Monday -Friday - 9:00 - 18:00 New Zealand Time



Understanding section CB3 of ITA 2007: Undertaking or Scheme

Often the IRD customer and compliance service team (Audit Team) argues that certain items are taxable under the CB3 of ITA 2007.

Let's understand the basic principles of CB3: Undertaking or Scheme for Profit Making. Over the years case law has derived certain principles. Let's look at those principles.

  1. The undertaking or scheme is a set program. A series of steps directed to attain the result. There must a nexus between the undertaking or scheme with the income/gain received.

  2. Not all schemes can get captured under undertaking or scheme. Certain one-off transactions cannot be considered as business. Such as certain capital gains can sit outside the scope of implication of CB3.

  3. For CB3 to apply profit making must be a dominant purpose. A taxpayer may have many purposes of entering into an arrangement of undertaking or scheme. However, it is the dominant purpose which needs to be analysed.

  4. The subjective nature of purpose to be analysed. The steps taken to enter in a scheme. Each step to be analysed, and to be viewed as a whole that how each step is making coherent plan.



*The above article is a high-level explanation of the methods of calculation, and there may be other technicalities/rules that are applicable. The complexity of the calculations can also vary. Please reach out to us if you have specific questions regarding your situation.


Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.


Generated with MOOJ Proforms Version 1.5

Please fill the form below to contact us! 


*Required information.