Section 179: what makes an arrangement an impermissible avoidance arrangement

The definition

An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it:

• creates rights, or obligations, which are not ordinarily created between persons dealing at arm's length;
• results, directly or indirectly, in the misuse or abuse of the provisions of the Act;
• lacks commercial substance, or is deemed to lack commercial substance under Section 180, in whole or in part; or
• is entered into, or carried out, by means or in a manner not ordinarily employed for bona fide purposes.

Presumption on main purpose

An arrangement is presumed - unless the assessee proves otherwise - to have been entered into or carried out for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, even if the main purpose of the whole arrangement is not to obtain a tax benefit.

Frequently asked questions