Income Tax Act 2004

A 1: Title
This Act is the Income Tax Act 2004. 1994 No 164 s AA 1(1)
A 2: Commencement
1 April 2005
1: This Act comes into force on 1 April 2005. Act effective for 2005-06 tax year and later
2: However, except when the context requires otherwise, this Act applies only—
a: with respect to the tax on income derived in the 2005-06 tax year and later tax years, in the case of a person whose income year is the same as the tax year; and
b: with respect to the tax on income derived in the corresponding income years, in the case of a person whose income year is not the same as the tax year. corresponding income year income income year tax tax year 1994 No 164 s AA 1(2), (3)
A: Purpose and interpretation
Contents
AA 1: Purpose of Act
The main purposes of this Act are—
a: to define, and impose tax on, net income :
b: to impose obligations concerning tax :
c: to set out rules for calculating tax and for satisfying the obligations imposed. net income tax 1994 No 164 s AA 1 Paragraphs (a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
AA 2: Interpretation
Aids to interpretation
1: Diagrams, flowcharts, readers' notes, and the lists of defined terms following sections are included in this Act only as interpretational aids. If there is conflict between an interpretational aid and a provision of this Act, the provision prevails. Defined terms
2: If a defined term is used in a section and is not included in the list of defined terms following the section, the term is nevertheless used in the section as defined. 1994 No 164 s AA 3(2)
AA 3: Definitions
References to this Act
1: Except in this Part and Parts B to E Tax Administration Act 1994 Significance of Part O
2: Definitions of terms that apply generally for the purposes of this Act, and general provisions on the interpretation and construction of this Act, appear in Part O 1994 No 164 s AA 4
B: Core Provisions
Contents
BA: Purpose
Contents
BA 1: Purpose
The purposes of this Part are—
a: to impose income tax, provisional tax, withholding tax, and other tax obligations concerning taxes :
b: to set out procedures to be followed for calculating tax and satisfying the obligations imposed under this Act
c: to provide a basis for applying the other Parts :
d: generally to set up the scheme of the Act and the main links between its Parts. income tax provisional tax tax 1994 No 164 s BA 1 Paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
BB: Income tax and resulting obligations
Contents
BB 1: Imposition of income tax
Income tax is imposed on taxable income, at the rate or rates of tax fixed by an annual taxing Act, and is payable to the Crown under this Act and the Tax Administration Act 1994 annual taxing Act income tax tax taxable income 1994 No 164 s BB 1
BB 2: Main obligations
Income tax liability
1: A person's income tax liability for a tax year must be calculated, and satisfied by the person, under subpart BC Non-filing taxpayer
2: Despite subsection (1), a non-filing taxpayer is not required to file a return of income. Provisional tax
3: A provisional taxpayer must pay provisional tax for a tax year under the provisional tax rules. Withholding liabilities
4: A person who has a withholding liability must satisfy it under subpart BE Other obligations
5: A person who has an obligation under subpart BF income tax liability non-filing taxpayer provisional tax rules provisional tax provisional taxpayer return of income tax year 1994 No 164 s BB 2
BB 3: Overriding effect of certain matters
Tax avoidance arrangements: subpart BG
1: Under Part G Double tax agreements: subpart BH
2: Despite anything in this Act, except section BH 1(5) subpart BH
a: income tax; or
b: any other tax imposed by this Act; or
c: the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax section 3 Commissioner double tax agreement income tax tax tax avoidance arrangement 1994 No 164 s BB 3
BC: Calculating and satisfying income tax liabilities
Contents
BC 1: Non-filing and filing taxpayers
Non-filing taxpayer
1: The income tax liability of a non-filing taxpayer for a tax year is the total tax withheld from amounts of income included in the taxpayer's annual gross income for the year. Filing taxpayer
2: The income tax liability of a filing taxpayer for a tax year is calculated under sections BC 2 to BC 6 Filing taxpayer with schedular income
3: If a filing taxpayer has schedular income, their income tax liability calculation is modified by section BC 7 amount annual gross income filing taxpayer income income tax liability non-filing taxpayer schedular income tax tax year 1994 No 164 ss BC 1(1), BC 2
BC 2: Annual gross income
A person's annual gross income for a tax year is the total of their assessable income that is allocated to the corresponding income year. annual gross income assessable income corresponding income year tax year 1994 No 164 s BC 4
BC 3: Annual total deduction
A person's annual total deduction for a tax year is the total of their deductions that are allocated to the corresponding income year. annual total deduction corresponding income year deduction tax year 1994 No 164 s BC 5
BC 4: Net income and net loss
Income more than deductions
1: If, for a tax year, a person's annual gross income is more than their annual total deduction, the difference is their net income for the year. Income equal to deductions
2: If, for a tax year, a person's annual gross income equals their annual total deduction, their net income for the year is zero. Deductions more than income
3: If, for a tax year, a person's annual total deduction is more than their annual gross income, the difference is their net loss for the year, and their net income for the year is zero. Treatment of net loss
4: A person with a net loss for a tax year may, under Part I
a: subtract the net loss from their net income for a future tax year; or
b: make the net loss available to another person to subtract from that other person's net income for that or a future tax year. annual gross income annual total deduction net income net loss tax year 1994 No 164 s BC 6
BC 5: Taxable income
A person's taxable income for a tax year is determined by subtracting any available net losses that the person has from their net income under Part I available net loss net income taxable income tax year 1994 No 164 s BC 7
BC 6: Income tax liability of filing taxpayer
Calculation rules
1: The income tax liability of a filing taxpayer for a tax year is the amount calculated under subsections (2) to (5). Unadjusted income tax liability
2: The unadjusted income tax liability of the filing taxpayer for the tax year is calculated by multiplying their taxable income for the tax year by the applicable basic tax rate. Adjusted income tax liability
3: The unadjusted income tax liability of the filing taxpayer becomes their adjusted income tax liability by subtracting their allowable rebates from their unadjusted income tax liability. Result positive
4: If the adjusted income tax liability is more than zero, that amount is the filing taxpayer's income tax liability for the tax year. Result negative
5: If the adjusted income tax liability is zero or negative, the filing taxpayer's income tax liability for the tax year is zero. adjusted income tax liability allowable rebates amount applicable basic tax rate filing taxpayer income tax liability tax year taxable income unadjusted income tax liability 1994 No 164 s BC 8(1)-(5)
BC 7: Income tax liability of person with schedular income
Modified income tax liability
1: The income tax liability for a tax year of a person who has schedular income for the year is the total of—
a: their schedular income tax liability for the year calculated under subsection (2) or (3); and
b: the amount that would be their income tax liability for the year if they had no schedular income. Schedular income tax liability
2: If a person has 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the amount that would be the income tax liability for the year if their only income for the year were that schedular income. Multiple schedular income
3: If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the total of the amounts calculated for each kind of schedular income. amount income income tax liability schedular income schedular income tax liability tax year 1994 No 164 s BC 3
BC 8: Surplus rebates
Amount of surplus rebates
1: If a person's adjusted income tax liability is negative for a tax year, their amount of surplus rebates is the lesser of—
a: the total of the refundable rebates to which they are entitled for the year; and
b: the difference between zero and their adjusted income tax liability. Refunds from Commissioner
2: The Commissioner must refund the amount of surplus rebates under section KD 4 adjusted income tax liability amount Commissioner refundable rebate tax year 1994 No 164 ss BC 8(6), BC 10(1)
BC 9: Satisfaction of income tax liability
Use of tax credits
1: Credits for tax paid or tax withheld, calculated under Part L Terminal tax
2: If the person's income tax liability is more than the total of their credits, the difference is the person's terminal tax. The person must pay the terminal tax to complete the satisfaction of their income tax liability. income tax liability tax tax year terminal tax 1994 No 164 ss BC 1(2), BC 9(1)
BC 10: Surplus credits
Composition of surplus credits
1: The composition of a person's surplus credits is determined as if their credits for tax paid or tax withheld were set off against their income tax liability in the following order:
a: non-refundable credits:
b: credits for supplementary dividends allowed to them under subpart LE
c: convertible credits:
d: refundable credits. Application of surplus credits
2: If, for a tax year, the total of a person's credits for tax paid or tax withheld is more than their income tax liability, then,—
a: first, their surplus credits are offset against their other income tax obligations, under Parts L M
b: second, any remaining surplus credits they have are dealt with under Parts L M
c: third, any surplus refundable credits they have are refunded by the Commissioner under Parts M N Commissioner convertible credit income tax income tax liability non-refundable credit refundable credit supplementary dividend surplus refundable credits tax tax year 1994 No 164 ss BC 9(2), (3), BC 10(2)
BD: Income, deductions, and timing
Contents
BD 1: Income, exempt income, excluded income, non-residents' foreign-sourced income, and assessable income
Amounts of income
1: An amount is income of a person if it is their income under a provision in Part C Exempt income
2: An amount of income of a person is exempt income if it is their exempt income under a provision in subpart CW CZ Excluded income
3: An amount of income of a person is excluded income if—
a: it is their excluded income under a provision in subpart CX CZ
b: it is not their non-residents' foreign-sourced income. Non-residents' foreign-sourced income
4: An amount of income of a person is non-residents' foreign-sourced income if—
a: the amount is a foreign-sourced amount; and
b: the person is a non-resident when it is derived; and
c: the amount is not income of a trustee to which section HH 4(3) Assessable income
5: An amount of income of a person is assessable income in the calculation of their annual gross income if it is not income of any of the following kinds:
a: their exempt income :
b: their excluded income :
c: their non-residents' foreign-sourced income. amount annual gross income assessable income excluded income exempt income foreign-sourced amount income non-resident non-residents' foreign-sourced income 1994 No 164 s BD 1 Subsection (5)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
BD 2: Deductions
An amount is a deduction of a person if they are allowed a deduction for the amount under Part D amount deduction 1994 No 164 s BD 2
BD 3: Allocation of income to particular income years
Application
1: Every amount of income must be allocated to an income year under this section. General rule
2: An amount of income is allocated to the income year in which the amount is derived, unless a provision in any of Parts C E to I Interpretation of derive
3: When the time of derivation of an amount of income is being determined, regard must be had to case law, which—
a: requires some people to recognise income on an accrual basis; and
b: requires other people to recognise income on a cash basis; and
c: more generally, defines the concept of derivation. Income credited in account
4: Despite subsection (3), income that has not previously been derived by a person is treated as being derived when it is credited in their account or, in some other way, dealt with in their interest or on their behalf. Role of Part E
5: Part E
a: specifically modify the allocation of income or have the effect of modifying the allocation of income; or
b: allocate income as part of the process of quantifying it. Single allocation
6: An amount of income may be allocated only once. amount income income year 1994 No 164 ss BD 3(1)-(4), EB 1(1)
BD 4: Allocation of deductions to particular income years
Application
1: Every deduction must be allocated to an income year under this section. General rule
2: A deduction for an amount of expenditure or loss is allocated to the income year in which the expenditure or loss is incurred, unless a provision in any of Parts D to I Interpretation of incur
3: When the time of incurrence of an amount of expenditure or loss is being determined, regard must be had to case law, which—
a: requires some people to recognise expenditure or loss on an accrual basis; and
b: requires other people to recognise expenditure or loss on a cash basis; and
c: more generally, defines the concept of incurrence. Role of Part E
4: Part E
a: specifically modify the allocation of deductions or have the effect of modifying the allocation of deductions; or
b: allocate deductions as part of the process of quantifying them. Allocation
5: If an expenditure or loss gives rise to more than 1 deduction, the deductions are allocated to income years to the extent that their total is no more than the amount of the expenditure or loss. amount deduction income year loss 1994 No 164 ss BD 4, EF 1(1)(a)
BE: Withholding liabilities
Contents
BE 1: Withholding liabilities
Source deduction payments
1: A person who makes a source deduction payment must withhold an amount from the payment under the PAYE rules. Resident withholding income
2: A person who makes a payment of resident withholding income must withhold an amount from the payment under the RWT rules. Non-resident withholding income
3: A person who makes a payment of non-resident withholding income must withhold an amount from the payment under the NRWT rules. Fringe benefits
4: A person who provides a fringe benefit to another person must pay fringe benefit tax under the FBT rules. Specified superannuation contributions
5: A person who makes a specified superannuation contribution to a superannuation fund must pay specified superannuation contribution withholding tax under the SSCWT rules. Retirement scheme contributions
5B: A person who makes a retirement scheme contribution to a retirement savings scheme must pay retirement scheme contribution withholding tax under the RSCWT rules. Dividend withholding payments
6: A person who receives dividends must make dividend withholding payments under the dividend withholding payment rules. amount dividend dividend withholding payment dividend withholding payment rules FBT rules fringe benefit fringe benefit tax non-resident withholding income NRWT rules PAYE rules payment resident withholding income retirement savings scheme retirement scheme contribution retirement scheme contribution withholding tax RSCWT rules RWT rules source deduction payment specified superannuation contribution specified superannuation contribution withholding tax SSCWT rules superannuation fund 1994 No 164 s BE 1 Section BE 1(5B) heading inserted 19 December 2007 section 4(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1(5B) inserted 19 December 2007 section 4(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms retirement savings scheme inserted 19 December 2007 section 4(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms retirement scheme contribution inserted 19 December 2007 section 4(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms retirement scheme contribution withholding tax inserted 19 December 2007 section 4(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section BE 1 list of defined terms RSCWT rules inserted 19 December 2007 section 4(2) Taxation (Business Taxation and Remedial Matters) Act 2007
