A Week in Review

Sea Captain’s application dismissed

For those of you who provide tax residency opinions for your clients, you will no doubt have been following the Van Uden case, which similar in vein to the Diamond landmark decision, required the Court to consider the facts and make a determination with respect to the issue of whether or not the taxpayer had a NZ permanent place of abode (“PPOA”) during the relevant income years in question.

When I first read the High Court judgement, just reading the facts of the case, I thought the taxpayer was in trouble, and sure enough, the decision was found in favour of the Commissioner. Not satisfied with the outcome however, the taxpayer then appealed to the Court of Appeal, where he again lost. Now at this point, just to give you a feel as to how the various courts were viewing the taxpayers case, as he had lost in the TRA as well, it should be noted that all Courts had also confirmed the imposition of shortfall penalties by the Commissioner, for the taxpayer taking an unacceptable tax position – indicative of a view that the taxpayers position was not even as likely as not to have been correct.

Clearly under the impression that he had suffered a serious miscarriage of justice, the taxpayer has then proceeded to seek leave from the Supreme Court to appeal the Court of Appeals decision. The Supreme Court dismissed the application for leave to appeal however, considering that it was not necessary in the interests of justice for the Court to hear and determine the proposed appeal. The Court found that the proposed grounds of appeal raised no point of general or public importance nor any matter of general commercial significance. There was also no appearance of a miscarriage of justice.

So with the case now at an end, what are some of the takeaways from the final decision that can provide useful guidance to us all, when advising clients of their potential NZ tax residency status, particularly with respect to the existence, or not, of a NZ PPOA:

• A core principle of any tax residency determination, is whether you have a NZ home available to you, and it is completely irrelevant in this regard, whether or not you actually own this home in your own name (dwelling owned by a trust in this case, of which the taxpayer was a trustee, although he did not hold a power of appointment over trustee positions);
   
• Once the availability of a NZ home is established, if your track record reflects that every time you return to NZ, you actually stay in the home, and you return to NZ quite regularly, you are going to be on the slippery downhill slope attempting to argue against the existence of a NZ PPOA; and,
   
• R can, and will, examine all of your expenditure habits during the period in question, which can ultimately lead to supporting their position taken of you having a NZ PPOA, if coupled with the previous two factors, plotting on a map where you actually spend your funds when present in NZ, is geographically centred around the dwelling that has been deemed a home for you. Add to this any evidence that you use the property as your mailing address or you have services such as Sky TV connected to the same address, then I suggest you may be in a spot of bother.

A distinctly different case in terms of factual background elements to Diamond I would suggest therefore, although naturally the principles espoused in that case, certainly played a role in the latest decision. Time will tell of course, as to what impact if any, the decision has on future tax residency disputes brought before the Courts.

IR close-down – be prepared!

Just in case you have not seen the various notifications, IR will be effectively closed for around 1 week over the Easter/ANZAC period. The shutdown is to facilitate further modernisations to IR’s systems, and in essence, the only things you will be able to do during the affected timeframe, is pay bills as you normally would through your bank account, and access information through IR’s website. The following is IR’s published statement (I’ve highlighted one critical point):

Services will be temporarily unavailable.

To make these changes our key services will be unavailable between 3pm, Thursday 18 April and 8am, Friday 26 April 2019. During this time you won’t be able to access myIR, E-File or contact us through our contact centres. Our offices will also be closed. Secure mail messages saved as drafts and any draft returns within myIR can’t be brought across and will be deleted as part of this process. Please therefore check your secure mail messages and submit any draft returns before Thursday 18 April. For more information, visit our service update website.

Click on the link for more detailed info, and remember that the Friday, Monday and Thursday of the specified period are all public holidays, so the impact may not be a bad as you first think.