The application of Pt IVA to stapled structures

In TA 2017/1, the Australian Taxation Office (ATO) states that it is reviewing arrangements which “attempt to fragment integrated trading businesses in order to re-characterise trading income into more favourably taxed passive income”.1

The alert identifies various provisions of the Income Tax Assessment Act 1997 (Cth) (ITAA97) and the Income Tax Assessment Act 1936 (Cth) (ITAA36) that may or may not be satisfied in respect of four different types of staple arrangements.

The ATO states that, even if such arrangements are effective under the “substantive” provisions, it is concerned the arrangements are being entered into or carried out for the dominant purpose of obtaining a tax benefit so as to attract the operation of Pt IVA ITAA36.

In this article by Greg Davies, QC (Chancery Chambers), and Eugene Wheelahan (Barrister, Aickin Chambers), the authors examine whether, and if so how, Pt IVA might apply to the entering into and carrying out of a scheme under which an infrastructure investment is acquired and held within a stapled structure.

In the authors’ opinion, while the application of Pt IVA will always depend on the particular facts and circumstances of a given case, the mere fact that an infrastructure investment is acquired and held within a stapled structure will be insufficient to attract the operation of Pt IVA.

The Commissioner’s rationale for the potential application of Pt IVA is that the stapled structure has the effect of fragmenting an “integrated trading business” and does so for the purpose of re-characterising trading income into more favourably taxed passive income.1 In the absence of exceptional circumstances, that is an incorrect characterisation of the stapled product. Moreover, the application of Pt IVA itself is dependent on the application of the eight matters in s 177D(2) ITAA36 and not on notions of economic equivalence.



The article, taken from the June 2018 edition of The Tax Specialist, looks at the history of stapled structures and Consideration by the courts of schemes involving stapled securities, namely Macquarie Finance Ltd v FCT and Mills v FCT.

It then looks at the use of stapled securities for investment in infrastructure, and some of the commercial reasons for stapled structures, including access to cash flows, the lower cost of capital, investor preferences, and behavioural biases.

The authors then discuss the significance of TA 2017/1 and ask ‘how might the Commissioner seek to apply Part IVA?’, before looking at the elements of Part IVA, including scheme, tax benefit and purpose.

The article concludes that, in the authors’ opinion, while the application of Pt IVA will always depend on the particular facts and circumstances of a given case, the mere fact that an infrastructure investment is acquired and held within a stapled structure will be insufficient to attract the operation of Pt IVA.

You can download the full article here.

Designed for the specialist tax professional, The Tax Specialist journal is essential reading for corporate tax advisers, accountants, lawyers and academics. Featuring in-depth analysis, opinion and argument on legislative, administrative and judicial issues, it is published five times per year and is available by subscription.

June’s edition also featured articles by Thomas Wu and Michael Clough, FTI, on ‘Providing investor certainty in tax deeds’ and Matthew Walsh, CTA, also covering issues with tax deeds. It also featured the article ‘Restructures, turnarounds and Insolvency’ by Christopher Hill and Julian Pinson, FTI.

Find out more on our website.


1 Pages 1 and 3 of TA 2017/1.

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