CAUTION: This Case Decision Summary should not be relied upon in deciding whether to enter into any particular arrangement or transaction (referred to as a 'scheme' in Part IVA Income Tax Assessment Act 1936 for the reasons which follow. It is recommended that should you wish to enter into a scheme similar to that summarised you seek further advice or a ruling from the ATO, or advice from a professional adviser.

This Case Decision Summary illustrates the approach taken by the Commissioner of Taxation in applying Part IVA to a real fact situation. The facts have been simplified to focus on key practical issues.

To properly apply Part IVA, the law must be applied to all the relevant facts. In particular, an eight step test must be applied to determine whether, on the facts, a particular scheme objectively has the dominant purpose of obtaining a tax benefit not intended by the law. Where the scheme simply takes advantage of the intended operation of a structural feature of the law, Part IVA will not apply because the required dominant purpose will not exist.

In applying the dominant purpose test, regard must be had to the manner in which the scheme is carried out; that is, whether the scheme bears the stamp of tax avoidance. The Full Federal Court in Bellinz Pty Limited v Federal Commissioner of Taxation 98 ATC 4634 at 4647; 39 ATR 198 at 212 has noted the difficulty in applying Part IVA prior to the scheme being carried out, because the execution of the scheme may in fact be different to that originally proposed. Even where the scheme has been carried out, the Court has noted that a difficulty in coming to a view on the application of Part IVA is to ensure that all relevant facts are considered, including those concerning the manner in which the scheme is carried out.

This Case Decision Summary has been withdrawn.

ATO Case Decision

Case Decision Number:



Does Part IVA (Income Tax Assessment Act 1936 (ITAA 1936)) apply to:

1)  an arrangement in which a taxpayer loans funds (interest free) from maturing investments to a discretionary trust formed by the taxpayer, and then invests the funds in the trustee’s name – (the income is distributed to immediate family members to minimise tax payable)?

2)  as above, but the taxpayer does not wait for the investments to mature; instead, assets are transferred to the trust immediately, to obtain the tax benefits earlier?


1)  No.

2)  No.

Reasons for Decision:

1)  Merely investing funds, interest free, into a company or into a taxpayer’s own family trust does not, on the face of it, attract Part IVA (ITAA 1936).

2)   If the assets are divested purely and simply to the trust, Part IVA (ITAA 1936) will not apply here.

Legislative References:

Income Tax Assessment Act 1936 Part IVA

Relevant Cases:

DFC of T v Purcell (1920-1921) 29 CLR 464

Rulings/Determinations Cited:

Taxation Determination TD 95/4


Borrowings & loans

Dealings & transactions

Discretionary trusts

Entities & taxpayer groups

Franked dividends


Interest waivers

Investment income

Part IVA

Tax avoidance

Tax planning

Tax planning, avoidance & evasion


FOI Number: