The Peterson Case and its Impact on the Rules in BNZ Investments Ltd. and Cecil Bros.
TAXATION ISSUES IN THE TWENTY-FIRST CENTURY, Adrian Sawyer, ed., Christchurch, 2006
13 Pages Posted: 14 May 2010 Last revised: 11 Apr 2015
Date Written: 2006
The Privy Council delivered its advice in the film shelter case of Peterson v Commissioner of Inland Revenue (2005) 22 NZTC 19,098 (PC), allowing Mr Peterson’s appeal. While the Peterson case was a notable win for Mr Peterson, this essay argues that in a broader context it was a major victory for the Commissioner of Inland Revenue and for tax payers who do not invest in shelters. The Privy Council put paid to several judicial heresies that threatened to enfeeble section BG1 of the Income Tax Act 2004, the general anti-avoidance rule, which is the Commissioner’s heaviest anti-avoidance artillery. Perhaps even more importantly, their Lordships interpreted the legalistic deduction rule in Cecil Brothers Pty Ltd v FCT almost into oblivion and recognised powers of apportionment in the Commissioner that no one thought he possessed. The judgment contains a detailed forensic template for the Commissioner to use in later cases.
Keywords: Income Tax Law, Income Tax Act 2004, Tax shelters, anti-avoidance, Cecil Brothers Pty ltd v FCT.
JEL Classification: K34
Suggested Citation: Suggested Citation