Australia: General anti-avoidance rule did not apply to taxpayer’s distribution of income (Full Federal Court decision)

Full Federal Court decision concerning whether general anti-avoidance rule applied to taxpayer’s distribution of income

General anti-avoidance rule did not apply to taxpayer’s distribution of income

The Full Federal Court on 8 March 2024 held (overruling an earlier initial decision of the court) that the general anti-avoidance rule in Part IVA of the ITAA 1936 did not to apply to the taxpayer’s distribution of income to particular unitholders subject to a 10% withholding tax, rather than the otherwise applicable 30% income tax.

The case is: Minerva Financial Group Pty Ltd v Commissioner of Taxation [2024] FCAFC 28


The taxpayer was a member of a corporate group that provided financial services involving the pooling of loan receivables and related securities into securitization trusts in order to fund loans it arranged for customers. In 2007 and 2008, the group undertook several transactions in anticipation of conducting an initial public offering of stapled securities in the taxpayer and a trust (the “stapled trust”).

Prior to taking these steps, the main operating company in the group was the holder of the residual income units (RIUs) of the securitization trusts. The restructure involved establishing future securitization trusts under a new “holding trust” (which became the holder of the RIUs) and transferring the ownership of the stapled trust to a nonresident owner. The resulting structure created a “corporate silo” and a “trust silo” through which the group operated.

Subsequently, the holding trust distributed almost all of its distributable income, comprising interest derived on loan receivables, to the stapled trust and in turn to the nonresident owner resulting in withholding tax at 10%, rather than income tax at 30% which would have applied in the event the income was distributed to the corporate silo.

In the court’s earlier initial decision, the primary judge concluded that the taxpayer had entered into a scheme for the dominant purpose of obtaining a tax benefit. However, on appeal the full court held the tax authority had not provided sufficient support for a conclusion that the taxpayer carried out a scheme for the dominant purpose of obtaining a tax benefit.

For more information, contact a KPMG tax professional in Australia:

Keith Swan |

Kristie Schubert |

Alice Chow |


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