The Australian government has introduced Tax Laws Amendment (Countering Tax Avoidance and Multi National Profit Shifting) Bill 2013 on February 13, 2013.

1. Australia Proposes Amendments to GAAR (Part IVA) to Counter Tax Dodging
(Sunnyvale, CA)- The Australian government has introduced Tax Laws Amendment (Countering Tax Avoidance
and Multi National Profit Shifting) Bill 2013 on February 13, 2013. The draft amendments are expected to address
schemes which are technically compliant with the law but, may have been carried out to evade tax, says Nair &
Co.’s International Tax Compliance Services Team.
The draft amendment, once approved in its existing form, would apply to on or after November 16, 2012.
Key Highlights: Australian GAAR (Part IVA) Amendments
The draft will introduce a new section 177CB into Part IVA which specifies two separate approaches to determine
whether a taxpayer has received a tax benefit relating to a scheme:
 Annihilation approach – The scheme is evaluated against a postulate which comprises of the events or
circumstances that happened or existed.
 Reconstruction approach - The scheme is evaluated against a postulate that is a rational alternative to
entering into the scheme. Under the reconstruction approach, the following must be taken into account for
determining whether a postulate is a reasonable alternative:
 the essence of the scheme, and
 any non-tax outcome for the taxpayer that is or would be achieved by the scheme.
Tax Benefit and the Scheme (177F (1))
As per the proposed amendment to section 177F (1), the application of Part IVA needs to start with a consideration
whether a person involved in the scheme is using it for the sole or dominant purpose of obtaining a tax benefit
related to the scheme.
Implications of the amendments
 Foreign companies that are planning to open operations or have operations or investments in Australia need
to think as how these amendments will affect their investment structures and transactions.
 Companies must ensure that the commercial and other factors motivating a decision are properly
documented.
 Taxpayers must ensure that they have correctly calculated their taxable income while entering into any
agreement.
 Part IVA has to be considered while entering into any arrangement which results in a tax benefit.
For a detailed advice on the issue, contact the International Tax Compliance Services team at info@nair-co.com.

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