BF: Other obligations
Contents
BF 1: Other obligations
A person must pay the following under the relevant Part:
a: qualifying company election tax under Part H :
b: income tax on taxable distributions from non-qualifying trusts under Part H :
c: withdrawal tax under Part I :
d: further income tax under Part M :
e: further dividend withholding payments under Part M further dividend withholding payment further income tax income tax non-qualifying trust qualifying company election tax taxable distribution withdrawal tax 1994 No 164 s BF 1 Paragraphs (a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
BG: Avoidance
Contents
BG 1: Tax avoidance
Avoidance arrangement void
1: A tax avoidance arrangement is void as against the Commissioner for income tax purposes. Reconstruction
2: Under Part G Commissioner income tax tax avoidance arrangement 1994 No 164 s BG 1
BH: Double tax agreements
Contents
BH 1: Double tax agreements
Meaning
1: Double tax agreement means an agreement that—
a: has been negotiated for 1 or more of the purposes set out in subsection (2); and
b: has been agreed between—
i: the government of any territory outside New Zealand and the government of New Zealand; or
ii: the Taipei Economic and Cultural Office in New Zealand and the New Zealand Commerce and Industry Office; and
c: has entered into force as a result of a declaration by the Governor-General by Order in Council under subsection (3). Purposes
2: The following are the purposes for which a double tax agreement may be negotiated:
a: to provide relief from double taxation:
b: to provide relief from tax:
c: to tax the income derived by non-residents from any source in New Zealand:
d: to determine the income to be attributed to non-residents or their agencies, branches, or establishments in New Zealand:
e: to determine the income to be attributed to New Zealand residents who have special relationships with non-residents:
f: to prevent fiscal evasion:
g: to facilitate the exchange of information:
h: to assist in recovering unpaid tax. Entry into force
3: An agreement to which subsection (1)(a) and (b) apply enters into force on the date specified by the Governor-General by Order in Council. Overriding effect
4: Despite anything in this Act, except subsection (5), or in any other Inland Revenue Act or the Official Information Act 1982 Privacy Act 1993
a: income tax :
b: any other tax imposed by this Act :
c: the exchange of information that relates to a tax, as defined in paragraphs (a)(i) to (v) of the definition of tax Agreement for recovery of tax
5: An agreement that provides for the recovery of unpaid tax is subject to Part 10A Reference to profits
6: A reference in a double tax agreement to the profits of an activity or business is to be read, if possible, as a reference to the amount that would be a person's net income if that activity or business were their only activity or business. business double tax agreement income income tax net income New Zealand New Zealand resident non-resident source in New Zealand tax 1994 No 164 s BH 1 Subsection (4) amended 3 April 2006 section 4 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the words any other Inland Revenue Act or the Official Information Act 1982 or the Privacy Act 1993, any other enactment, Subsections (4)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
C: Income
Contents
CA: General rules
Contents
CA 1: Amounts that are income
Amounts specifically identified
1: An amount is income of a person if it is their income under a provision in this Part. Ordinary meaning
2: An amount is also income of a person if it is their income under ordinary concepts. amount income 1994 No 164 ss BD 1(1), CD 5
CA 2: Amounts that are exempt income or excluded income
What this section does
1: This section identifies the subparts in this Act that deal with exempt income and excluded income. Exempt income
2: An amount of income of a person is exempt income subpart CW CZ Excluded income
3: An amount of income of a person is excluded income
a: it is their excluded income under a provision in subpart CX CZ
b: it is not their non-residents' foreign-sourced income. amount excluded income exempt income non-residents' foreign-sourced income
CB: Income from business or trade-like activities
Contents
Business generally
CB 1: Amounts derived from business
Income
1: An amount that a person derives from a business is income of the person. Exclusion
2: Subsection (1) does not apply to an amount that is of a capital nature. amount business income 1994 No 164 s CD 3 Schemes for profit
CB 2: Profit-making undertaking or scheme
An amount that a person derives from carrying on or carrying out an undertaking or scheme entered into or devised for the purpose of making a profit is income of the person. amount income 1994 No 164 s CD 4 Personal property
CB 3: Personal property acquired for purpose of disposal
An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it. amount income personal property 1994 No 164 s CD 4
CB 4: Business of dealing in personal property
An amount that a person derives from disposing of personal property is income of the person if their business is to deal in property of that kind. amount business income personal property 1994 No 164 s CD 4
CB 4B: Disposal of certain shares by portfolio investment entity or New Zealand Superannuation Fund after declaration of dividend
When this section applies
1: This section applies to a portfolio investment entity or the New Zealand Superannuation Fund (the entity
a: the entity disposes of a share in a company; and
b: section CX 44C
c: a dividend from the share is—
i: declared before the disposal; and
ii: paid to a holder of the share who after the disposal becomes entitled to the dividend. Income
2: The entity derives an amount of income that is the greater of zero and the amount calculated using the formula (declaration shares - distribution shares) x distribution. Definition of items in formula
3: The items in the formula are defined in subsections (4) to (6). Declaration shares
4: Declaration shares Distribution shares
5: Distribution shares Distribution
6: Distribution
a: the dividend that is not fully imputed as that term is defined in section NG 2(3)
b: the dividend, if paragraph (a) does not apply. amount company dividend imputation credit account income portfolio investment entity share Section CB 4B substituted 19 December 2007 section 5 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 4B inserted 1 October 2007 section 4 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section CB 4B(1)(a) amended 1 October 2007 section 4 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Land
CB 5A: Land partially sold or sold with other land
Sections CB 5 to CB 21
a: is part of the land to which the relevant section applies:
b: is the whole of the land to which the relevant section applies:
c: is disposed of together with other land. amount dispose land Section CB 5A inserted 19 December 2007 section 6(1) Taxation (Business Taxation and Remedial Matters) Act 2007
CB 5: Disposal: land acquired for purpose or with intention of disposal
Income
1: An amount that a person derives from disposing of land is income of the person if they acquired the land—
a: for 1 or more purposes that included the purpose of disposing of it :
b: with 1 or more intentions that included the intention of disposing of it. Exclusions
2: Subsection (1) is overridden by the exclusions for residential land in section CB 14 section CB 17 amount business dispose income land 1994 No 164 s CD 1(2)(a) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CB 6: Disposal: land acquired for purposes of business relating to land
Income
1: An amount that a person ( person A
a: both the following apply:
i: at the time person A acquired the land they, or an associated person, carried on a business of dealing in land; and
ii: person A acquired the land for the purpose of the business; or
b: both the following apply:
i: at the time person A acquired the land they, or an associated person, carried on a business of developing land or dividing land into lots; and
ii: person A acquired the land for the purpose of the business; or
c: all the following apply:
i: at the time person A acquired the land they, or an associated person, carried on a business of erecting buildings; and
ii: person A acquired the land for the purpose of the business; and
iii: before or after acquiring the land person A, or the associated person, made improvements to it. Exclusions
2: Subsection (1) is overridden by the exclusions for residential land in section CB 14 section CB 17 amount associated person business dispose improvements income land 1994 No 164 s CD 1(2)(b)(i), (c)(i), (d)(i)
CB 6B: Disposal: Land used for landfill, if notice of election
An amount that a person derives from disposing of land is income of the person if—
a: the person uses the land as a landfill before disposing of the land; and
b: at the time of disposal, the land is not being used as a landfill; and
c: the person acquiring the land is not an associated person under section OD 7
d: the person gives written notice to the Commissioner of an election that the land be subject to this section by the day that is the later of the following:
i: the day that is 12 months after the day on which the person acquires the land:
ii: 24 June 2006; and
e: the person makes an election under paragraph (d) for all land that the person acquires and uses as a landfill; and
f: any person associated with the person makes an election under paragraph (d) for all land that the associated person acquires and uses as a landfill. associated person Commissioner dispose Section CB 6B inserted 1 October 2005 section 4 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CB 7: Disposal within 10 years: land dealing business
Income
1: An amount that a person derives from disposing of land is income of the person if—
a: they dispose of the land within 10 years of acquiring it; and
b: at the time they acquired the land, they carried on a business of dealing in land, whether or not the land was acquired for the purpose of the business. Income: associated person in business of dealing in land
2: An amount that a person ( person A person B
a: person A carried on a business of dealing in land; or
b: the land was acquired for the purpose of person B's business. Exclusions
3: Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 section CB 17 amount associated person business dispose income land year 1994 No 164 s CD 1(2)(b)(ii)
CB 8: Disposal within 10 years: land development or subdivision business
Income
1: An amount that a person derives from disposing of land is income of the person if—
a: they dispose of the land within 10 years of acquiring it; and
b: at the time they acquired the land, they carried on a business of developing land or dividing land into lots, whether or not the land was acquired for the purpose of the business. Income: associated person in business of developing or subdividing land
2: An amount that a person ( person A person B
a: person A carried on a business of developing land or dividing land into lots :
b: the land was acquired for the purpose of person B's business. Exclusions
3: Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 section CB 17 amount associated person business dispose income land year 1994 No 164 s CD 1(2)(c)(ii) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CB 9: Disposal within 10 years of improvement: building business
Income
1: An amount that a person derives from disposing of land is income of the person if—
a: they dispose of the land within 10 years of completing improvements to it; and
b: at the time they began the improvements, they carried on a business of erecting buildings, whether or not the land was acquired for the purpose of the business. Income: associated person in business of erecting buildings
2: An amount that a person ( person A person B
a: person A carried on a business of erecting buildings; or
b: the land was acquired for the purpose of person B's business. Exclusions
3: Subsections (1) and (2) are overridden by the exclusions for residential land in section CB 14 section CB 17 amount associated person business dispose improvements income land year 1994 No 164 s CD 1(2)(d)(ii)
CB 10: Disposal: schemes for development or division begun within 10 years
Income
1: An amount that a person derives from disposing of land is income of the person if the amount is derived in the following circumstances:
a: an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
b: the undertaking or scheme involves the development of the land or the division of the land into lots; and
c: the person, or another person for them, carries on development or division work on or relating to the land; and
d: the development or division work is not minor; and
e: the undertaking or scheme was begun within 10 years of the date on which the person acquired the land. Exclusions
2: Subsection (1) is overridden by the exclusions for residential land in section CB 15 section CB 18 section CB 19 section CB 21 amount business dispose income land year 1994 No 164 s CD 1(2)(f)
CB 11: Disposal: amount from major development or division and not already in income
Income
1: An amount that a person derives from disposing of land is income of the person if—
a: the amount is not income under any of sections CB 5 to CB 10 CB 12
b: the amount is derived in the following circumstances:
i: an undertaking or scheme, which is not necessarily in the nature of a business, is carried on; and
ii: the undertaking or scheme involves the development of the land or the division of the land into lots; and
iii: the person, or another person for them, carries on development or division work on or relating to the land; and
iv: the development or division work involves significant expenditure on channelling, contouring, drainage, earthworks, kerbing, levelling, roading, or any other amenity, service, or work customarily undertaken or provided in major projects involving the development of land for commercial, industrial, or residential purposes. Exclusions
2: Subsection (1) is overridden by the exclusions for residential land in section CB 15 section CB 18 section CB 19 section CB 21 Relationship with section DB 20
3: Section DB 20 amount business deduction dispose income land 1994 No 164 s CD 1(2)(g) Section CB 11(2) heading substituted 19 December 2007 section 7(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 11(2) substituted 19 December 2007 section 7(1) Taxation (Business Taxation and Remedial Matters) Act 2007
CB 12: Disposal: amount from land affected by change and not already in income
Income
1: An amount that a person derives from disposing of land is income of the person if—
a: the amount is not income under any of sections CB 5 to CB 10
b: the person disposed of the land within 10 years of acquiring it; and
c: the total amount that they derive from its disposal is more than the cost of the land; and
d: at least 20% of the excess arises from a factor, or more than 1 factor, that—
i: relates to the land; and
ii: is described in subsection (2); and
iii: occurs after the person acquired the land, for the factors described in subsection (2)(c), (e), (g), and (i). Factors for purposes of subsection (1)(d)
2: The factors referred to in subsection (1)(d) are—
a: the rules of an operative district plan under the Resource Management Act 1991 :
b: the likelihood of the imposition of rules :
c: a change to the rules :
d: the likelihood of a change to the rules :
e: a consent granted under the Resource Management Act 1991 :
f: the likelihood of a consent being granted :
g: a decision of the Environment Court made under the Resource Management Act 1991 :
h: the likelihood of a decision being made :
i: the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction under the Resource Management Act 1991 :
j: the likelihood of the removal of a condition, covenant, designation, heritage order, obligation, prohibition, or restriction :
k: an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j) :
l: the likelihood of an occurrence of a similar nature to any of the occurrences described in any of paragraphs (a) to (j). Exclusions
3: Subsection (1) is overridden by the exclusions for residential property in section CB 16 section CB 20 amount dispose income land year 1994 No 164 s CD 1(2)(e) Subsection (2)(a) (k) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CB 13: Transactions between associated persons
