Otago Law Review, Vol. 4, p. 165-184, 1978
21 Pages Posted: 14 Nov 2009 Last revised: 11 Jul 2011
Is an “intention to make a profit” necessary for there to be business income within the meaning of section 65(2)(a) of the Income Tax Act 1976? English cases on an analogous provision suggest intention to make a profit is not required. Literal interpretation of the New Zealand provision tends to support this conclusion. However, starting from the case of Commissioner of Inland Revenue v Watson  NZLR 259 (Henry J), the courts have found such an intention is necessary.
Section 65(2)(a) of the 1976 Act is reproduced in a similar form in section CB1(1) of the Income Tax Act 2007. In 2009, the problem of defining when an economic gain should be taxable as business income remains controversial under the 2007 Act. An intention to make a profit remains a touch-stone for New Zealand courts.
Keywords: business income, intention to make a profit, income tax act 1976, tax law
JEL Classification: K34
Suggested Citation: Suggested Citation
Prebble QC, John, Intention to Make a Profit and 'Business' in Section 65(2)(A) of the Income Tax Act 1976. Otago Law Review, Vol. 4, p. 165-184, 1978. Available at SSRN: https://ssrn.com/abstract=1505108 or http://dx.doi.org/10.2139/ssrn.1505108