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Guardian in the Full Federal Court – 100A meets Part IVA

01 March 2023

3 min read


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Guardian in the Full Federal Court – 100A meets Part IVA

The Full Federal Court’s judgment in Commissioner of Taxation v Guardian AIT Pty Ltd ATF Australian Investment Trust [2023] FCAFC 3 is of significant precedential value. It is also the first in which section 177CB of the Income Tax Assessment Act 1936 (Cth) is relevant to the outcome and the matters that the Court could have regard to in their application of Part IVA as prior cases had made non-binding comments only.

The use of clean skin bucket companies to receive trust distributions and the interposition of holding companies to access company profits tax-free will be in the ATO’s sights – as much seems clear from the release of TA 2023/1. Anyone that has adopted such a structure should assess their risk exposure and determine a strategy going forward.

Our key takeaways from this judgment are:

  • the scope to attribute an advisor’s purpose to a taxpayer is far more limited under section 100A than it is Part IVA – and such purpose should not be attributed unless the tax advisor is an authorised representative with authority to act on behalf of the taxpayer
  • in applying section 100A, the mere inclusion of a corporate beneficiary as an eligible beneficiary and the fact that a distribution may be made to such a beneficiary is not sufficient to demonstrate a dealing was not an ordinary commercial or family dealing
  • in applying Part IVA:
    • for periods following the amendments made by section 177CB in identifying the tax benefit and reasonable alternative, it was not open to the Court to consider the higher Australian income tax cost that would have applied had the income been directly distributed to the non-resident beneficiary. This means not having regard to evidence of what a tax advisor would have recommended as an alternative – which does differ from the approach adopted by courts to such evidence before the enactment of section 177CB
    • while the scheme is posited and framed by the Commissioner, it is the taxpayer that has the responsibility of satisfying the Court of what might reasonably be expected to have occurred in the absence of the scheme
    • the conclusion as to purpose should be drawn from the application of each of the factors referred to in section 177D. Each of those factors is to be applied according to their respective terms. Some of those factors refer to when the scheme was entered into or carried out and others refer to the consequences of the scheme.

Ultimately, the taxpayer succeeded in the 100A arguments and in the non-application of Part IVA to the 2012 income year. The Commissioner succeeded on the application of Part IVA to the 2013 income year.


The Full Federal Court’s decision showcases how section 177CB can nullify a taxpayer’s argument that the increased tax costs would make the scheme so unlikely that it could never be a reasonable alternative. In fact, evidence led by an accountant as to the tax advice given in that regard is now irrelevant.

This was an appeal from a first instance Federal Court decision from Logan J. You can read our thoughts on the first instance decision and the facts underlying this appeal here.

We acted for the taxpayer in this case. If you have any questions about this judgment or need assistance with any tax disputes, please get in touch with a member of our national tax team below.

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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