New Zealand


  • Service: Tax
  • Type: Business and industry issue
  • Date: 24/08/2011


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Taxmail - Penny & Hooper: Round Three 

Knock-out for the Commissioner?                   Issue 2, October 2010


A knock-out win for the Commissioner, or a points decision? Either way, the case has some important implications

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The Supreme Court dismissed unanimously an appeal by Ian Penny and Gary Hooper (“Penny & Hooper”) against the Court of Appeal judgement, in favour of the Commissioner of Inland Revenue, that the payment of non-market salaries to the two orthopaedic surgeons, by their respective companies, amounted to tax avoidance.


The decision confirms that the adoption of a particular business structure is not tax avoidance, in and of itself, and payment of a non-market salary may be justified in some circumstances.


However, the result will change if tax is more than an incidental driver of the overall arrangement.


The decision also confirms that the Parliamentary contemplation test remains a crucial part of the tax avoidance landscape, although its application remains uncertain in our view.


The taxmail PDF analyses the Penny & Hooper Supreme Court decision in greater detail.


Taxmail - Comment on topical tax issues from KPMG NZ Tax. 

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