By Michael Evans
The High Court has had its first opportunity to decide a case on the general anti-avoidance rule in Australia’s Goods and Services Tax (GST) law, enacted more than a decade ago. In Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16, the High Court unanimously decided that the Commissioner can apply the GST anti-avoidance rule, even when a taxpayer makes specific choices or elections to engage in corporate structures, decisions and deals that are expressly allowed in the law.
The decision confirms that the GST anti-avoidance rule in div 165 of the GST law (and the income tax anti-avoidance rule on which it is based) gives the Commissioner of Tax a broad power to deal with avoidance schemes. Importantly, it confirms that, as intended by parliament, s 165-5(1)(b) of the GST law limits the protection for taxpayers that could arise from such statutory choices, agreements and elections contained in the GST law. This broader approach replaces the narrower ‘choice principle’ that was found to apply in earlier tax anti-avoidance rules such as former s 260 of the Income Tax Assessment Act 1936 (Cth). The ‘choice principle’ as explained in W P Keighery Pty Ltd v Federal Commissioner of Taxation [1957] HCA 2, was that the anti-avoidance rule cannot be interpreted to remove from taxpayers their choices to order their affairs as they saw fit. Continue reading