Abstract:
Although the anti-avoidance provisions contained in Pt IVA of the Income Tax Assessment Act 1936 (Cth) were introduced in May 1981, the Federal Court was only recently given its first opportunity to consider these provisions. The discussion in Peabody v. Federal Commissioner of Taxation gives practitioners their first view of judicial attitudes concerning the scope of Pt IVA. It is important to note that on appeal, the Full Court of the Federal Court confined PT IVA's potentially limitless scope in accordance with Lord Denning's "Predication Test." By its judgment, the Court indicated that Pt IVA would not apply to transactions that had commercial considerations as their overriding concern. This decision provides taxpayers with an important reassurance that PT IVA will not catch legitimate business arrangements.