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Inland Revenue

Tax Policy

Commissioner given discretion not to rule on reconstruction provision

(Clause 118)

Summary of proposed amendment

Section GA 1 of the Income Tax Act 2007 gives the Commissioner of Inland Revenue the power to reconstruct a tax avoidance arrangement to counteract the tax advantage gained. An amendment is proposed that will give the Commissioner a discretion whether to make a private ruling to the extent to which it would be a ruling on how section GA 1 applies or would apply.

Application date

The amendment will apply from the date of enactment.

Key features

The discretion to make a ruling is only in relation the application of section GA 1, and is not a general widening of the Commissioner’s general discretion to make a ruling.


Currently, the Commissioner is required to rule on how section GA 1 applies, or would apply when a taxpayer requests such a ruling. This occurs in some instances where the Commissioner has determined that the taxpayer’s arrangement constitutes tax avoidance. Requiring the Commissioner to make a ruling on exactly how the Commissioner would apply the reconstruction provision is not ideal, and can be difficult to do without an investigation. Giving the Commissioner a discretion to make a ruling will allow the Commissioner to provide a ruling when its position regarding reconstruction is clear, and will allow the Commissioner to refrain from making a ruling if the position is uncertain.