibid.

74 The Parliament of the Commonwealth of Australia, Income Tax Laws Amendment Bill (No 2) 1981 Explanatory Memorandum at 2.

75 (1994) 94 ATC 4663 (High Court).

76 Peabody v FCT (1993) 93 ATC 4104.

77 See for example, Brian, Nolan and Tom, Reid, “Rewriting The Tax Act” (1994)Google Scholar 22 FL Rev 448 at 455 and Gordon Thring and Emanuel Hiou, “Part IVA: A Victory for Peabody, But What Does It Really Mean?” October/November 1994(5) CCH Journal of Australian Taxation 4.

78 (1994) 94 ATC 4663 at 4668-4669.

79 Peabody v FCT (1993) 93 ATC 4104 at 4116.

80 Ibid.

81 Ibid at 4111.

82 Ibid at 4118.

83 (1994) 94 ATC 4663 at 4669.

84 Ibid at 4670.

85 Ibid.

86 Barkoczy, S and Gumley, W, “What Now of Part IVA? The Federal Court Decisions in Peabody’s Case” April/May 1993Google Scholar 5(2) CCH Journal of Australian Taxation 4 at 12.

87 FCT v Peabody (1994) 94 ATC 4663 at 4667.

88 Ibid at 4671.

89 Ibid at 4671-4672.

90 Ibid at 4671.

91 S Barkoczy and W Gumley, above n 86 at 12.

92 FCT v Peabody (1994) 94 ATC 4663 at 4671.

93 Peabody v FCT (1992) 92 ATC 4585 at 4593.

94 Ibid at 4110.

95 See Harris, Paul, “Old Dog New Tricks” unpublished 1994Google Scholar honours thesis, Faculty of Law, ANU.

96 FCT v Peabody (1994) 94 ATC 4663 at 4671.

97 See G Thring and E Hiou, above n 77 for this view.

98 (1992) 92 ATC 4585 at 4593.

99 (1994) 94 ATC 4663 at 4671.

100 G Thing and E Hiou, above n 77 at 7-8.

101 (1994) 94 ATC 4663 at 4670.

102 [1967] 2 AC 18 at 27.

103 [1984] AC 474.

104 Ibid at 527. (Emphasis in the original.)

105 (1989) 89 ATC 4101.

106 Ibid at 4109-4110.

107 By better, I mean better from the point of view of the revenue.

108 IRC v Duke of Westminster [1936] AC 1.

109 Ibid at 19.

110 See generally Harman, C “The State and Capital Today” (1991)Google Scholar 51 International Socialism Journal 1.

111 J Passant, “Tax Avoidance and the Judiciary” (1990) 7(2) Law in Context 24 at 28.

112 See, for example, Kennedy, R “The Structure of Blackstone’s Commentaries” (1979)Google Scholar 28 Buffalo L Rev 205.

113 (1994) 94 ATC 4663 at 4761.