Can TOFA stop an earn out being a look-through earnout right?

Although not the primary focus of the case, Merchant also considers application of the taxation of financial arrangements (TOFA) to earn-out arrangements, as highlighted by Julian Humphrey and James Macky.

The decision of Thawley J in Merchant v Commissioner of Taxation back in May 2024 has been scrutinised for its application of the general anti-avoidance rule and the dividend stripping rule in Part IVA to, what the Commissioner described, as a “wash sale” and the forgiveness of related party debts. But for those that make it through the first 574 paragraphs of the judgement on those topics, there are some interesting observations in relation to the application of taxation of financial arrang...

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Authors: Julian Humphrey, James Macky

Published Date: 22 July 2024