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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 92
N
EW
Z
EALAND
POSITION
New Zealand Court of Appeal approach:
o
City Motors
Same facts as
BP Australia
The test is a praccal weighing of compeng indicaons
Held that the contribuons were a capital receipt – there was a substanal contribuon to the capital
assets of City Motors
o
LD Nathan
The taxpayer purchased goodwill from a business (the value of import licences and customer lists) –
they then wanted to claim a deducon for that purchase
Held to be a non-deducble capital payment – what was actually being acquired was a significant part
of the business; it couldn’t be operated without the import licences and customer lists, so they were
part of the capital structure
o
Buckley & Young
A payment was made to secure the rerement of an incompable director – part of the payment was
a restraint of trade to stop him from compeng and part of it was a rerement payment
When examining the true character of the payments made and the benefits provided, the restraint of
trade had a capital nature (as it has a capital-like benefit to the company), and the rerement
payment had a revenue nature (as it is normally part of the business like salary and wages)
As the company couldn’t dissect the two payments and the amount necessary of each component,
they couldn’t be deducted
Trustpower Ltd v Commissioner of Inland Revenue
[2016] NZSC 91
o
Facts
Trustpower is a generator and retailer of electricity – they generated about half of the electricity they
sold and bought the rest from other generators
They were considering building two hydro farm and two wind farm power staons to generate more
electricity – these were part of its “development pipeline” (which usually had around 200 projects at
any me)
The purpose of the pipeline was both to provide Trustpower with informaon about the viability,
feasibility, and costs of building new generaon capacity, and to provide a range of opons when it
comes to decide whether to build a new generaon project or to buy electricity on the market
Trustpower applied for resource consent for the four different projects – they incurred costs of $17.7
million on preliminary steps is assessing and then applying for the consents
The consents were for land use, water permits and discharge permits
Some consents were only for limited me periods for 10 to 35 years whereas others were
unlimited
Some of the projects were built while others went no further from the planning stage
o
Submissions
Trustpower argued that the pipeline is the asset (rather than the four projects):
The pipeline is the normal process by which Trustpower carries out its operaons and earns
income – therefore, expenditure incurred in relaon to this (i.e. resource consent on the four
projects) was of a revenue nature
Trustpower also argued:
The accounng treatment of the expenditure supported it being of a revenue nature
Most of the expenditure was expensed before Trustpower became commied to the project
– it was pre-commied
The Commissioner argued:
The expenditure was related to the capital asset / infrastructure of the power plants –
therefore, it was of a capital nature
The expenditure produced an enduring benefit as the resource consents ranged from 10 to
35 years to unlimited
The expenditure related to the structure of the business rather than the process – the power
plants were going to be used to carry on the business of selling electricity, so the plants go to
the structure
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