TalkTax

In recent times, we have seen several tax cases being lost by Taxpayers. Analysing the judgments, I believe we have seen a fundamental move when dealing with tax avoidance – a move back towards statutory interpretation. The Newton and Elmiger cases are the policy basis for our anti-avoidance rule as they focus on statutory interpretation and I believe the courts are showing a move back to this ordinary approach (as can be seen in the Banks cases).

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The appeal in Penny and Hooper has been decided in favour of the Commissioner in a 2:1 majority decision of the Court of Appeal released on 4 June 2010.

In the first instance the decision could be considered to have been rendered largely nugatory for the time being given the recent reduction of the top marginal rate to that of the trustee rate. However, with the new company rate now significantly below these rates, the matter of below market salaries will likely be a live issue for some time.

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Received anonymously:

The Rewrite Advisory Panel (RAP) was established to advise rewriters of the Income Tax Act 1994. The Income Tax Act 2004 saw the RAP becoming the arbiter on possible unintended legislative changes and the Income Tax Act 2007 saw it becoming the overseer of the clarity of that Act (see: www.rewriteadvisory.govt.nz)

In 2009, a submitter raised with the RAP the definition of ‘revenue account property’ (the second RAP referred to in the title but, to avoid confusion, I do not use that acronym in this note). The submitter said:–

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Trusts can provide excellent inter-generational asset protection. However, when relationships break up assets in trust solution (rightly or wrongly – I’ll leave that analysis for another day) are often taken into account. The equal sharing principle of the Property (Relationship) Act 1976 is pretty much standard modus operandi now and accordingly, or despite, many parties fail to appreciate or understand the advantages and limitations imposed when trusts are involved.

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Congratulations to Vicki Ammundsen one of TalkTax’s respected authors. Her new book ‘Taxation of Trusts’, published by CCH, is out now…

Taxation of Trusts

Taxation of sale of rental properties and personal residences

In early 2009 a rental property investor was referred to Owens Tax Advisors Ltd, having bought and sold a number of residential rental properties and then been audited by IRD.  At one point IRD proposed that if the sale of rental properties amounted to a business then the sale of one or two private homes were also potentially subject to GST and income tax.

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Tax advisors finally have some decent weekend reading now that the Income Tax Bill has been reported back to Parliament.

lf you feel like sharing a few moments of exasperation with us, take a look at the Officials’ cursory dismissal of our submission that the anti-streaming rule for partnerships in section HG 2(2) be abolished.

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