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Edited version of your written advice
Authorisation Number: 1012801517240
Ruling
Subject: Part IVA
Question and Answer
Will the Commissioner apply Part IVA to deny any tax benefit obtained as a result of the arrangement?
No
This ruling applies for the following period
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced on
1 July 2014
Relevant facts
You plan to invest before 30 June 2015.
You are short of a deposit, and financial institutions will not loan you enough to purchase both properties.
After considering your options you decided to borrow money from a private individual. You intend to borrow to cover the deposit and acquisition costs. The loan conditions are strictly commercial in nature.
You will be the sole owner of the investments.
You will receive assessable income from the investments.
The total amount borrowed from the friend will be used as described above.
Relevant legislative provisions
Income Tax Assessment Act 1936 Part IVA
Reasons for decision
Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) is a general anti-avoidance provision that can apply in certain circumstances if a taxpayer obtains a tax benefit in connection with a scheme, and it can be concluded that the scheme, or any part it, was entered into for the dominant purpose of enabling a tax benefit to be obtained. Part IVA is a provision of last resort.
In order for Part IVA to apply, the following requirements must be satisfied:
• There must be a scheme as defined by section 177A of the ITAA 1936.
• There must be a tax benefit as defined by section 177C of the ITAA 1936, obtained in connection with the scheme
• The scheme must be one to which Part IVA applies, as determined by section 177D of the ITAA 1936, where it would be concluded that the taxpayer (or any other person involved in the scheme) had the sole or dominant purpose of entering into the scheme to obtain the tax benefit.
It is determined that Part IVA would not apply to the proposed arrangement.
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