The Australian government has introduced the 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.

1. Australia’s Amendments to Counter Tax Evasion – What You must Know
The Australian government has introduced the 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. The draft amendment,
once approved in its existing form, would apply on or after November 16, 2012.
A quick glance at the highlights
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
in 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.
Keeping up with the ceaseless list of regulations existing in a foreign country can very be complex. While doing
business overseas, there could also be a lot of impediments to your business without suitable guidance.
Professional advice is necessary to steer clear of any violation of these changing laws and regulations. It is
imperative to take the help of an expert, who can provide assistance in the various aspects of your business like
expat tax advice, international accounting services, etc.
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