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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 67
The use of the house could not be converted to cash as the manager could not rent out the house –
therefore, it was not income
o
Commentary
Example of the converbility principle – an employer paying the employee in gold bars would be
income because the gold bars are converble to cash
Note that in Subpart CE, an employer providing an employee with somewhere to live is counted as
income – but this case is sll good law for the converbility principle (to be used in cases that are not
covered by Part C of the ITA)
Wilkins v Rogerson
[1961] Ch 133
o
Facts
The employer provided the employee suits to wear to work
The tax authority wanted to assess tax on that benefit
o
Judgment
The suits were a benefit that counted as income because ownership of the suit passed to the
employee – therefore, he could theorecally sell it and convert it to cash
However, the
income was valued at the second-hand value of the suit
(i.e. the price at which the
employee could have sold it for) and not the price of the suit when the employer paid for it
Heaton v Bell
[1970] AC 728
o
Facts
The employee was given the choice of a company car (a benefit not converble to cash as it belongs
to the company) or a higher salary – the value of use of the car was equivalent to the increase in
salary
o
Judgment
The choice counts as a benefit that is converble into cash because the employee could convert the
benefit into cash by means of choosing the higher salary – therefore, the employee had to pay tax as
if they chose the higher salary
Californian Copper Syndicate (Limited and Reduced) v Harris
(1904) 5 TC 159
o
Facts
Company C invested in a mining property but did not mine the property itself – it sold the property to
Company F
F paid for the property by issuing shares of their company
o
Submissions
The tax authority argued that the shares were income and thus subject to tax
Company C argued that the shares were not income because:
Gains are only income when they are realised – the gains were not realised here because the
shares hadn’t been sold for cash
Even if geng shares is realisaon, this was a capital gain (as it sold a capital asset) and thus
not income
o
Judgment
Company C intended to sell the property for a profit rather than mining it
A gain has been realised here because the shares are potenally converble into cash
The gain of geng shares is of a revenue nature because Company C acquired the mining property for
the purposes of selling it – therefore, it was income
o
Note
Nowadays with the bright line test, if you buy and sell a property within 10 years without living in it,
you pay tax – it doesn’t maer what your intenon was with the property
Dawson v Commissioner of Inland Revenue
(1978) 3 NZTC 61,252
o
Facts
The company’s business included renng out TVs
The company wanted to raise money by debentures
Members of the public lend money to the company, and the loan is secured by the
debenture
The lenders usually get paid interest, which is taxable – but in this case, the company offered
them two different deals: either free use of the TVs or geng paid interest
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