Income
1: An amount that a person ( transferee sections CB 5 to CB 12
a: the land has been transferred to the transferee from another person ( transferor
b: the transferor and the transferee are associated persons at the time of the transfer; and
c: the amount derived is more than the cost of the land to the transferee; and
d: the amount derived would have been income of the transferor under any of sections CB 5 to CB 12 Date on which some transferees acquire land
2: For the purposes of sections CB 6 to CB 10 CB 12 amount associated person dispose income land 1994 No 164 ss CD 1(11), GD 9(1) Exclusions for residential land
CB 14: Residential exclusion from sections CB 5 to CB 9
Exclusion
1: Sections CB 5 to CB 9
a: the person—
i: acquired the land with a dwellinghouse on it; or
ii: acquired the land and erected a dwellinghouse on it; and
b: the dwellinghouse was occupied mainly as a residence by—
i: the person and any member of their family living with them; or
ii: if the person is a trustee, 1 or more beneficiaries of the trust. What exclusion applies to
2: The exclusion applies to the land that has the dwellinghouse on it. It also applies to land related to the land that has the dwellinghouse on it if the total area of the related land is—
a: 4,500 square metres or less; or
b: more than 4,500 square metres, if the larger area is required for the reasonable occupation and enjoyment of the dwellinghouse. Who exclusion does not apply to
3: The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of dwellinghouses. dispose land trustee 1994 No 164 s CD 1(3)(b)
CB 15: Residential exclusion from sections CB 10 and CB 11
Exclusion: developing or dividing land for residential use
1: Sections CB 10 CB 11
a: the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
b: the development, division, or improvement is for use in, and for the purposes of, the residing on the land of the person or any member of their family living with them. Exclusion: dividing residential land
2: Sections CB 10 CB 11
a: the land is a lot that came out of a larger area of land that the person divided into 2 or more lots; and
b: the larger area of land—
i: was 4,500 square metres or less immediately before it was divided; and
ii: was occupied by the person mainly as residential land for themselves and a member of their family living with them. land 1994 No 164 s CD 1(2)(f)(iv), (6) Section CB 15(1) amended 19 December 2007 section 8 Taxation (Business Taxation and Remedial Matters) Act 2007
CB 16: Residential exclusion from section CB 12
Exclusion
1: Section CB 12
a: the person acquired the land and used it or intended to use it for residential purposes; and
b: they disposed of the land to another person who acquired it for residential purposes. Purpose of acquisition for purposes of subsection (1)(b)
2: For the purposes of subsection (1)(b), the purpose of the acquisition by the other person is ascertained from the circumstances of the disposal and other relevant matters. Meaning of residential purposes
3: In this section, residential purposes
a: means a purpose that the person has of using the land or intending to use the land mainly as a residence for themselves and members of their family living with them; and
b: includes the purpose of erecting a dwellinghouse on the land to be occupied as such a residence. dispose land residential purposes 1994 No 164 s CD 1(4)(a)(ii), (b)(ii) Exclusions for business premises
CB 17: Business exclusion from sections CB 5 to CB 9
Exclusion
1: Sections CB 5 to CB 9
a: the land is the premises of a business; and
b: the person acquired and occupied, or erected and occupied, the premises mainly to carry on a substantial business from them. Who exclusion does not apply to
2: The exclusion does not apply to a person who has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of premises for businesses. Meaning of land
3: In this section, land
a: is reserved, with the premises, for the use of the business; and
b: is of an area no greater than that required for the reasonable occupation of the premises and the carrying on of the business. business dispose land 1994 No 164 s CD 1(3)(a)
CB 18: Business exclusion from
sections CB 10 and CB 11 Sections CB 10 CB 11
a: the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
b: the development, division, or improvement is for use in, and for the purposes of, the carrying on of a business by the person on the land; and
c: the business does not consist of the undertaking or scheme. business land 1994 No 164 s CD 1(2)(f)(iii) Section CB 18 heading amended 19 December 2007 section 9(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 18 amended 19 December 2007 section 9(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Exclusions for farm land
CB 19: Farm land exclusion from sections CB 10 and CB 11
Exclusion
1: Sections CB 10 CB 11
a: the land is a lot resulting from the division of a larger area of land into 2 or more lots; and
b: immediately before the land was divided, the larger area of land was occupied or used by the person, their spouse, civil union partner or de facto partner
c: the area and nature of the land disposed of mean that it is then capable of being worked as an economic unit as a farming or agricultural business; and
d: the land was disposed of mainly for the purpose of using it in a farming or agricultural business. Circumstances for purposes of subsection (1)(d)
2: The circumstances of the disposal of the land are relevant to the decision on whether the land was disposed of mainly for the purpose of using it in a farming or agricultural business. The circumstances include—
a: the consideration for the disposal of the land :
b: current prices paid for land in that area :
c: the terms of the disposal :
d: a zoning or other classification relating to the land :
e: the proximity of the land to any other land being used or developed for uses other than farming or agricultural uses. business dispose land 1994 No 164 s CD 1(7) Subsection (1)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(b) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (2)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CB 20: Farm land exclusion from section CB 12
Exclusion
1: Section CB 12
a: the person ( person A spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner
b: they disposed of the land to another person ( person B Purposes of acquisition for purposes of subsection (1)(b)
2: For the purposes of subsection (1)(b), person B's purposes in acquiring the land are ascertained from circumstances of the disposal arising after person A acquired the land and other relevant matters, not including the factors described in section CB 12(1) business dispose land 1994 No 164 s CD 1(4)(a)(i), (b)(i), (c) Subsection (1)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(a) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Exclusion for investment land
CB 21: Investment exclusion from
sections CB 10 and CB 11 Sections CB 10 CB 11
a: the work involved in the undertaking or scheme is to create or effect a development, division, or improvement; and
b: the development, division, or improvement is for use in, and for the purposes of, the person's deriving from the land income of the kind described in section CC 1 income land 1994 No 164 s CD 1(2)(f)(v) Section CB 21 heading amended 19 December 2007 section 10(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CB 21 amended 19 December 2007 section 10(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Timber
CB 22: Disposal of timber or right to take timber
Income
1: An amount is income of a person if they derive it from—
a: disposing of timber; or
b: disposing of a right to take timber. Whether or not person owns land
2: Subsection (1) applies whether or not the person owns the land on which the timber is situated. amount dispose income own right to take timber 1994 No 164 s CJ 1(1)
CB 23: Disposal of land with standing timber
When this section applies
1: This section applies when a person disposes of land with standing timber on it. Exclusions
2: This section does not apply when the standing timber is of 1 of the following kinds:
a: trees that are ornamental or incidental, as evidenced by a certificate given under section 44C
b: trees in a crop subject to a forestry right, as defined in section 2 Land Transfer Act 1952
c: trees subject to a right to take a benefit (in the form of a profit à prendre) granted before 1 January 1984. Income
3: The amount that the person derives from disposing of the standing timber is income of the person. amount dispose income standing timber 1994 No 164 s CJ 1(2)(a)-(d), (e)(i) Farming, forestry, or fishing
CB 24: Income equalisation schemes
Income derived by a person, as timed and quantified under any of the following provisions, is income of the person:
a: sections EH 11 EH 14 EH 16 EH 18 EH 20 to EH 22 EH 24 EH 26 :
b: sections EH 47 EH 49 EH 51 to EH 53 EH 55 EH 57 :
c: sections EH 74 EH 76 EH 78 adverse event income equalisation scheme income main income equalisation scheme person thinning operations income equalisation scheme Paragraphs (a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Environmental restoration This heading was inserted 21 June 2005 section 5 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CB 24B: Environmental restoration accounts
Income from refund
1: A person who receives a refund for a tax year under section EK 12 Income from transfer from environmental restoration account
2: If there is a transfer from a person's environmental restoration account under section EK 15 EK 16 EK 19 Definitions of items in formulas
3: The items in the formulas are defined in subsections (4) to (6). Refund
4: Refund Tax rate
5: Tax rate
a: is stated in schedule 1
b: would apply to the person for the tax year if the person had sufficient taxable income. Transfer
6: Transfer Income arising from renewal of resource consent
7: A person who incurs expenditure of a type listed in schedule 6B, part A, paragraphs 2 to 5 schedule 6B, part C
a: the deduction under section DB 37
b: the period of the grant of the resource consent is extended by more than 50% in a later income year or a new resource consent is granted for a period that is more than 50% of the total period of the resource consent. Amount of income
8: The person derives for the income year in which the period of the resource consent is extended, or the new resource consent is granted, an amount of income equal to the greater of zero and the difference between—
a: the total deduction under section DB 37
b: the total deduction for the expenditure that the person would have had under section DB 37 corresponding income year environmental restoration account income income tax taxable income tax year. Section CB 24B inserted 1 October 2005 section 5 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Minerals
CB 25: Disposal of minerals
Income
1: An amount that a person derives from disposing of minerals taken from land is income of the person. Whether or not person owns land
2: Subsection (1) applies whether or not the person owns the land from which the minerals are taken. amount dispose income mineral own 1994 No 164 s CJ 1(1) Intellectual property
CB 26: Sale of patent applications or patent rights
If a person derives an amount from the sale of a patent application with a complete specification or from the sale of patent rights, the amount is income of the person. amount income patent rights. Section CB 26 substituted 1 October 2005 section 6(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Transfer of business
CB 27: Sale of business: transferred employment income obligations
When this section applies
1: This section applies when section DC 9 Income
2: The excess is income of the buyer. Timing of income
3: The income is allocated to the income year in which the reduction of the transferred provision is required to be recognised by the buyer under generally accepted accounting practice. amount generally accepted accounting practice income income year 1994 No 164 s CD 3A Stolen property
CB 28: Property obtained by theft
Income
1: If a person obtains possession or control of property without claim of right, an amount equal to the market value of the property is income of the person. Timing of income
2: The income is allocated to the income year in which the person obtains possession or control of the property. Whether or not constructive trust
3: Subsection (1) applies whether or not the person holds the property as a trustee under a constructive trust. amount claim of right income income year possession property trustee 1994 No 164 ss CD 6(1), (2), EN 5(1), (2) Emissions trading scheme Heading added 26 September 2008 section 58 Climate Change Response (Emissions Trading) Amendment Act 2008
CB 29: Disposal of ETS units
When this section applies
1: This section applies when a person disposes of an ETS unit. Income
2: The amount that a person derives on disposal by the person of an ETS unit is income. Surrender of unit: generally zero income
3: If the person disposes of the unit by surrender under the Climate Change Response Act 2002 Surrender of unit: pre-1990 forest land deforestation
4: Despite subsection (3), subsection (5) applies if—
a: the person surrenders the ETS unit in relation to the deforestation of pre-1990 forest land; and
b: at the time of the surrender, the person would not derive income, other than exempt income or excluded income, from a disposal of the pre-1990 forest land without timber; and
c: the ETS unit is not a post-1989 forest land unit. Surrendered unit treated as sold for cost
5: If subsection (4) applies, the surrendered unit is treated as having been sold by the person, at the time of its surrender, to an unrelated person for an amount equal to its cost. Converted unit treated as sold
6: If a person converts a New Zealand unit into a Kyoto unit under the Climate Change Response Act 2002 Exempt income: pre-1990 forest land unit
7: Section CW 3B Disposal at below market value
8: Section GD 16 amount convert ETS unit excluded income exempt income forest land unit income Kyoto unit New Zealand unit pre-1990 forest land unit post-1989 forest land unit pre-1990 forest land surrender Section CB 29 added 26 September 2008 section 58 Climate Change Response (Emissions Trading) Amendment Act 2008
CC: Income from holding property (excluding equity)
Contents
Land use
CC 1: Land
Income
1: An amount described in subsection (2) is income of the owner of land if they derive the amount from—
a: a lease, licence, or easement affecting the land; or
b: the grant of a right to take the profits of the land. Amounts
2: The amounts are—
a: rent :
b: a fine :
c: a premium :
d: a payment for the goodwill of a business :
e: a payment for the benefit of a statutory licence :
f: a payment for the benefit of a statutory privilege; or
g: other revenues. Relationship with section GD 10
3: The treatment of leases of property to related parties for less than an adequate rent is dealt with in section GD 10 amount business income lease own 1994 No 164 s CE 1(1)(e) Subsection (2)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CC 2: Non-compliance with covenant for repair
When this section applies
1: This section applies when a person who is a lessor of land derives an amount for non-compliance by the lessee with an obligation under a lease of the land—
a: to maintain the land; or
b: to make repairs to improvements on the land. Income
2: The amount is income of the lessor. Timing of income
3: The income is allocated to the income year in which the lessor receives the amount. Relationship with sections EI 4 and EI 5
4: Subsection (3) is overridden by sections EI 4 EI 5 amount income income year lease repairs 1994 No 164 s EN 1(1), (2) Financial instruments
CC 3: Financial arrangements
Income: party to financial arrangement
1: If a person who is a party to a financial arrangement is treated as deriving an amount of income under the financial arrangement under subpart EW Income: trustee
2: Income derived by a trustee in the circumstances described in section EW 51 amount financial arrangement income trustee 1994 No 164 s CE 1(1)(c)
CC 4: Payments of interest
Income
1: Interest derived by a person is income of the person. Apportionment
