Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Inland Revenue issues guidance on tax avoidance arrangements


1 September 2011

Inland Revenue issues guidance on tax avoidance arrangements

Inland Revenue has issued a Revenue Alert outlining the circumstances in which diverting personal income into other business structures or entities in order to take advantage of lower tax rates can be considered tax avoidance.

Revenue Alerts are issued by the Commissioner of Inland Revenue to provide information about significant or emerging tax planning issues.

Group Tax Counsel, Assurance, Graham Tubb, said that this Alert provides updated and expanded guidance on this issue following the recent Supreme Court decision in the Penny and Hooper case.

“The use of an incorporated business or one that is managed through a trust does not necessarily constitute tax avoidance. There are also often legitimate reasons why business owners retain a portion of the profits within the entity, such as capital expenditure, and Inland Revenue does not set a person’s remuneration level.

“However, a person’s income should properly reflect their contribution to a business and their tax liability should reflect their income,’’ he said.

“We are focusing on cases where there are clear indicators that someone is deemed to be paying themselves an artificially low salary, and a substantial amount of their income is diverted into a structured arrangement delivering financial and tax benefits to themselves or their family.

“The indicators may involve the operating structure of a business, and whether ownership has been transferred. Other indicators may be profits distributed to other people or associated entities in an artificial or contrived manner, where the outcome of this arrangement is reduction of a person’s tax liability.”

Mr Tubb said income diversion arrangements can also enable people to reduce child support and student loan repayment obligations and gain Working for Families Tax Credits or student allowances benefits.

“Inland Revenue will continue to focus on more serious cases. Investigators are unlikely to review cases where at least 80% of business income was properly returned as individual income by the people who generated it from their own services.’’

“We will look at all aspects of a person’s income arrangement to determine whether there is a case of tax avoidance. People should contact their tax agent or advisor if they have any concerns or talk directly to Inland Revenue.”

The Revenue Alert is available at


© Scoop Media

Business Headlines | Sci-Tech Headlines


Frog Recruitment: Kiwi Workers Reluctant To Make Business Trips Across The Ditch Despite Trans-Tasman Bubble Opening

When the trans-Tasman travel bubble opens today, many Kiwi companies won't be rushing to buy an air ticket, reluctant to cross the ditch to do business. The latest survey conducted by leading recruitment agency, Frog Recruitment of nearly 1,000 New Zealand ... More>>

Tourism: Employers Welcome Back Working Holidaymakers

Tourism businesses gearing up for the return of Australian visitors from next week will be relieved to learn that they will also have access to an offshore pool of much-needed job candidates, Tourism Industry Aotearoa says. Tourism employers around ... More>>

Commerce Commission: Latest Broadband Report Confirms Improved Performance Of Premium Fibre Plans

The latest report from the Commerce Commission’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the Commission, its independent testing partner, ... More>>

Air New Zealand: Capital Raise Deferred

Air New Zealand has decided to defer its planned capital raise to later in 2021 allowing more time to assess the impacts of recent developments on the airline’s path to recovery. 'We’ve seen some clearing of COVID-19 clouds recently, with ... More>>

Stats NZ: New Report Shows Impact Of Demands On Land In New Zealand

A new environmental report released today by the Ministry for the Environment and Stats NZ, presents new data on New Zealand’s land cover, soil quality, and land fragmentation. The land cover data in the report, Our land 2021 , provides the most ... More>>


Stats NZ: March Card Spending Rebounds Despite COVID

There was a lift in retail card spending in March following a fall in the lockdown-disrupted February month, Stats NZ said today. Seasonally adjusted retail card spending rose by $53 million (0.9 percent), compared with February 2021. Visit our website to read ... More>>

PwC: Outcome Of Review Into Air New Zealand Gas Turbines Business

Air New Zealand has received the report into its Gas Turbines business from independent external advisers PwC. Air New Zealand Chairman Dame Therese Walsh says the report identified a range of effective controls in the Gas Turbines revenue contracting ... More>>