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Inland Revenue

Tax Policy

Chapter 4 - Evidence of intention or purpose

4.1 As noted in the previous chapter, one of the main difficulties associated with the date of acquisition being set at the earlier phases of a sale and purchase agreement is the problem of providing evidence of a person’s subjective intention or purpose.

4.2 Currently, if the taxpayer disputes a Commissioner’s assessment of their tax liability or vice versa, the statutory burden of proof requires the taxpayer to prove, on the balance of probabilities, that the Commissioner’s assessment is incorrect. In the context of section CB 6, this means that the taxpayer has to prove on a balance of probabilities that they had no intention or purpose to dispose of the land when they acquired the land.

4.3 The practical concern is that if the date of acquisition is marked at the earlier phases of an agreement for the sale and purchase of land, both the taxpayer and the Commissioner may have little evidence to prove or disprove the taxpayer’s intention at this time.

4.4 This evidentiary problem does not impact on providing certainty in relation to determining the date of acquisition, but it does present practical implications, particularly for the Commissioner, who has to determine what the taxpayer is thinking at a specific point in time.

4.5 A suggestion to address this practical concern is to legislatively allow the Commissioner and taxpayer to consider and submit evidence that is before and after the date of acquisition, albeit introducing an objective element to this provision. Therefore if a dispute were to progress through to the challenge procedures, the relevant deciding authority in considering what the taxpayer’s intention was, will ask “what is the taxpayer’s intention or purpose using all the reasonable information available to me?”

4.6 It is arguable that this is already the situation, given that the Courts have held that although purpose or intention is to be determined on a subjective basis, it must be determined on the totality of the evidence.[5]

4.7 However it is suggested that by providing a legislative provision to this effect, it will clearly reaffirm the common law position and ensure that the Court can consider the totality of the evidence before and after the date of acquisition not just the totality of the evidence at the date of acquisition.

4.8 We welcome feedback on this suggestion.


5 Case Y3 (2007) 23 NZTC 13,028, see also National Distributors Ltd v CIR [1989] 3 NZLR 661 (CA).