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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: general

GA 1: Commissioner’s power to adjust

You could also call this:

“The Commissioner can adjust tax calculations if someone tries to avoid paying taxes”

This law gives the Commissioner special powers when someone tries to avoid paying taxes. If you’re part of an arrangement that’s not allowed because it avoids tax, the Commissioner can change your taxable income to make sure you pay the right amount of tax.

The Commissioner can also change your tax credits. They might take away some or all of your tax credits, or they might give some of your tax credits to someone else.

When the Commissioner is deciding what to do, they can think about how much income, deductions, tax losses, or tax credits you might have had if you didn’t try to avoid tax. They can look at what you would have had, what you probably would have had, or what they think you might have had.

The Commissioner can only count your income or deductions once. If they add some of your income or deductions to your taxable income, they can’t also add it to someone else’s taxable income.

In this law, a tax credit means something that reduces the amount of tax you have to pay. This could be because you’ve already paid some tax, or because of some other benefit you’re entitled to.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516864.

Topics:
Money and consumer rights > Taxes
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Part G Avoidance and non-market transactions
Avoidance: general

GA 1Commissioner’s power to adjust

  1. This section applies if an arrangement is void under section BG 1 (Tax avoidance).

  2. The Commissioner may adjust the taxable income of a person affected by the arrangement in a way the Commissioner thinks appropriate, in order to counteract a tax advantage obtained by the person from or under the arrangement.

  3. The Commissioner may—

  4. disallow some or all of a tax credit of a person affected by the arrangement; or
    1. allow another person to benefit from some or all of the tax credit.

      1. When applying subsections (2) and (3), the Commissioner may have regard to 1 or more of the amounts listed in subsection (5) which, in the Commissioner’s opinion, had the arrangement not occurred, the person—

      2. would have had; or
        1. would in all likelihood have had; or
          1. might be expected to have had.

            1. The amounts referred to in subsection (4) are—

            2. an amount of income of the person:
              1. an amount of deduction of the person:
                1. an amount of tax loss of the person:
                  1. an amount of tax credit of the person.

                    1. When applying subsection (2), if the Commissioner includes an amount of income or deduction in calculating the taxable income of the person, it must not be included in calculating the taxable income of another person.

                    2. In this section, tax credit means a reduction in the tax a person must pay because of—

                    3. a credit allowed for a payment by the person of an amount of tax or of another item; or
                      1. another type of benefit.

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