Specific legislative measures the government has taken, along with additional proposed measures being planned, to counter tax avoidance practices make it difficult to identify acceptable exit strategies that can be used to mitigate withholding taxes on outbound income streams (i.e. dividends, interest and royalties) from Australia. Among these measures are provisions that impose on the payer the obligation to withhold tax and those that extend the application of the general anti-avoidance rule (see Sec. 13.1.) to certain situations in which a scheme has been entered into to enable a taxpayer avoid payment of withholding tax. Similarly, tax avoidance schemes involving the interposition of a holding company in a tax treaty country between a foreign parent and its domestic subsidiary to avoid the payment of capital gains on shares are caught by the general anti-avoidance provision.
It is believed that the scope of the current anti-avoidance measures, particularly those intended to apply the general anti-avoidance provision to schemes involving the avoidance of withholding tax, might not cover situations where (a) no dividend, interest or royalty is paid, but would have been paid if the scheme had not been entered into, or (b) an amount of interest, dividends or royalties is converted into something other than interest, dividends or royalties. The viability of such a strategy, especially in light of currently proposed reforms to the general anti-avoidance rule is, however, doubtful.