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Abstract

The courts were only recently given their first opportunity to consider the substantive operation of Part IVA of the Income Tax Assessment Act 1936 (Cth) in the trilogy of Peabody v FCT. Given the potential scope of Part IVA, an understanding of the Courts' appraisal of the legislation's breadth is crucial for all taxation practioners.

Whilst aspects of the High Court's judgment particularly its view as to the Commissioner's discretion under s 177F, may cause taxpayers concern, other aspects of the judgment affirm the existence of significant limits upon Part IVA's scope. When coupled with Hill J's acceptance that transactions entered into for commercial reasons are not caught by Part IVA, it is submitted that Peabody provides an appropriate balance between preventing tax avoidance and not discouraging business and family transactions.

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