Plain language law

New Zealand law explained for everyone

Goods and Services Tax Act 1985

General provisions

76: Avoidance

You could also call this:

"Stopping people from avoiding paying their fair share of tax"

Illustration for Goods and Services Tax Act 1985

If you enter into a tax avoidance arrangement, it is void against the Commissioner for tax purposes. You need to know that a tax avoidance arrangement is one that has tax avoidance as its purpose or effect. The Commissioner can adjust the amount of tax you pay if you get a tax advantage from an arrangement.

If the Commissioner thinks you have a tax advantage, they can treat you as if you were a registered person, even if you are not. They can also treat a supply of goods and services as if it was made to or by a registered person. The Commissioner can make these changes to counteract any tax advantage you got from the arrangement.

The Commissioner has rules to stop people avoiding tax by transferring their business to someone else. If you transfer your business to someone you are associated with, the Commissioner can treat you both as one person for tax purposes. You can read more about this in sections 15(3), 15(4), 19A(1) and 51(1).

The Commissioner can decide not to apply these rules if they think it is fair to do so. An arrangement can be a contract, agreement, plan or understanding, and it can include all the steps to carry it out. Tax avoidance includes reducing your tax liability, postponing paying tax, getting a bigger tax refund, or getting a refund earlier.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM85289.

Topics:
Money and consumer rights > Taxes
Previous

75B: General rules for giving information or communicating matters, or

"Rules for sharing information or talking to people about tax matters"

Next

77: New Zealand or foreign currency, or

"Paying tax: using New Zealand dollars or other currencies"

Part 11General provisions

76Avoidance

  1. A tax avoidance arrangement entered into by a person is void against the Commissioner for tax purposes.

  2. A tax avoidance arrangement is one that directly or indirectly—

  3. has tax avoidance as its purpose or effect; or
    1. has tax avoidance as one of its purposes or effects, whether or not another purpose or effect relates to ordinary business or family dealings, if the purpose or effect is not merely incidental.

      1. If a tax avoidance arrangement is void against the Commissioner, the Commissioner may adjust the amount of tax payable by, or the amount of tax refundable to, a registered person affected by the arrangement, whether or not the registered person is a party to the arrangement, in the manner the Commissioner considers appropriate to counteract any tax advantage obtained by the registered person from or under the arrangement.

      2. For the purpose of subsection (3), the Commissioner may, in addition to any other treatment the Commissioner considers appropriate, treat—

      3. a person who is not a registered person and who is a party to or has participated in an arrangement as being a registered person:
        1. a supply of goods and services, whether or not a taxable supply, that is affected by or is part of an arrangement as being made to or by a registered person:
          1. a supply of goods and services as occurring in a taxable period that, but for an arrangement affected by this section, would have occurred in the taxable period in which the supply was made:
            1. a supply of goods and services as having been made, or consideration for the supply as having been given, at open market value.

              1. Subsection (6) applies if—

              2. a person (person A) enters into an arrangement on or after 22 August 1985 whereby a taxable activity formerly carried on by person A is carried on, in whole or in part, by another person (person B) or other persons; and
                1. either—
                  1. person A and person B are associated persons; or
                    1. person A and the other persons are associated persons.

                    2. For the purpose of sections 15(3), 15(4), 19A(1) and 51(1), the value of the supplies made in the course of carrying on all taxable activities in a 12-month period starting on the first day of any month by person A and person B or person A and the other persons is, to the extent that the value relates to supplies arising from the taxable activity formerly carried on by person A, each to be treated as being equal to the aggregate of the value of the taxable supplies made by all persons for that period.

                    3. The Commissioner may, having regard to the circumstances of the case and if the Commissioner considers it equitable to do so, determine that subsection (6) does not apply to person A, person B or the other persons.

                    4. For the purpose of this section—

                      arrangement means a contract, agreement, plan or understanding, whether enforceable or unenforceable, including all steps and transactions by which it is carried into effect

                        tax avoidance includes—

                        1. a reduction in the liability of a registered person to pay tax:
                          1. a postponement in the liability of a registered person to pay tax:
                            1. an increase in the entitlement of a registered person to a refund of tax:
                              1. an earlier entitlement of a registered person to a refund of tax:
                                1. a reduction in the total consideration payable by a person for a supply of goods and services.

                                Notes
                                • Section 76: substituted, on (applying on and after 10 October 2000), by section 116(1) of the Taxation (GST and Miscellaneous Provisions) Act 2000 (2000 No 39).