Legitimate tax planning or tax avoidance?

In August the Supreme Court released its long-awaited decision about a landmark tax case: Penny & Hooper. The case was decided in favour of Inland Revenue and this decision has widespread implications for the many small businesses using trust structures.

"This case involved the restructuring of the business of two surgeons (Penny and Hooper) from sole practitioners earning an income of approximately $500,000 per year, into a company owned by a family trust for the benefit of the surgeons and their respective families," says tax lecturer Daniel Hunt. "The surgeons became...