The Inland Revenue Department (IRD) has lost an appeal against a High Court ruling over the tax status of the Wellington Regional Stadium Trust.
Inland Revenue's lawyer, Andrew Beck, had argued the trust was a council-controlled trading organisation and should pay tax on its profits.
However, in a decision released today, the Court of Appeal dismissed IRD's argument, saying the trust's dominant purpose was not to make a profit and it was therefore exempt from paying tax.
The trust is a charitable organisation that makes profit only to reinvest in running the Westpac Stadium.
Justices Glazebrook, O'Regan and Robertson said was obvious that "stadia generally do not make money", and if the trust had to pay tax, it would not be financial viable.
The case began in January 2002, when the IRD Commissioner informed the trust that it had lost its charitable status on March 31, 1999 as a result of changes to the Local Government Act and to the Income Tax Act.
The trust went to court to clarify its tax status, and in July, the High Court ruled in its favour, but this was appealed by Inland Revenue.
In a judgment released yesterday, the court dismissed Inland Revenue's appeal, and allowed the trust's cross appeal, widening the basis for finding the loans were allowed to be interest-free.
"Although the stadium has generated an operating surplus each year, this has not reached the $2 million per annum necessary to service the interest and principal requirements of the [$33 million] ANZ loan," the ruling said.
"The evidence was that the stadium is not projected to reach the $2 million operating surplus in the next three years and that, if it was required to pay interest on the funding from Wellington City Council and Wellington Regional Council, it would be insolvent."
The Court of Appeal decided the trust had its own special legal authority that fell outside normal local government laws covering council-controlled trading organisations, and the tax status that imposed.
"Even as a going concern, apart from the cost of capital, we were being told that a stadium was not very easy to run and to keep its head above water."
IRD's director of litigation management, Karen Whitiskie, said IRD was still considering the judgment and no decision had yet been made on whether to appeal.
- NZPA
IRD loses appeal against Wellington Stadium tax status
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