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Clarification regarding blue pencil

The recent decision in Canterbury Development Corporation & Ors v Charities Commission (see cch.co.nz) provides a useful consideration of the “blue pencil” provisions in s. 61B of the Charitable Trusts Act 1957.  Essentially s. 61B can be used to delete provisions of a trust that invalidate a charitable purpose.  However,  although the section refers to a “trust”, the High Court has interpreted the legislation broadly and to be read as referring to a charitable entity rather than to be limited to a charitable trust.  Although this decision did not assist the appellant in this case, it provides a useful clarification regarding the scope and limitations of s.61B .

Australia New Zealand DTA enters into force

Yesterday the Government announced that the new Australia/New Zealand double tax agreement has entered into force. This means that both countries have completed their domestic law requirements for incorporating the treaty into their respective laws. The way is clear for the provisions of the treaty to apply.

The application dates are different for different types of tax. The first relevant application date is the provisions relating to Fringe Benefit Tax (“FBT”).  Briefly the Article provides that FBT will follow the taxing rights of salary and wages, thereby reducing the possibility of double FBT. The provisions apply from 1 April 2010, and is slightly different compared with the 1995 treaty position.

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The Still Whine

As a first port of call on the subject of the taxation of the wine industry I felt obligated to touch on the issue that, more than any other issue, makes winemakers whine: excise.

Until 1 July this year, and bearing in mind that the retail price of most wines remains under extreme pressure owing to discounting, approximately $2.15 of the price of each 750ml bottle of wine purchased in a wine shop, supermarket, bar, restaurant, cellar door or online retailer will be attributable to excise.

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Residential Care Subsidy – Means Assessment and Gifted Assets

Advisors may be under the impression gifting assets to a family trust will provide some degree of protection from a means assessment for the residential care subsidy under the Social Security Act 1964.  However the level of protection is not as significant as you may initially have thought.

It is widely known that the means assessment “adds back” gifts made within 5 years of the date of assessment if the gift is in excess of 5,500 p.a.  It is perhaps less widely known that this claw back also extends to gifts made by the person’s spouse or partner.

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Case Z24 – Troubling trends in tax avoidance jurisprudence

In Case Z24 the taxpayer had transferred an avocado orchard and her private practice as an anaesthetist to a family company.  In the 2003 and 2004 years she provided her services to the family company for a nil or low salary.   The Commissioner had argued that the rent paid by the family company to the family trust for the lease of the orchard was inflated and the salary paid to the taxpayer for her services was too low.  Judge Barber was unimpressed by the Commisioner’s arguments as to the inflated rent but held that the payment of an artificially low salary was tax avoidance. 

Two elements of this case are troubling:  there was no reference to Penny & Hooper anywhere in the case, notwithstanding the High Court decision was delivered over a year ago; and there is no explanation of how the tax consequences of combining a loss-making business (the orchard) with a profitable business (the private practice) achieved a result that was manifestly outside the contemplation of Parliament.  If it is accepted, which it appears to have been, that in aggregate there was little in the way of distributable profit from both businesses, then what principle of tax law would compel the owner to pay themselves a salary?

A fair rate of GST

It seems accepted in many quarters now that an increase to the rate of GST is inevitable.  If this is the case the figure of 15% appears to be a likely contender for the new rate – even if the math will be hard.  I’ve already stated my consumption tax bias, and as an avid home gardener, am currently collecting heirloom seeds for my next home grown home consumed zero-rated crop.

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Recent comments

  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...
  • Davo: Jo, quite likely is that the transition to an LTC was not done in time and the company became a normal company...

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