25 Aug 2011

Call for more guidance on tax ruling

4:16 pm on 25 August 2011

The Institute of Chartered Accountants says more guidance is needed from the Inland Revenue Department following a Supreme Court ruling on tax avoidance.

The court found that Christchurch orthopaedic surgeons Ian Penny and Gary Hooper underpaid themselves so they did not have to pay the top tax rate.

Profits from the businesses were paid into family trusts, which funded items including a loan and a holiday home.

The Institute of Chartered Accountants says the ruling failed to spell out what's an appropriate salary in such cases.

Tax director Craig Macalister says he suspects there are many cases similar to that of the two surgeons.

The Inland Revenue Department says the case has cleared the way for it to pursue other, similar cases.

Deputy Commissioner Carolyn Tremain says the IRD will now target other cases where it believes people have organised their businesses to avoid paying the right amount of tax.

Ms Tremain says the department is focused only on the most egregious cases and it won't be a witch-hunt.