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The rise of specific integrity provisions

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Partner Jonathan Ortner features in The Tax Institute's Tax Vine newsletter and surveys the landscape of specific integrity provisions for private groups, considering their purpose and scope, and calling for action to reform.

The rise in the Commissioner’s use of specific integrity measures, particularly for trusts, should put private groups and their advisers on notice that Part IVA is not the only provision in the Commissioner’s arsenal when it comes to avoidance concerns. The complexity, breadth and vagueness of sections 100A, 99B, 99C and Division 7A make it very difficult for advisers to understand and apply them, and for the Commissioner to administer them in a contemporary context. Despite their titles, these provisions are not as easy as ABC and are ripe for reform.

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Section 100A

The Commissioner's recent guidance on section 100A (Taxation Ruling TR 2022/4 and Practical Compliance Guideline PCG 2022/2), and the decisions in Commissioner of Taxation v Guardian AIT Pty Ltd ATF Australian Investment Trust and BBlood Enterprises Pty Ltd v Commissioner of Taxation, appear to have created further uncertainty about the extent to which section 100A might apply. As the year comes to an end, section 100A will again need some serious consideration when considering appropriate tax planning opportunities and preparing year end resolutions.

Section 99B

Although section 99B was introduced to remedy a deficiency in the operation of Division 6 of Part III of the ITAA, it has left advisers bewildered as they try to apply the provision to arrangements not thought by many to fall within its scope. Section 99B, along with section 102AAM of the ITAA, are no longer fit for purpose and should be updated to reflect modern times.

Division 7A

The Board of Taxation's review into Division 7A revealed that in its current form, Division 7A fails in achieving its policy objectives. The provision is complex, administratively burdensome and often results in unintended tax consequences for businesses and individuals. Reform, as difficult as it may be, should come back onto the agenda as a priority.

The aforementioned integrity provisions are often difficult to understand and apply in modern contexts due to their complexity, breadth and vagueness, which puts forward the question: are these provisions still fit for purpose?

If you would like to view the full Tax Vine newsletter, please click here.

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