Private ruling: Part IVA
Published: May 2013
Ruling period: 1 July 2011 to 30 June 2012 | 1 July 2012 to 30 June 2013 | 1 July 2013 to 30 June 2014

Ruling: Will provision Part IVA of the Income Taxation Assessment Act 1936 be applied to the payment? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Individual 1, Individual 2 and the Company are all residents of Australia for taxation purposes. Individual 1 and Individual 2 are married, but separated. Individual 2 is the current sole director and shareholder of the Company. Individual 1 is not a shareholder of the Company. Individual 1 is an associate of the Company because of Individual 2 who is the director and shareholder of the Company. No services have been rendered by Individual 1 to the Company. There has been no office or employment held by Individual 1 in the Company. The Orders are proposed as part of the property settlement between Individual 1 and Individual 2 arising out of their separation. The Orders are, in essence, settled between the parties pending the outcome of this ruling request. The Orders will be binding on all parties. Pursuant to the Orders, the Company will pay to Individual 1 the payment. This will occur within a period of the publication of the Orders. The purpose of the Payment is to ensure that Individual 1 and Individual 2 each receive a part of the total available assets. Individual 1 and Individual 2 have at all times dealt with each other at arm's length in relation to the property settlement. Individual 1 and Individual 2 have always been represented by a separate set of lawyers and advisers.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 177A | Income Tax Assessment Act 1936 subsection 177A(1) | Income Tax Assessment Act 1936 subsection 177A(3) | Income Tax Assessment Act 1936 subsection 177A(5) | Income Tax Assessment Act 1936 Section 177C | Income Tax Assessment Act 1936 subsection 177C(1) | Income Tax Assessment Act 1936 Section 177D | Income Tax Assessment Act 1936 Section 177F

Reasons for decision: Summary: Application of Part IVA Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) is a general anti-avoidance provision that can apply in certain circumstances. Part IVA gives the Commissioner the power to cancel a 'tax benefit' (or part of a 'tax benefit') that has been obtained, or would, but for section 177F of the ITAA 1936, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. In broad terms, Part IVA will apply where the following requirements are satisfied: there is a scheme (see section 177A) a taxpayer has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme (see section 177C) the dominant purpose of a person who entered into or carried out the scheme, or any part of the scheme, was to enable the relevant taxpayer to obtain a tax benefit in connection with the scheme, or to enable the relevant taxpayer and another taxpayer or other taxpayers each to obtain a tax benefit in connection with the scheme (paragraph 177D(b)). The application of Part IVA depends on a careful weighing of all the relevant facts and surrounding circumstances of each case. Application to your circumstances What you are proposing is a 'scheme' capable of attracting the operation of Part IVA. However, when considered in conjunction with the factors in paragraph 177D(b) of the ITAA 1936, all these factors either point against the application of Part IVA or are neutral. Therefore, Part IVA will not apply to this arrangement.