cheap lenses australia

Penny & Hooper – legitimate tax planning or avoidance?

The Supreme court has today released its long-awaited decision about a landmark tax case – Penny & Hooper. The case was decided in favour of Inland Revenue and this decision has widespread implications for the many small businesses using trust structures.

The case is a classic example of taxpayers complying with the ‘black-letter’ of the law, yet not acting within the ‘scheme and purpose’ of the Income Tax Act.

This case involved the restructuring of the business of two surgeons (Penny & Hooper) from sole practitioners earning an income of approximately $500,000 per year, into a company owned by a family trust for the benefit of the surgeons and their respective families. The surgeons became employees of their companies, on salaries of approximately $120,000 per year, while the remainder of the profit from their services was retained by the companies and allocated to the trusts.

Legitimate tax planning or avoidance – what is your view?

2 Responses

Bip on August 25, 2011 at 7:44 am

What really gets me is how the govt creates these entities with different tax rates for people to trade under and then deem them to be tax avoidance if they pay less tax by using them???
Hello —- isn’t it a simple answer of capping the tax rates at say 30cents for the highest rate in any entity and then who cares which entity is use?

Elizabeth Mitchell on September 4, 2011 at 7:31 pm

On 4th September, 2011, Daniel Hunt published an article in the Herald on Sunday titled “Hard line on tax avoidance” – http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10749243

Write a Comment

Take a moment to comment and tell us what you think. Some basic HTML is allowed for formatting.

*

Recent comments

  • Peter: When you have more than one job all your income is added up and you pay tax on the total income amount. For...
  • 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...

Upcoming Events

  • No events.

Poll

In the past 12 months, do you think the amount of IRD investigations being undertaken has?

View Results

Loading ... Loading ...

Authors

    For the moment, we have no authors