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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

21 Pages Posted: 14 Nov 2009 Last revised: 11 Jul 2011

John Prebble QC

Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law

Abstract

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 [1960] 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

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

John Prebble QC (Contact Author)

Victoria University of Wellington - Faculty of Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)

HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Notre Dame Australia - School of Law

Sydney Campus, New South Wales
Australia

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