The Full Federal Court decision
The Full Federal Court decision of Minerva Financial Group Pty Ltd v Commissioner of Taxation [2024] FCAFC] 28 decided that Part IVA of the Income Tax Assessment Act 1936 did not apply to a trustee’s failure to exercise its discretion to distribute distributable income to special unitholders which would attract a higher tax rate on the income.
The decision represents a significant win for taxpayers and provides guidance on the operation of Australia’s anti-avoidance rules contained in Part IVA.
Particularly, the court emphasised the need to consider the ‘surrounding context’ to determine whether a scheme is entered into for a dominant purpose of enabling the taxpayer to obtain a tax benefit. The court’s holistic approach in considering the eight factors of section 177D of the Income Tax Assessment Act 1936 is a reminder to taxpayers and advisers of the need to view transactions in their full context when considering Part IVA risk.
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