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CSUM 21/02
Issued
02 Feb 2021
Decision
02 Dec 2020
Court
NZTRA
Appeal Status
Not appealed

Whether expenditure is of a capital or revenue nature is not to be found by any rigid test or description but upon consideration of all the circumstances; if capital in nature, it is not deductible for income tax purposes

The Tax Review Authority (TRA) held that the Commissioner’s decision to disallow as repair and maintenance the sum of $332,071.90 for the 2012, 2013 and 2014 income tax years pursuant to section DA2(1) of the ITA 2007, was correct. The TRA disagreed with the Disputant’s assertion that the work undertaken on the Property and 6 Green Street were not related projects but were separate and independent of each other. The TRA agreed with the Commissioner that the Disputant was engaged in one overall project to undertake capital works on the Property and no portion of the disputed expenditure can be treated as deductible repair costs. The TRA also found that when viewed objectively, the Disputant’s 2012 tax position was about as likely as not to be correct and therefore the UTP shortfall penalty was correctly imposed.

Tax Information Bulletin Vol 33 No 1 - February 2021

Case
TRA 015/19 [2020] NZTRA 2
Legal terms
Shortfall penalties, Unacceptable Tax Position

Income Tax Act 2007, sections DA1(1), DA2(1), DA2(7)
Tax Administration Act 1994, sections 3(1), 141(2), 141B, 141B(1), 141B(7), 141FB