Are there any grounds to challenge tax assessments issued on the basis of the IDs?

Undoubtedly a test case will emerge to test the ATO’s technical position. The test case will permit the technical aspects of the IDs to be considered in detail by the Courts.  However the test case process may take some considerable time.

Possibly a better approach is to contact the ATO and propose that the any LBRA arrangement, to which the IDs apply, be restructured to remove the offending elements of zero or low interest rates and, where possible, reduce the LVR or provide additional security.