Australia: Restructuring not subject to anti-avoidance rules (Full Federal Court decision)
Court provides insights into operation of anti-avoidance rules.
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February 19, 2026
The Full Federal Court on December 3, 2025, held in Commissioner of Taxation v Hicks [2025] FCAFC 171 that the anti-avoidance rules of section 45B and Part IVA of the Income Tax Assessment Act (ITAA) 1936 did not apply to the taxpayer’s 2016 restructuring transaction because:
- Section 45B: The court observed that a “purpose” of the kind or quality required by paragraph 45B(2)(c) could not exist in circumstances when amounts were substituted for a distribution of net income by the trustee of a trust, or alternatively, amounts were substituted for a distribution from a company that solely had share capital.
- Part IVA: Applying the principles of Commissioner of Taxation v PepsiCo Inc [2025] HCA 30, the court accepted that the taxpayer’s alternative postulate (rather than the Commissioner’s alternative postulate, which would have resulted in the payment of more tax) realistically achieved the same commercial outcomes as the 2016 restructuring, being the need to extinguish substantial Division 7A loan balances and to retain sufficient working capital to carry on the taxpayer’s business, and on that basis, the 2016 restructuring did not give rise to a “tax benefit” nor possessed the requisite “dominant purpose” for the purposes of subsection 177D(1).
Read a February 2026 report prepared by the KPMG member firm in Australia