Released yesterday, the amendments to the existing anti-avoidance provisions propose to widen the base on which Part IVA can apply.

These amendments have been introduced as a result of recent court decisions, which cast doubt as to the ability of the existing law to counter anti-avoidance schemes.

Once enacted, these changes will apply to schemes entered into or commenced from 16 November 2012.  Therefore taxpayers may need to review any scheme entered into after this date now, whilst they are still fresh in the mind.

If any scheme was entered into that may have tax as a dominant purpose, consideration should be given to what, if any, alternative way the scheme could have been carried out.   Particular regard should be paid to the substance of the scheme and the non-tax results and consequences achieved by the taxpayer from the scheme, disregarding potential tax costs.

These changes may provide more clarity for taxpayers, however a detailed consideration of all matters is required prior to entering into an arrangement that may provide a tax benefit.

The impact of these amendments will depend on the ATO’s enthusiasm in applying the proposed changes to unsettle corporate taxpayers.  It will be a major concern for businesses if the ATO uses these more robust anti avoidance measures to attack transactions which are commercially reasonable.