2: Interest due but unpaid on the date on which a person disposes of a security is apportioned between the person disposing of the security and the person acquiring it. income interest pay 1994 No 164 s CE 1(1)(a)
CC 5: Annuities
Income
1: An annuity derived by a person is income of the person. Apportionment
2: Income under an annuity due but unpaid on the date on which a person disposes of the annuity is apportioned between the person disposing of the annuity and the person acquiring it. Relationship with sections CW 4 and CW 24
3: This section is overridden by sections CW 4 CW 24 income 1994 No 164 s CE 1(1)(a)
CC 6: Prizes received under Building Societies Act 1965
Income
1: A prize received by a person under section 31A Timing of income
2: The income is allocated as follows:
a: a cash prize is allocated to the day on which the bonus ballot giving rise to the prize is held; and
b: an advance is allocated to the day on which the advance is made or, if the advance is made in a series of advances, to the first day on which an advance is made. income 1994 No 164 s CE 1(2)(d)
CC 7: Consideration other than in money
When this section applies
1: This section applies when—
a: a lender provides money to a borrower for use in a business that the borrower carries on in New Zealand; and
b: the borrower provides to the lender, as some or all of the consideration, a tangible or intangible benefit that—
i: is not interest; and
ii: may or may not be relief from an obligation; and
iii: may or may not be convertible into money; and
c: the borrowing is a commercial transaction under which the borrower would have been liable to pay interest at the current commercial rate, given the nature and term of the loan, if the borrower had not provided the benefit (whether or not the contract between the borrower and the lender provides for the payment of interest if the benefit is not provided). Income
2: The amount described in subsection (3) is income of the lender. Amount of income
3: The amount is the interest that the borrower would have been liable to pay if the lender had lent the money to the borrower in consideration of the payment of interest at the current commercial rate, given the nature and term of the loan, reduced by the amount of any interest that the borrower pays. amount business income interest New Zealand pay payment 1994 No 164 s CE 1(1)(b), (2)(a)-(c)
CC 8: Use of money interest payable by Commissioner
Income
1: Interest payable by the Commissioner to a person under Part 7 Timing of income
2: Interest to which this section applies is allocated under section EF 4 Relationship with financial arrangements rules
3: Interest to which this section applies is disregarded for the purposes of the financial arrangements rules. Commissioner financial arrangements rules income interest pay 1994 No 164 s ED 5
CC 8B: Certain commercial bills: non-resident holders
When this section applies
1: This section applies in relation to a commercial bill held by a non-resident when—
a: neither the financial arrangements rules nor the old financial arrangements rules apply to the calculation and allocation of income and expenditure in relation to the commercial bill because of the application of section EW 9(2) to (4) EZ 45(e)
b: the non-resident holder—
i: disposes of the commercial bill other than by redemption; or
ii: redeems a commercial bill whose issuer is an associated person of the non-resident. Income: disposal
2: The value of the commercial bill on the day the non-resident holder disposes of it is income of the person. Income: redemption
3: The amount that the non-resident holder receives on redemption is income of the person. amount associated person commercial bill financial arrangements rules income non-resident old financial arrangements rules Section CC 8B inserted 6 October 2009 section 735(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Royalties
CC 9: Royalties
Income
1: A royalty derived by a person is income of the person. Meaning of royalty
2: Royalty
a: the use of, or right to use, a copyright, patent, plant variety rights, :
b: the use of, or right to use, a mine or quarry :
c: the extraction, removal, or other exploitation of standing timber or a natural resource :
d: the right to extract, remove, or otherwise exploit standing timber or a natural resource :
e: the use of, or right to use, a film, a videotape, or a tape in connection with radio broadcasting :
f: the supply of scientific, technical, industrial, or commercial knowledge or information :
g: the total or partial forbearance of the use of, or the grant of a right to use, property or a right referred to in any of paragraphs (a) to (e) :
h: the supply of assistance that enables the application or use of anything in any of paragraphs (a) to (f) :
i: the total or partial forbearance of the supply of knowledge or information or assistance referred to in paragraph (f) or (h). Relevance of description of payment
3: For the purposes of subsection (2), none of the following is relevant:
a: how the payment is described or computed :
b: whether the payment is periodical or otherwise :
c: whether the payment is an instalment of the purchase price of real property :
d: whether the payment is an instalment of the purchase price of personal property. income royalty standing timber 1994 No 164 ss CD 2, OB 1 royalty Subsection (2)(a) amended 1 October 2005 section 7 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting patent, plant variety rights, patent, Subsections (2)(a) (h) (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CC 10: Films
When this section applies
1: This section applies when a person has a right or interest of any of the kinds described in subsection (2) in or to—
a: a film; or
b: a print of the film; or
c: publicity material for the film; or
d: any other tangible asset relating to the film. Right or interest
2: The right or interest is a right or interest, including a future or contingent right or interest, of any of the following kinds:
a: copyright in the film :
b: a licence relating to the copyright :
c: an equitable right in the copyright :
d: an equitable right in a licence relating to the copyright :
e: any other right existing in or attaching to the film :
f: a right to income, or a share of income, from the rental, sale, use, or other exploitation of the film. Income
3: The following amounts are income of the person:
a: an amount received or receivable by the person for—
i: the use of, or the right to use, the film or a right or interest in a right in the film :
ii: the granting of a licence for a future right in the film :
iii: the disposal of some or all of a right or interest in a right in the film :
iv: the assignment of a right or an interest in a right :
v: the assignment of a right to derive income from the use of a right or interest; and
b: an amount derived by the person from the rental, sale, use, or other exploitation of the film. Relationship with section FC 21
4: This section is overridden by section FC 21 amount film income 1994 No 164 s CJ 2 Subsection (2)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Subsection (3)(a)(i) (iv) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
CD: Income from equity
Contents
Income
CD 1: Dividend
A dividend derived by a person is income of the person. dividend income 1994 No 164 ss CE 1(1)(a), CF 1 The heading to section CD 1 substituted 1 October 2006 section 5 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CD 1B: Distribution excluded from being dividend
A distribution, derived by a member of a co-operative company, that is excluded by section CD 24B co-operative company dividend income Section CD 1B inserted 3 April 2006 section 6(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 What is a dividend?
CD 2: Meaning of dividend
Sections CD 3 to CD 13 dividend
CD 3: Transfers of value generally
Transfers of value from company
1: A transfer of value from a company to a person is a dividend if—
a: the cause of the transfer is a shareholding in the company, as described in section CD 5
b: none of the exclusions in sections CD 14 to CD 26 Calculation rules
2: Sections CD 27 to CD 31 company dividend transfer of value 1994 No 164 s CF 2(1)(a)-(e), (g)-(l), (1A), (3), (7), (10)
CD 4: What is a transfer of value?
General test
1: A transfer of value
a: the company provides money or money's worth to the person; and
b: if the person provides any money or money's worth to the company under the same arrangement, the market value of what the company provides is more than the market value of what the person provides. Release of debt
2: A company (the creditor debtor
a: the obligation the debtor is released from is an amount of debt to which section EW 46B(3)
b: at the time the debtor is released, the debtor is a company that is a member of the same wholly-owned group as the creditor, and the debtor is described in section EW 46B(1)(a) or (b) When shares are cancelled
2B: The market value of any transfer from the shareholder to the company on the cancellation of a share of the shareholder's rights as a shareholder is zero. Provision of services for less than market value
3: Despite subsection (1), a transfer of value does not occur to the extent to which the money's worth provided by the company is only the provision of services. Limit to subsection (3)
4: Subsection (3) does not apply to the provision of services by a company that is a close company, if the provision is the benefit of expenditure of the company. arrangement close company company market value pay services share shareholder transfer of value wholly-owned group of companies 1994 No 164 s CF 2(1)(a)-(e), (g)-(l), (1A), (3), (10) Section CD 4(2) replaced 30 March 2017 section 385(1) section 385(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 4(2B) heading inserted 6 October 2009 section 736(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 4(2B) inserted 6 October 2009 section 736(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 4 list of defined terms market value inserted 6 October 2009 section 736(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 4 list of defined terms share inserted 6 October 2009 section 736(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 4 list of defined terms shareholder inserted 6 October 2009 section 736(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 4 list of defined terms wholly-owned group of companies inserted 30 March 2017 section 385(2) section 385(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CD 5: When is a transfer caused by a shareholding relationship?
General test
1: A transfer of value from a company to a person ( recipient
a: the recipient at any relevant time—
i: holds shares in the company; or
ii: is associated with a shareholder; or
iii: is the trustee of a trust, and a beneficiary of the trust is either a shareholder or the spouse, civil union partner or de facto partner
b: the company makes the transfer because of that shareholding of the relevant shareholder. Indication that test met
2: One indication that a transfer is caused by a shareholding is if the terms of the arrangement that results in the transfer are different from the terms on which the company would enter into a similar arrangement if no shareholding were involved. Deductible distributions of producer boards
3: Despite subsection (1), a transfer of value by a statutory producer board to a member is not caused by a shareholding if—
a: the transfer is a cash distribution; and
b: the distribution is a deduction under section HF 1
c: the board does not choose to treat the distribution as a dividend under section ME 30 Deductible distributions of co-operative companies
4: Despite subsection (1), a transfer of value by a co-operative company to a shareholder is not caused by a shareholding if—
a: the transfer is a cash distribution; and
b: the distribution is a deduction under section HF 1
c: the company does not choose to treat the distribution as a dividend under section ME 35 arrangement associated person company co-operative company deduction share shareholder statutory producer board transfer of value trustee 1994 No 164 s CF 2(1)(g), (k), (l), (2), (7) Subsection (1)(a)(iii) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(a)(iii) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
CD 6: Bonus issues in lieu of dividend
Bonus issues in lieu
1: A bonus issue in lieu is a dividend. Amount of dividend
2: The amount of the dividend is the money or money's worth offered as an alternative, minus any resident withholding tax payable in relation to the dividend. amount bonus issue in lieu dividend pay resident withholding tax 1994 No 164 s CF 2(1)(f), (6)(a)
CD 7: Elections to make bonus issue into dividend
Treating bonus issues as dividends
1: A bonus issue that is not a bonus issue in lieu is a dividend if—
a: the bonus issue—
i: is issued fully paid from reserves of the company:
ii: if a dividend, would not be exempt income under section CW 10 CW 11
b: the company chooses under this section to treat the bonus issue as a dividend. Form of election
2: A company chooses to treat a bonus issue as a dividend by—
a: resolving, when it makes the bonus issue, that it is a dividend; and
b: resolving, when it makes the bonus issue, the amount to be treated as a dividend, which must be more than zero; and
c: giving notice to the Commissioner under section 63 Amount of dividend
3: The amount of the dividend is the amount chosen by the company. amount bonus issue bonus issue in lieu Commissioner company dividend notice 1994 No 164 ss CF 2(1)(f), (6)(b), CF 8 Subsection (1) substituted 1 October 2005 section 8(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CD 7B: Interests in money or property of foreign unit trust
Interest absolutely vested in unit holder
1: If a beneficial interest in money or property of a unit trust that is a foreign company vests absolutely in a unit holder, the money or property is a dividend for the unit holder. Amount of dividend
2: The amount of the dividend is the value of the money or property. dividend foreign company unit holder unit trust Section CD 7B inserted 1 October 2005 section 168 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
CD 7C: Bonus issue by foreign unit trust instead of money or property
Interest absolutely vested in unit holder
1: A bonus issue made to a unit holder by a unit trust that is a foreign company is a dividend for the unit holder if the issue is made under an arrangement or decision that the unit trust will make the bonus issue instead of causing a beneficial interest in money or property of the unit trust to vest absolutely in the unit holder. Amount of dividend
2: The amount of the dividend is the value of the money or property in which a beneficial interest would have vested in the unit holder if the bonus issue had not been made. bonus issue dividend foreign company unit holder unit trust Section CD 7C inserted 1 October 2005 section 168 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
CD 8: Notional distributions of producer boards and co-operative companies
Notional distributions of producer boards
1: A notional distribution of a statutory producer board is a dividend if the board determines to attach an imputation credit to the notional distribution under section ME 30 Calculation: section ME 33
2: The amount of the dividend is calculated under section ME 33 Notional distributions of co-operative companies
3: A notional distribution of a co-operative company is a dividend if the company determines to attach an imputation credit to the notional distribution under section ME 35 Calculation: section ME 38
4: The amount of the dividend is calculated under section ME 38 Corresponding payments not dividends
5: Section CD 24 amount co-operative company dividend imputation credit statutory producer board 1994 No 164 s CF 2(1)(l)
CD 9: Tax credits linked to dividends
Imputation and dividend withholding payment credits
1: The amount of a dividend is increased by—
a: an imputation credit attached to the dividend :
b: a dividend withholding payment credit attached to the dividend. Relationship with section CD 10
2: Subsection (1) sections CD 10 CD 10B When subsection (1)
3: Subsection (1)
a: Part L subpart LE
b: Part M
c: Part N amount dividend dividend withholding payment credit imputation credit tax 1994 No 164 s CF 6(1) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Subsection (2) amended 1 July 2006 section 7 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting sections CD 10 and CD 10B section CD 10
