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IRD chalks up another win: Supreme Court rejects Trustpower’s appeal

The deductibility of feasibility expenditure on capital projects got knocked back by the Supreme Court in its decision released today (27/07/16). The court said:

“ On a purist view of the capital/revenue distinction, any expenditure (feasibility in nature or otherwise) addressed to a capital project … is necessarily on capital account. On this approach – which has been espoused by Professor John Prebble QC and Hamish McIntosh – the feasibility expenditure in issue was necessarily not deductible.

The approach which we adopt is broadly similar to that proposed by Professor Prebble and Mr McIntosh but, for reasons which we explain, allows for some flexibility, for instance, in respect of initial stages of feasibility work … [W]e consider that some feasibility expenditure referable to proposed capital projects might sometimes be deducted. We do not, however, see such deductibility as extending to external costs incurred in respects which do, or were intended to, materially advance the capital project in question.”

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Government response to Shewan inquiry: she’s all go!

A new tax bill in August will see the government adopting all of the key recommendations made in the Shewan Inquiry on foreign trusts. Expect to see these initiatives in the draft legislation:

  • information on foreign trusts to be maintained in a register overseen by Inland Revenue
  • foreign trusts to file an annual tax return
  • disclosure of tax information and personal information about the settlors, non-resident trustees and classes of beneficiaries
  • exemption on foreign source income removed if registration and disclosure obligations not met
  • new registration fee ($270) and annual filing fees ($50) to apply to foreign trusts.

Increased Anti-Money Laundering (AML) requirements for lawyers and accountants are also signalled with effect from 2017.

Read the full summary of the government’s response here.

Wolters Kluwer CCH New Zealand

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