CD 10: Certain dividends not increased by tax credits
When this section applies
1: This section applies when a unit trust manager, in the ordinary course of their management activities for a unit trust,—
a: acquires units from unit holders under the terms on which the units were offered to potential unit holders; and
b: derives a dividend from the redemption or other cancellation of units in the unit trust. Credit not included
2: For the purposes of Parts B C E F Relationship with section FC 3
3: To the extent to which subsection (2) applies, section FC 3 Some definitions
4: In this section,— imputation credit unit trust manager
a: a person nominated by the unit trust manager; or
b: a trustee or a manager of a group investment fund that derives category A income; or
c: a person nominated by the trustee or the manager of the group investment fund. amount cancellation dividend dividend withholding payment credit imputation credit pay tax unit trust unit trust manager 1994 No 164 s CF 7A
CD 10B: Credit transfer notice
When this section applies
1: This section applies if a share user under a share-lending arrangement—
a: derives a dividend for the original share, with an imputation credit attached; and
b: issues a credit transfer notice for the dividend. Credit not included
2: The dividend derived by the share user does not include the amount of the imputation credit. Income
3: The amount of the imputation credit is income derived by the share supplier when the credit transfer notice is issued. Definition
4: In this section, imputation credit amount credit transfer notice dividend dividend withholding payment credit imputation credit original share share-lending arrangement share supplier share user Section CD 10B inserted 1 July 2006 section 8(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CD 10C: Dividend reduced if foreign tax paid on company's income
When this section applies
1: This section applies if a person—
a: derives a dividend from a company that is a foreign company; and
b: has a liability under the laws of a country or territory outside New Zealand for income tax on income of the company corresponding to the liability that the person would have under the laws of New Zealand for income tax on income of the company if the company were a partnership in which the person were a partner; and
c: pays the income tax; and
d: provides to the Commissioner upon request, within the time allowed by the Commissioner, sufficient information to satisfy the Commissioner as to the amount of income tax paid. Amount of dividend reduced
2: The amount of the dividend is reduced by the greater of zero and the amount calculated using the formula— total tax paid – earlier reductions. Definition of items in formula
3: In the formula,—
a: total tax paid
b: earlier reductions branch equivalent method Commissioner company controlled foreign company dividend FIF income or loss foreign company foreign investment fund income income tax Section CD 10C inserted 1 April 2006 section 8(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CD 11: Foreign tax credits and refunds linked to dividends
Foreign tax credits
1: If a double tax agreement gives a person a tax credit in a foreign country when they derive a dividend from that country, the amount of the dividend is increased by the tax credit. Foreign tax refunds
2: When a person who has derived a dividend from outside New Zealand also derives a refund of income tax of a foreign country, the refund is treated as a dividend if—
a: the company paying the dividend was entitled to deduct the tax from the dividend; and
b: the person was not personally liable to pay the tax. amount company dividend double tax agreement income tax New Zealand pay tax 1994 No 164 ss CF 6(2), CF 7
CD 12: Benefits of shareholder-employees or directors
Unclassified fringe benefits
1: A non-cash benefit provided by a company to an employee is a dividend if—
a: the benefit is an unclassified benefit; and
b: the employee is a shareholder in the company; and
c: the company chooses, under section CX 16(2) Non-executive directors' non-cash benefits
2: A non-cash benefit provided by a company to a non-executive director of the company is a dividend if the director is a shareholder in the company, even if the benefit is provided solely because the director is a non-executive director. Other shareholder-employee benefits
3: In any other case of a non-cash benefit provided by a company to a person who is both an employee and a shareholder, the benefit is not a dividend if—
a: the application of section CX 16(2)
b: section CD 23 Meaning of non-executive director
4: In this section, non-executive director company director dividend employee fringe benefit non-executive director shareholder unclassified benefit 1994 No 164 ss CF 2(1A), CI 2A(1), (2), OB 1 non-executive director shareholder
CD 13: Attributed repatriations from controlled foreign companies
Attributed repatriations
1: An amount of attributed repatriation of a person who has an income interest in a CFC is a dividend. Calculation: sections CD 34 to CD 41
2: The amount of the dividend is calculated under sections CD 34 to CD 41 Timing of income
3: The dividend is treated as having been paid by the CFC to the person, and as having been derived by the person,—
a: 6 months after the end of the accounting period of the CFC for which the attributed repatriation is calculated, if the person is a company for which the dividend is exempt income under section CW 9
b: at the end of the accounting period, in any other case. New Zealand residents
4: The dividend of a person who has ceased to be a New Zealand resident is treated as being derived while the person is a New Zealand resident. accounting period amount attributed repatriation CFC company dividend exempt income income interest New Zealand resident pay 1994 No 164 ss CF 2(16), CG 8(13) What is not a dividend?
CD 14: Returns of capital: off-market share cancellations
Application of this section
1: This section applies if a company pays an amount to a shareholder because of the off-market cancellation of a share in the company, other than on liquidation of the company. Ordering rule
2: The amount is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the ordering rule, if—
a: 1 of the bright line tests in subsection (3) is met; and
b: the company is not an unlisted trust that has chosen the slice rule for the share under subsection (4); and
c: the anti-avoidance rule in subsection (6) does not apply. Bright line tests
3: The bright line tests referred to in subsection (2)(a) are as follows:
a: the cancellation is part of a pro rata cancellation that results in a fifteen percent capital reduction for the company :
b: the cancellation is part of a pro rata cancellation that results in a ten percent capital reduction for the company and the Commissioner has given a notice under subsection (8) :
c: the cancellation is not part of a pro rata cancellation and results in the shareholder suffering a fifteen percent interest reduction :
d: the company is an unlisted trust and the cancellation is not part of a pro rata cancellation :
e: the share is a non-participating redeemable share. Unlisted trusts choosing slice rule
4: If the company is an unlisted trust, it may issue a share on terms that the ordering rule does not apply and that instead the slice rule applies to the cancellation. If this happens, the amount paid is not a dividend to the extent to which it is less than or equal to the available subscribed capital per share calculated under the slice rule (but still subject to the antiavoidance rule in subsection (6)). Calculation concessions for foreign unlisted widelyheld trusts
5: If a company is an unlisted widely-held trust not resident in New Zealand and a shareholder cannot obtain sufficient information to calculate the available subscribed capital per share under the ordering rule,—
a: the share is treated as if it were issued under subsection (4) on terms that the slice rule applies; and
b: the available subscribed capital under the slice rule is—
i: the amount paid for the issue of the share, if subparagraph (ii) does not apply; or
ii: the value of the money or property in which a beneficial interest would have vested in the share-holder had the share not been issued, if the share is a taxable bonus issue under paragraph (d) Overriding anti-avoidance rule
6: Neither subsection (2) nor (4) excludes an amount paid by a company on cancellation of a share from being a dividend if any part of the payment is in lieu of the payment of a dividend. Factors relevant in applying anti-avoidance rule
7: For the purposes of applying subsection (6), the following factors must be considered:
a: the nature and amount of dividends paid by the company before or after the cancellation; and
b: the issue of shares in the company after the cancellation; and
c: the expressed purpose or purposes of the cancellation; and
d: any other relevant factor. Commissioner notifying view
8: If no part of a payment on cancellation of a share is in lieu of the payment of a dividend, the Commissioner may give notice to the company that subsection (6) does not apply to the cancellation. Some definitions
9: In this section,— counted associate
a: a person associated with the shareholder other than merely by virtue of being a relative; or
b: a spouse, civil union partner, de facto partner spouse, civil union partner, de facto partner counted associate: paragraph (b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse, civil union partner spouse counted associate: paragraph (b) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner, de facto partner spouse, civil union partner fifteen percent capital reduction fifteen percent interest reduction
a: the total direct voting interests in the company of the shareholder and any counted associates is 85% or less of their total direct voting interests in the company immediately before the cancellation; and
b: if at the time of the cancellation a market value circumstance exists, the total direct market value interests in the company of the shareholder and any counted associates is 85% or less of their total direct market value interests immediately before the cancellation non-participating redeemable share
a: the share is issued, under the company's constitution or establishing legislation, on terms that involve the share being required or allowed to be redeemed or repaid before the company is liquidated; and
b: the share is—
i: a redeemable share under section 68
ii: issued under 1 of New Zealand's Acts relating to co-operative companies; or
iii: subject to section FC 1 FC 2 or section FC 2B(2)
iv: a unit in a unit trust that is not a widely-held trust; and
c: the share is either a fixed rate share or a share for which the amount payable on cancellation is no more than the available subscribed capital per share calculated under the slice rule; and
d: the shareholder does not have shareholder decisionmaking rights in relation to the share except—
i: a protective right; or
ii: if the company is subject to 1 of New Zealand'sActs relating to co-operative companies participating share protective right
a: arises only if the shareholder's position may be altered to the shareholder's detriment or if the company defaults on its obligations under the terms of the share; and
b: is granted to the shareholder only to assist the shareholder to prevent the alteration or to remedy the default; and
c: when the share is issued is not expected to arise ten percent capital reduction unlisted trust amount associated person available subscribed capital cancellation Commissioner company co-operative company counted associate direct market value interest direct voting interest dividend ifteen percent capital reduction fifteen percent interest reduction fixed rate share group investment fund liquidation market value circumstance New Zealand non-participating redeemable share notice off-market cancellation ordering rule participating share pay pro rata cancellation protective right recognised exchange relative resident in New Zealand share shareholder shareholder decision-making rights slice rule ten percent capital reduction trustee unit trust unlisted trust unlisted widely-held trust widely-held trust 1994 No 164 s CF 3(1)(b), (2)(c), (14) Subsection (3)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Subsection (5) substituted 1 October 2005 section 9 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section CD 14(9) non-participating redeemable share amended 6 October 2009 section 737 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 15: Ordering rule and slice rule
Ordering rule
1: Under the ordering rule Definition of items in formula
2: In the formula,—
a: available subscribed capital of class
b: shares being cancelled of class Slice rule
3: Under the slice rule Definition of items in formula
4: In the formula,—
a: available subscribed capital of class
b: shares of class Amount when foreign company information inadequate
5: Despite subsections (2) to (4), the available subscribed capital per share calculated under the ordering rule is zero if—
a: the company is not resident in New Zealand; and
b: the relevant shareholder cannot obtain sufficient information to calculate the actual available subscribed capital per share using the relevant rule. available subscribed capital cancellation foreign company ordering rule resident in New Zealand share shareholder shares of the same class slice rule 1994 No 164 ss CF 3(2)(b), OB 1 available subscribed capital per share available subscribed capital per share cancelled
CD 16: Returns of capital: on-market share cancellations
Companies acquiring own shares
1: An amount paid by a company in acquiring any of its shares in an on-market cancellation is not a dividend. When excess amount relevant
2: Despite subsection (1), any excess of the amount paid over the available subscribed capital per share calculated under the ordering rule—
a: is treated as a dividend and not a return of capital when applying—
i: section CD 29 :
ii: section CD 32(2)(c) :
iii: section GB 1(3)
b: gives rise to an imputation credit account debit under section ME 5(1)(c) and (2)(c) amount available subscribed capital company dividend imputation credit account on-market cancellation ordering rule pay share 1994 No 164 ss CF 3(1)(e), (f), OB 1 available subscribed capital Subsection (2)(a)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
CD 17: Treasury stock acquisitions
Treasury stock generally
1: An amount paid by a company in acquiring any of its shares is not a dividend if—
a: the acquisition is treated as not resulting in the cancellation of the share, under section 67A(1) section 24
b: the acquisition is not part of a pro rata cancellation or something that is in substance a pro rata cancellation. Reversion to on-market cancellation treatment
2: Subsections (4) to (6) apply in the case of an acquisition of a share to which subsection (1) section CF 3(1)(d) or (da) of the Income Tax Act 1994
a: before the first anniversary of the acquisition, the company cancels the share; or
b: at the first anniversary, the company has failed to transfer a share of the same class in an arm's length transfer, except if the company is established under New Zealand co-operative company legislation; or
c: after the first anniversary, the company, which is established under New Zealand co-operative company legislation, cancels the share. Requirement for arm's length transfers
3: When subsection (2)(b) is applied,—
a: a transfer is arm's length only if it is—
i: to a person not associated with the company; or
ii: in a transaction that occurs on a recognised exchange, through a broker or some other agent independent of the company, and that is not preceded by any arrangement between the transferee and the company for the transfer; and
b: each arm's length transfer of a share is taken into account only in relation to a single share acquisition to which subsection (1) has applied. Reduction of available subscribed capital
4: If subsection (2) applies, then, with effect from the cancellation or the first anniversary, depending on which first causes subsection (2) to apply, the available subscribed capital of the class of the share is reduced by the lesser of—
a: the amount paid to the shareholder on the acquisition; and
b: the available subscribed capital per share calculated under the ordering rule, and calculated in the case of the first anniversary as if the share and any other shares to which this subsection applies on that date were cancelled on that date. Imputation credit account debit
5: If subsection (2) applies, then, with effect from the date of the acquisition by the company, section ME 5(1)(c) and (2)(c) a section ME 5(1)(c) Relief from imputation penalty tax
6: No imputation penalty tax is imposed under section 140B agent amount arrangement associated person available subscribed capital cancellation company co-operative company dividend imputation credit account imputation penalty tax New Zealand on-market cancellation ordering rule pay pro rata cancellation recognised exchange share shareholder 1994 No 164 s CF 3(1)(d), (da), (3), (3A) Section CD 17(4) substituted 6 October 2009 section 738(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CD 18: Capital distributions on liquidation
or emigration Application of this section
1: This section applies if a shareholder—
a: is paid an amount in relation to a share on the liquidation of the company:
b: is treated under section FCB 2 Return of subscribed capital or capital gains
2: The amount paid is a dividend only to the extent to which it is more than—
a: the available subscribed capital per share calculated under the ordering rule; and
b: the available capital distribution amount calculated under section CD 33 Statutory producer board capital levies
3: If the company is a statutory producer board, the amount is not a dividend to the extent to which it is a return of a levy charged specifically for capital development. Non-deductible capital
4: An amount that is not a dividend as a result of subsection (3) is nevertheless treated as a return of capital for the purposes of the capital limitation. amount available capital distribution amount available subscribed capital capital limitation company dividend emigrating company levy liquidation ordering rule pay share shareholder statutory producer board 1994 No 164 s CF 3(1)(c), (i), (4) The heading to section CD 18 amended 3 April 2006 section 9(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting or emigration liquidation Subsection (1) substituted 3 April 2006 section 9(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 3 April 2006 section 9(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting emigrating company
CD 19: Property made available intra-group
Application of this section
1: This section applies if—
a: a transfer of value is made by a company ( first company associated company
b: if this section did not exist, the transfer would be a dividend under section CD 5(1)(a)(ii) section CD 5(1)(a)(iii) spouse, civil union partner or de facto partner Intra-group property arrangements worth $10,000 or less
2: The transfer of value is not a dividend if—
a: the transfer consists of making property available for less than market value; and
b: the transfer is not a loan; and
c: in the tax year of the first company in which the transfer occurs, the total amount of transfers of value by the first company to the associated company that would be dividends for the year if this section did not exist is $10,000 or less. Downward transfers of value
3: The transfer of value is also not a dividend if—
a: either—
i: the first company has a voting interest in the associated company; or
ii: the first company is associated with a company ( parent company
b: the associated company does not have a voting interest in the first company; and
c: no person, other than the parent company, has both—
i: a voting interest or (if there is a market value circumstance in respect of either the first company or the associated company) a market value interest in the first company; and
ii: a voting interest, or (if there is a market value circumstance in respect of either the first company or the associated company) a market value interest in the associated company, of more than 10%. Relationship with section FC 3
4: Subsection (3) does not apply to a transfer of value that is subject to section FC 3 Rules for identifying voting interests
5: For the purposes of subsection (3)(a) and (b),—
a: for the purposes of determining if a company has a voting interest in another company, the look-through rule in section OD 3(3)(d)
b: a zero voting interest is not a voting interest. Rules for identifying voting and market value interests
6: For the purposes of subsection (3)(c),—
a: for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest in the first company or the associated company, the look-through rules in sections OD 3(3)(d) OD 4(3)(d)
b: for the purposes of determining the extent to which a person, other than the parent company, has a voting interest or market value interest of more than 10% in the associated company, the look-through rules in sections OD 3(3)(d) OD 4(3)(d)
c: a zero voting interest is not a voting interest and a zero market value interest is not a market value interest. amount assessable income associated person company dividend dividend withholding payment loan market value circumstance market value interest non-resident withholding income shareholder tax year transfer of value trustee voting interest 1994 No 164 s CF 2(13)-(14) Subsection (1)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(b) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
CD 20: Transfers of certain excepted financial arrangements within wholly-owned groups
When section ED 2 dividend excepted financial arrangement wholly-owned group of companies 1994 No 164 s EE 14(4)
CD 21: Non-taxable bonus issues
A non-taxable bonus issue is not a dividend. dividend non-taxable bonus issue 1994 No 164 s CF 3(1)(a)
CD 21BA: Issues to shareholders of rights to subscribe for or sell back shares
Issue of rights to subscribe for shares
1: The issue by a company to a shareholder of a right to subscribe for a share, or to sell a share in the company to the company, is not a dividend. Issue of shares under rights to subscribe for shares
2: The issue by a company of a share to a person for consideration less than the market value, immediately before the issue, of a share in the same class of shares, is not a dividend if—
a: the person subscribes for the share under a right (a subscription right
b: the company does not, as part of the issue of the subscription right, give the person a right to dispose of the share to the company. Premiums from issue of rights to subscribe for shares
3: A distribution by a company to a shareholder is not a dividend if—
a: the company issues to the shareholder a right (the shareholder right shareholder price
b: the shareholder fails or is ineligible to exercise the shareholder right; and
c: another person pays to the company an amount—
i: for the shareholder right:
ii: greater than the shareholder price, for the issue of a share under the shareholder right; and
d: the distribution is from the amount of the payment that does not increase the company's available subscribed capital. available subscribed capital bonus issue in lieu company consideration dividend share shareholder Section CD 21BA inserted 17 July 2013 section 152(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CD 21B: Transfer by unit trust of legal interest after beneficial interest vests
Transfer of legal interest in money or property that is dividend If money or property of a unit trust is a dividend under section CD 7B dividend unit holder unit trust Section CD 21B inserted 1 October 2005 section 169 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
CD 22: Flat-owning companies
Occupation rights
1: If a flat-owning company makes residential property available to a person, that is not a dividend. Meaning of flat-owning company
2: In this section, flat-owning company
a: whose constitution provides that every registered shareholder is entitled to the use of a specific residential property in New Zealand owned by the company; and
b: whose only significant assets are residential properties available for use by specific shareholders and funds reserved for meeting the company's costs. company dividend flat-owning company New Zealand shareholder 1994 No 164 s CF 2(1)(e), (21)
CD 23: Employee benefits
FBT rules
1: A fringe benefit subject to fringe benefit tax is not a dividend. Board
2: An amount that is employment income under section CE 1(c) amount dividend employment income FBT rules fringe benefit fringe benefit tax 1994 No 164 s CF 3(1)(g), (h)
CD 24: Payments corresponding to notional distributions of producer boards and co-operative companies
Statutory producer board payments
1: An amount paid by a statutory producer board to a person in relation to a tax year is not a dividend if—
a: the person was a member of the board at some time during the tax year; and
b: unless the Commissioner allows otherwise, the amount is calculated on the basis of the member's share of—
i: the total produce transactions of members with the board during the tax year; or
ii: the total levies payable by members to the board for the tax year; and
c: the amount corresponds to a notional distribution amount treated as a dividend under section CD 8(1) Co-operative company payments
2: An amount paid by a co-operative company to a person in relation to a tax year is not a dividend if—
a: the person was a shareholder of the company at some time during the tax year; and
b: the amount is calculated on the basis of the shareholder's share of the total produce transactions of shareholders with the company during the tax year; and
c: the amount corresponds to a notional distribution amount treated as a dividend under section CD 8(3) Non-deductible capital
3: An amount that is not a dividend as a result of this section is nevertheless treated as a return of capital for the purposes of the capital limitation. amount capital limitation Commissioner co-operative company dividend levy member pay produce transactions producer board shareholder statutory producer board tax year 1994 No 164 s CF 3(1)(ia), (j), (4)
CD 24B: Distribution to member of co-operative company based on member's transactions
Election by co-operative company that distribution not be dividend
1: A co-operative company may choose that an amount of a distribution ( trading distribution
a: the trading distribution is made by the co-operative company, or by a company ( subsidiary company)
b: the requirements of subsection (2) are met. Further requirements for election
2: A co-operative company may make an election under subsection (1) if—
a: the co-operative company is resident in New Zealand for the period to which the trading distribution relates; and
b: the company making the distribution is resident in New Zealand for the period to which the trading distribution relates; and
c: the co-operative company believes on reasonable grounds that the member at the time of the distribution—
i: is resident in New Zealand:
ii: has a fixed establishment in New Zealand; and
d: the value of the trading distribution is determined by the value for the period of transactions between the member and the co-operative company or subsidiary company that satisfy subsection (3); and
e: the number of shares in the co-operative company held by the member determines the value of the transactions with the co-operative company or subsidiary company that the member has a right to enter. Transactions must involve trading stock
3: A transaction must—
a: be the sale and purchase of trading stock of the vendor that is not intangible property; and
b: not be subject to section FB 3 FB 4(1) Amount excluded from being dividend
4: The amount of a trading distribution that is excluded under subsection (1) from being a dividend for a member is the lesser of the following:
a: the amount of the trading distribution:
b: the amount of the trading distribution relating to shares in the co-operative company that the member acquires for the purpose of obtaining the right to enter transactions with the co-operative company or subsidiary company. Form of election
5: The co-operative company makes an election under subsection (1) for an income year containing the period to which a trading distribution relates by giving the Commissioner notice of the election when providing the company's return of income for the tax year to which the income year corresponds. Period of election
6: The election applies for distributions in the income year referred to in subsection (5) and for distributions in later income years. company co-operative company resident in New Zealand shareholder Section CD 24B inserted 3 April 2006 section 10(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section CD 24B list of defined terms foreign-sourced amount repealed 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
CD 25: Qualifying amalgamations
An amount derived by an amalgamated company on a qualifying amalgamation from an amalgamating company that ceases to exist on the amalgamation is not a dividend if it arises from—
a: the amalgamated company acquiring property of the amalgamating company; or
b: the amalgamated company being relieved of an obligation owed to the amalgamating company. amalgamated company amalgamating company amalgamation amount dividend qualifying amalgamation 1994 No 164 s CF 5(a)
CD 26: Foreign investment fund income
Amount not dividend
1: An amount paid by a company to a person is not a dividend if,—
a: at the time the person derives the amount, the person's interest in the company is an attributing interest or would have been an attributing interest if the company had not been liquidated; and
b: the person calculates their FIF income or loss in relation to the interest and the period in which the amount is paid under—
i: the comparative value method:
ii: the deemed rate of return method:
iii: the cost method:
iv: the fair dividend rate method. Exclusion for interests in grey list companies
2: Subsection (1)(b)(iv) does not apply if—
a: the FIF is a grey list company; and
b: the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls. Application of rule for certain managed funds
3: Subsection (2) does not apply if—
a: the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
b: the FIF is a foreign investment vehicle. amount attributing interest company comparative value method cost method deemed rate of return method direct income interest dividend fair dividend rate method FIF income foreign investment fund oreign investment vehicle life insurance liquidation loss pay portfolio investment entity 1994 No 164 s CF 3(1)(k) Section CD 26(1) heading substituted 7 September 2010 section 197 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CD 26(1) heading inserted 6 October 2009 section 739(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(1) substituted 7 September 2010 section 197 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section CD 26(b) substituted 19 December 2007 section 11 Taxation (Business Taxation and Remedial Matters) Act 2007 Paragraph (b) amended 1 April 2007 section 5(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting comparative value method, the deemed rate of return method, the cost method, or the fair dividend rate method comparative value method or the deemed rate of return method See section 5(3) Section CD 26(1)(b)(iv) amended 6 October 2009 section 739(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(1)(c) repealed 6 October 2009 section 739(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(2) heading added 6 October 2009 section 739(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(2) added 6 October 2009 section 739(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(3) heading added 6 October 2009 section 739(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26(3) added 6 October 2009 section 739(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26 list of defined terms direct income interest inserted 6 October 2009 section 739(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26 list of defined terms foreign investment vehicle inserted 6 October 2009 section 739(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26 list of defined terms life insurance inserted 6 October 2009 section 739(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 26 list of defined terms portfolio investment entity added 6 October 2009 section 739(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 The list of defined terms was amended 1 April 2007 section 5(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method See section 5(3) Calculation rules
CD 27: General calculation rule for transfers of value
Difference in value
1: The amount of a dividend that is a transfer of value from a company to a person is calculated using the formula— value from company – value from person. Definition of items in formula
2: In the formula,— (a) value from company (b) value from person
i: is the market value of the money or money's worth (if any) that the person provides to the company as consideration for the transfer; and
ii: excludes any amount that is attributable merely to the holding or giving up of rights as a shareholder in the company. Relationship with sections CD 28 to CD 31
3: This section is overridden by sections CD 28 to CD 31 amount company dividend shareholder transfer of value 1994 No 164 s CF 2(1)(c)-(e)
CD 28: Calculation of amount of dividend when property made available
How this section applies
1: This section applies to determine the amount of a dividend that arises under section CD 3 Amounts calculated quarterly
2: The amount of the dividend is calculated for each quarter during which the property is made available. Date when amounts treated as paid
3: The amount of the dividend calculated for a quarter is treated as being paid by the company to the person and as being derived by the person 6 months after the end of the company's income year. However, if the company gives notice to the shareholder on an earlier date of the amount of the dividend for that quarter, the amount is treated as being paid and derived on that earlier date instead. Using FBT rules
4: Unless the property made available is a loan, the amount of the dividend for each quarter is the value of the fringe benefit for that quarter calculated under the FBT rules as if—
a: making the property available were the provision of a fringe benefit by the company to an employee in relation to employment, despite anything in sections CX 6 to CX 32
b: the company were not to choose to pay fringe benefit tax on an income year basis under section ND 14 Using difference from benchmark rate
5: If the property made available is a loan, the amount of the dividend for each quarter is the excess (if any) of interest, calculated for the quarter on the basis of the daily balance of the loan and the benchmark rate specified in subsections (6) to (8), over the actual amount of interest accruing on the loan in the quarter. However, the company may choose instead to calculate the dividend as the excess of the benchmark interest rate amount over the amount of income accruing to the company in the quarter calculated under the yield to maturity method. Benchmark rate: fringe benefit tax rate for certain loans
6: For the purposes of subsection (5), the benchmark rate of interest is the prescribed rate of interest if—
a: all amounts payable to the company for the loan are expressed in New Zealand dollars; and
b: either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter. Setting benchmark rate
7: For the purposes of subsection (5), the benchmark rate is the rate set by the Commissioner if—
a: all amounts payable to the company in relation to the loan are payable in a single currency other than New Zealand dollars; and
b: the Commissioner has set a benchmark rate for that currency and the quarter; and
c: either the borrower is not a company or, if the borrower is another company, the company making the loan notifies the Commissioner that this subsection is to apply to the loan and the quarter. Default benchmark rate
8: For the purposes of subsection (5), if neither subsection (6) nor (7) applies, the benchmark rate of interest is a market rate determined at the end of the quarter for a loan made on the same terms between persons at arm's length. Daily loan balance: certain repayments backdated
9: For the purposes of subsection (5), in determining the daily balance of a loan during a tax year, an amount repaid during the tax year is treated as having been applied in repayment of the loan at the start of the company's tax year or, if later, the day the loan was made, if—
a: the amount is repaid by applying any salary, wages, extra pay, dividends, or interest payable by the company to the borrower; and
b: the amount payable by the company is income of the borrower in the tax year or a previous tax year; and
c: the amount payable by the company is payable without any tax deduction under the PAYE rules, the RWT rules, or the NRWT rules. Daily loan balance: company nominating amount
10: Subject to subsection (9), for the purposes of subsection (5), the daily balance of the loan for a tax year is treated as being equal to the notional balance chosen under subsection (11) by the company making the loan if—
a: the borrower is a company; and
b: the loan is a variable principal debt instrument; and
c: the company making the loan notifies the Commissioner that this subsection applies for the loan and the tax year; and
d: the amount of the dividend calculated as a result for the loan, the borrower, and the tax year is no more than 30% greater or less than the amount that would be calculated if this section did not apply. Notional balance options
11: The notional balance referred to in subsection (10) is whichever of the following is chosen by the company making the loan and notified to the Commissioner:
a: the average of the outstanding balances of the loan at the end of each month in the company's tax year :
b: the average of—
i: the outstanding balance of the loan at the start of the tax year or the first time during the tax year at which the loan exists, whichever is later; and
ii: the outstanding balance of the loan at the end of the tax year or the last time during the tax year at which the loan exists, whichever is earlier. Notice generally by tax returns
12: Reference in this section to a company notifying the Commissioner is a reference to—
a: a notice given to the Commissioner with the company's return of income for the relevant tax year; or
b: if no return is required, a notice given by the date on which a return would be required to be filed for the tax year if a return had been required. Attributed repatriation dividends
13: No amount of dividend arises under section CD 3
a: the outstanding balance of the loan at the end of the accounting period is taken into account under sections CD 35 to CD 41
b: as a result, the person derives a dividend under section CD 13 When loan disregarded
14: Subsection (13) does not apply to the extent to which the loan is a loan to which—
a: section CD 39(11)
b: section CZ 10(4) accounting period amount attributed repatriation CFC Commissioner company dividend employee extra pay FBT rules fringe benefit fringe benefit tax income income year interest loan New Zealand New Zealand repatriation amount notice notify NRWT rules pay PAYE rules prescribed rate of interest quarter return of income RWT rules shareholder tax deduction tax year variable principal debt instrument 1994 No 164 s CF 2(11), (12), (19) Subsection (11)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
CD 29: Adjustment if dividend recovered by company
When dividends recovered
1: If a company recovers a dividend from a shareholder under section 56
a: the recovered dividend and any attached imputation credit or dividend withholding payment credit are disregarded for the purposes of this Act; and
b: the resulting refunds are made. Amendment of assessments
2: Section 113B section LE 2 Refunds
3: If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2),
a: income tax, dividend withholding payment, or dividend withholding payment penalty tax of the shareholder; and
b: non-resident withholding tax or resident withholding tax of the company. Relationship with sections MD 1 and NH 4
4: The refund is made despite sections MD 1 NH 4 Adjustments to accounts
5: If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2), a credit or debit
a: the imputation credit account of the company; or
b: if the shareholder is an imputation credit account company or dividend withholding payment account company, the imputation credit account or dividend withholding payment account of the shareholder. assessment Commissioner company dividend dividend withholding payment dividend withholding payment account dividend withholding payment account company dividend withholding payment rules dividend withholding payment credit dividend withholding payment penalty tax imputation credit imputation credit account imputation credit account company imputation rules income tax non-resident withholding tax notice NRWT rules resident withholding tax RWT rules shareholder 1994 No 164 s CF 2(8) Section CD 29(2) replaced 30 June 2014 section 197(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29(3) amended 30 June 2014 section 197(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29(5) amended 30 June 2014 section 197(3) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29 list of defined terms dividend withholding payment rules inserted 30 June 2014 section 197(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29 list of defined terms imputation rules inserted 30 June 2014 section 197(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29 list of defined terms NRWT rules inserted 30 June 2014 section 197(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section CD 29 list of defined terms RWT rules inserted 30 June 2014 section 197(4) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
CD 30: Adjustment if amount repaid later
When released debt repaid
1: If the release by a company of a shareholder's obligation to pay money to the company has been treated as a dividend and the released amount is later repaid to the company, this section applies to the extent necessary to ensure that—
a: the dividend is disregarded for the purposes of this Act; and
b: the resulting refunds are made. When close company expenditure repaid
2: If any expenditure of a close company that shareholders in the company believed on reasonable grounds was only for the benefit of the company is nevertheless a dividend and the expenditure is later repaid to the company, this section applies to the extent necessary to ensure that—
a: the dividend is disregarded for the purposes of this Act; and
b: the resulting refunds are made. Amendment of assessments
3: Section 113B Refunds
4: If the Commissioner is given notice of the repayment, the Commissioner must refund any relevant tax of the shareholder. Relationship with section MD 1
5: The refund is made despite section MD 1 Repayment of pre-1992 loans
6: Subsection (1) also applies to the repayment of an amount treated as a dividend under section 4(1)(b) of the Income Tax Act 1976 amount assessment close company Commissioner company dividend notice pay shareholder tax 1994 No 164 s CF 2(9), (10) Subsection (3) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression 113B 113A
CD 31: Adjustment if additional consideration paid
Differences from market value
1: If a dividend from a company arises because of a difference between the market value of property provided by or to the company and the consideration paid for it, the dividend is disregarded for the purposes of this Act if the conditions in subsections (2) to (4) are met. Market value
2: The consideration paid must have been an amount that the company considered was the market value, having taken reasonable steps at the time of the transaction to ascertain a market value. Difference paid
3: The recipient of the dividend must have later paid to the company—
a: sufficient additional consideration to reflect the actual market value of the property at the time of the transaction; or
b: a refund of any excess consideration paid by the company. Accounts adjusted
4: Any necessary adjustments must have been made to the accounts of the company and the recipient for the additional consideration or refund. amount company dividend pay 1994 No 164 s CF 2(9A)
CD 32: Available subscribed capital amount
Formula for calculating amount of available subscribed capital
1: For a share ( share calculation time available subscribed capital 1 July 1994 balance + subscriptions – returns. Definition of items in formula
2: In the formula,—
a: 1 July 1994 balance
i: if the company existed before 1 July 1994, the amount calculated under subsection (3); and
ii: in any other case, zero:
b: subscriptions the class
c: returns section CD 14 CD 16 1 July 1994 balance
3: The 1 July 1994 balance is calculated using the formula Definition of items in formula
4: In the formula,—
a: paid-up capital
b: premiums
c: all shares issued
d: 30 June 1994 shares 1 July 1994 balance: bonus issues after 30 September 1988
5: The capital amount included in calculating the 1 July 1994 amount does not include an amount paid up by way of a bonus issue made after 30 September 1988, unless—
a: the bonus issue was a taxable bonus issue; or
b: the amount was paid up by application of an amount of qualifying share premium. Subscriptions amount: taxable bonus issues and debt capitalisations
6: The subscriptions amount includes,—
a: in the case of a bonus issue in lieu, the amount offered as an alternative to the bonus issue; and
b: in the case of a taxable bonus issue that is not a bonus issue in lieu, the amount of the dividend arising from the taxable bonus issue; and
c: in the case of shares issued on conversion of, or as consideration for the release of, a debt claim against the company, the amount of debt converted or released. Subscriptions amount: non-taxable and exempt bonus issues
7: The subscriptions amount does not include—
a: an amount for a bonus issue if neither subsection (6)(a) nor (b) applies; or
b: an amount for a taxable bonus issue made to a shareholder to whom the bonus issue was exempt income under section CW 9 Subscriptions amount: reinvested exempt dividends
8: The subscriptions amount does not include—
a: an amount received by the company that is mainly attributable, directly or indirectly, to the company paying a dividend to a shareholder,—
i: if the dividend was exempt income of the shareholder under section CW 9 CW 10
ii: if the shareholder was not required to deduct an amount of dividend withholding payment from the dividend by section NH 1
iii: to the extent to which the dividend is not fully credited; or
b: an amount received by the company that is mainly attributable, directly or indirectly, to the company paying a dividend at a time when the company is a controlled foreign company to another controlled foreign company (regardless of whether either company is resident in a grey list country). Subscriptions amount: share-for-share exchanges
9: Subsection (10) applies if—
a: the company receives an amount, directly or indirectly, for the issue of shares in the class that is in the form of shares in another company; and
b: immediately after the issue there are 1 or more persons whose common voting interests (or common market value interests), as defined in section IG 1(5)
c: the receipt is not on an amalgamation. Subscriptions amount: no uplift for share-for-share exchanges
10: If subsection (9) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share, calculated under the slice rule and calculated after deducting any ineligible capital amount described in subsections (13) and (14) of the shares in the other company at the date on which the amount is received. Subscriptions amount: company share capital reorganisation When subsection (10D) applies
10B: Subsection (10D) applies for a company (the calculation company
a: section EW 46B(1)(a) or (b)
b: the creditor is a non-resident company; and
c: section EW 46B(3)
d: the calculation company is the debtor, or the calculation company holds, before section OD 3 OD 4 When subsection (10D) applies
10C: Subsection (10D) also applies if section EW 46B(1)(c) calculation company
a: is the creditor’s debtor, to whom section EW 46B(1)(c)
b: has, before the application of section OD 3 OD 4 section EW 46B(1)(c) Subscriptions amount: debt forgiven within economic group
10D: For the calculation company, the subscriptions amount is treated as including the amount of debt to which section EW 46B(5) section EW 46B(1)(c)
a: if the calculation company is the debtor, the amount of debt:
b: if the calculation company is not the debtor, the amount of debt multiplied by 1 of the following interests, determined before the application of section OD 3 OD 4
i: the calculation company’s voting interests in the creditor’s debtor; or
ii: the calculation company’s market value interest in the creditor’s debtor, if there is a market value circumstance.
11: Subsection (12) applies if a company receives an amount for the issue of shares in the class in the form of—
a: a shareholder giving up rights of membership in the company; or
b: a shareholder giving up rights of membership in a company associated with the company or that is in substance the same company. Subscriptions amount: no uplift for share capital reorganisation
12: If subsection (11) applies, the subscriptions amount does not include the amount received to the extent to which it is more than the total available subscribed capital per share of the rights given up at the date they are given up, calculated—
a: under the slice rule; and
b: after deducting any ineligible capital amount described in subsections (13) and (14); and
c: as if the rights given up were shares, if they are not shares. Subscriptions amount: when ineligible capital arises
13: For the purposes of subsections (10) and (12), an ineligible capital amount arises if—
a: a company ( acquiring company acquired company
b: the acquired company has issued shares in anticipation of the shares being acquired by the acquiring company; and
c: those shares issued in anticipation are not a fully credited taxable bonus issue; and
d: the acquiring company pays an amount in consideration for acquiring the shares in the acquired company in addition to issuing shares in the acquiring company. Subscriptions amount: amount of ineligible capital
14: The ineligible capital amount is the lesser of—
a: the total of the available subscribed capital per share calculated under the slice rule of the shares in the acquired company that is attributable to the shares issued in anticipation (except to the extent to which the shares issued in anticipation are a fully credited taxable bonus issue); and
b: the total additional amount paid by the acquiring company referred to in subsection (13)(d). Subscriptions amount: amalgamated company
15: The subscriptions amount for a company that is an amalgamated company resulting from an amalgamation—
a: includes an amount, as if it were consideration received at the time of the amalgamation for the issue of the amalgamated company's shares, equal to the available subscribed capital, at the time of the amalgamation, of all shares in the amalgamating companies that are—
i: of an equivalent class to the class; and
ii: not held directly or indirectly by an amalgamating company; and
iii: not shares in the amalgamated company:
b: does not include any other amount for the agreement of shareholders of an amalgamating company to the amalgamation and the resulting property acquisitions by the amalgamated company. Subscriptions amount: emigrating company
15B: If a company has been treated under section FCB 2 Subscriptions amount: Maori authority
16: If the company is a Maori authority, the subscriptions amount includes the taxable income derived by the Maori authority in the 2003-04 tax year or an earlier tax year. Subscriptions amount: no double counting
17: The subscriptions amount does not include amounts included in calculating the 1 July 1994 balance. Subscriptions amount: treasury stock sales excluded
18: The subscriptions amount does not include the amount of consideration received by a company for disposing of a share if the disposal is taken into account under section CD 17 section CD 17(4) to (6) Subscriptions amount: superannuation fund's interest in GIF
19: The subscriptions amount of a company that is a group investment fund includes the value of the interest of a superannuation fund in the group investment fund at the end of 31 March 1999. 1 July 1994 and subscriptions amount: foreign currency conversions
20: If an amount of consideration that a company receives for the issue of shares is payable in a foreign currency, the amount paid is treated, for the purposes of this section, as if it were converted into New Zealand currency at the calculation time. Returns amount: on-market cancellations by associate
21: If the acquisition of a share by an associate of the company is treated under section ME 5(5) Returns amount: recovered amounts
22: The returns amount does not include any amount recovered by the company before the calculation time under section 56 Returns amount: shares cancelled on amalgamation
23: If shares in an amalgamated company held by an amalgamating company are cancelled on the amalgamation, the returns amount included in calculating the available subscribed capital amount of a share in the amalgamated company that is of the same class as the cancelled shares is increased by the amount calculated using the formula— cancelled shares x asc per share. Definition of items in formula
24: In the formula,—
a: cancelled shares
b: asc per share Meaning of fully credited
25: In this section, the part of a dividend that is fully credited Definition of items in formula
26: In the formula,—
a: dividend excluding credits
b: actual ratio dividend ( section MZ 18 Link cannot be done — section MZ 18 not yet inserted.
c: maximum ratio section ME 8(1) Meaning of qualifying share premium
27: In this section, qualifying share premium
a: the amount was credited to a share premium account in the company's books; and
b: the issue of shares was not in consideration for the acquisition, directly or indirectly, of shares in another company. amalgamated company amalgamating company amalgamation amount associated person available subscribed capital bonus issue bonus issue in lieu cancellation common market value interest common voting interest company consideration controlled foreign company dividend dividend withholding payment dividend withholding payment credit dividend withholding payment ratio exempt income fully credited grey list group investment fund imputation credit imputation ratio Maori authority market value circumstance market value interest New Zealand non-resident company on-market cancellation pay qualifying share premium share shareholder shares of the same class slice rule superannuation fund tax year taxable bonus issue taxable income voting interest 1994 No 164 ss CF 3(2)(a), (14), CF 4, OB 1 available subscribed capital fully credited ineligible capital amount qualifying share premium transitional capital amount Section CD 32(10B) inserted 30 March 2017 section 386(1) section 386(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 32(10C) inserted 30 March 2017 section 386(1) section 386(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 32(10D) inserted 30 March 2017 section 386(1) section 386(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Subsection (15) substituted 1 April 2005 section 11(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (15B) inserted 3 April 2006 section 11(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section CD 32(26)(b) amended 19 December 2007 section 12 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CD 32 list of defined terms consideration inserted 6 October 2009 section 740 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CD 32 list of defined terms market value circumstance inserted 30 March 2017 section 386(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 32 list of defined terms market value interest inserted 30 March 2017 section 386(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 32 list of defined terms non-resident company inserted 30 March 2017 section 386(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 32 list of defined terms voting interest inserted 30 March 2017 section 386(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CD 33: Available capital distribution amount
Formula for calculating amount of available capital distribution
1: For a share ( the share available capital distribution amount Definition of items in formula
2: In the formula,—
a: receipt
b: asc per share
c: capital gains capital gain amounts available
d: capital property distributed
e: cost capital property distributed
f: capital losses
g: total receipts
h: total asc Positive amounts
3: Despite subsection (1), the available capital distribution amount per share is zero if either multiplier in the formula is negative. When foreign company information inadequate
4: Despite subsection (1), the available capital distribution amount is zero if—
a: the company is not resident in New Zealand; and
b: the shareholder cannot obtain sufficient information to calculate the actual available capital distribution amount. Capital gain amount: bonus issued capital gains
5: A capital gain amount is treated as still being available for distribution to the extent to which—
a: it has been applied to pay up a bonus issue made after 30 September 1988; and
b: the bonus issue is a non-taxable bonus issue; and
c: the bonus issued share is still on issue at the time of the company's liquidation. This subsection is overridden by subsection (6). Capital gain amount: capital gains after 31 March 1988 and before 1992-93
6: A capital gain amount, derived after 31 March 1988 and before the 1992-93 tax year, is not available for distribution to the extent to which a capital loss amount has arisen for the company in the tax year in which the capital gain amount was derived or in a later tax year before the 1992-93 tax year. Capital loss amounts are offset against capital gain amounts in the chronological order in which each arose and, to the extent offset, are then disregarded for the purposes of this subsection. Capital gain amount: when capital gain amounts arise
7: For the purposes of this section, a company derives a capital gain amount if,—
a: after 31 March 1988, it disposes of capital property for an amount of consideration that is more than the cost of the property to the company, including a disposal that the company is treated as making under section DB 19 DB 20
b: after 31 March 1988, it receives a capital gain, including a gift, and no part is assessable income of the company; the capital gain amount is the amount of the capital gain; or
c: an amount is derived by the company from another company on liquidation of the other company that is excluded from being a dividend as a result of section CD 18(2)(b)
d: an amount is derived by the company that is attributable to a revaluation of livestock in the 1992-93 or a later tax year under section 86D of the Income Tax Act 1976 section EC 16 EC 20
e: the amount is described in section CZ 9(1) Capital gain amount: amalgamated company inheriting gain
8: An amalgamated company is treated as deriving a capital gain amount at the time of the amalgamation equal to a capital gain amount of an amalgamating company to the extent to which—
a: the amalgamating company ceases to exist on the amalgamation; and
b: the amalgamating company's capital gain amount was available for distribution at the time and was not distributed to anyone other than the amalgamated company. Capital gain amount: consideration when debt forgiven within economic group
8B: The amount of a debt that section EW 46B section CD 32(10D) Capital losses amount: when capital losses arise
9: For the purposes of this section, a company incurs a capital loss if it disposes of capital property for an amount of consideration that is less than—
a: the adjusted tax value of the property at the date of disposal, if the property is an item of depreciable property; or
b: the cost of the property to the company at the date of disposal, if the property is not an item of depreciable property. Capital loss amount
9B: The capital loss amount for a disposal referred to in subsection (9) is equal to the deficit referred to in that subsection for the disposal. Capital losses amount: company existing before 1 April 1988
10: In the case of a company that existed before 1 April 1988, the capital losses amount cannot be more than the total of—
a: the amount of the capital gains
b: the amount of the capital property distributed Related person transactions
11: No capital gain amount is derived or capital loss amount is incurred by a company after 31 March 1988 on disposing of property under an arrangement with a related person. This subsection is overridden by subsections (7)(c) and (12) Close companies liquidations
12: Subsection (11) does not apply if—
a: the company is a close company; and
b: the related person is not a company; and
c: the disposal is on the liquidation of the company. Reinvested exempt dividends
13: When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of any shares subscribed for by the company in another company does not include any consideration for the subscribed shares that is excluded from the available subscribed capital of the other company under section CD 32(7)(b) or (8) Amounts written up
14: When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of the relevant capital property is increased to the extent to which—
a: the value of the property is written up in the company's books; and
b: because it was attributed to the write-up,—
i: an amount paid before 11 June 1965 is treated as described in section CZ 9(2)(a)
ii: an issue of a share before 1 April 1988 is treated as described in section CZ 9(2)(b) Meaning of related person
15: In subsections (11) and (12), related person first company
a: the person owns, can control (directly or indirectly), or has the right to acquire 20% or more of the first company's ordinary shares; or
b: the person owns, can control (directly or indirectly), or has the right to acquire 20% or more of the voting rights of shareholders in the first company; or
c: the person is a company and the first company owns, can control (directly or indirectly), or has the right to acquire 20% or more of the ordinary shares in the person; or
d: the person is a company and the first company owns, can control (directly or indirectly), or has the right to acquire 20% or more of the voting rights of shareholders in the company; or
e: the person is a company and 20% or more of the shares or voting rights in the person are owned or controlled by persons that also own, control, or have the right to acquire 20% or more of the shares or voting rights in the first company; or
f: the person is a partner or co-venturer of the first company; or
g: the person is the trustee of a trust and the first company, or a person who is a related person of the first company under this subsection, benefits or can benefit under the trust (directly or indirectly); or
h: the person is a partnership and 1 or more persons, that are related persons of the first company under this subsection, are entitled to 50% or more of the partnership's assets or profits or are able to control the partnership. Look-through relatives and nominees
16: For the purposes of subsection (15), a person is treated as holding anything held by—
a: their spouse, civil union partner or de facto partner
b: their child; or
c: a child of their spouse, civil union partner or de facto partner
d: a spouse, civil union partner or de facto partner a child of their spouse, civil union partner or de facto partner Look-through interposed companies
17: For the purposes of subsection (15)(e), if shares or voting rights in a company are owned or controlled by another company, a look-through approach must be applied. The lookthrough approach requires that—
a: the shares or voting rights are treated as if owned or controlled by the shareholders in the other company; and
b: if a shareholder in the other company is a company, that shareholder's portion of the shares or voting rights are treated as if owned or controlled by the shareholders in the shareholder company; and
c: the approach is applied in the same way to any chain of companies, whatever the length of the chain. Meaning of capital property
18: In this section, capital property amalgamated company amalgamating company amalgamation amount available capital distribution amount available subscribed capital bonus issue capital property close company company deduction depreciation loss dividend income liquidation nominee non-taxable bonus issue ordering rule pay related person relative resident in New Zealand revenue account property share shareholder tax year trustee 1994 No 164 ss CF 3(2)(b), (6)-(12), (14) excess return amount capital gain amount Subsection (2)(c) amended 1 April 2005 section 12(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting capital gain amounts available capital gain available Subsection (7)(b) substituted 1 April 2005 section 12(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section CD 33(8B) inserted 30 March 2017 section 387(1) section 387(4) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 33(9) replaced 30 March 2017 section 387(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 33(9B) inserted 30 March 2017 section 387(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 33(11) amended 7 December 2009 section 149 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Subsection (16)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (16)(a) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (16)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (16)(c) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (16)(d) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (16)(d) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting a child of their spouse or civil union partner their spouse's child Subsection (16)(d) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (16)(d) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting a child of their spouse, civil union partner or de facto partner a child of their spouse or civil union partner Section CD 33 list of defined terms deduction inserted 30 March 2017 section 387(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 Section CD 33 list of defined terms depreciation loss inserted 30 March 2017 section 387(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 CFC attributed repatriation calculation rules
CD 34: When does a person have attributed repatriation from a CFC?
General rule
1: A person has an amount of attributed repatriation
a: the person has an income interest under sections EX 8 to EX 13
b: the person's income interest is 10% or more for the accounting period, under sections EX 14 to EX 17
bb: at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
c: the CFC has a New Zealand repatriation amount for the accounting period, under sections CD 35 to CD 41 Formula
2: The amount of the person's attributed repatriation for the accounting period is calculated using the formula— Definition of items in formula
3: In the formula,—
a: income interest
b: repatriation
c: days
d: days in accounting period accounting period amount attributed repatriation CFC income interest New Zealand repatriation amount New Zealand resident transitional resident 1994 No 164 s CG 8(1) Section CD 34(1)(b) amended 19 December 2007 section 13(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1)(bb) inserted 1 October 2005 section 13(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 13(5) and (6) Subsection (2) substituted 1 October 2005 section 13(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 13(5) and (6) Subsection (3) inserted 1 October 2005 section 13(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 13(5) and (6) The list of defined terms was amended 1 October 2005 section 13(4)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting New Zealand resident See section 13(5) and (6) The list of defined terms was amended 1 October 2005 section 13(4)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 13(5) and (6)
CD 35: New Zealand repatriation amount
Formula
1: The New Zealand repatriation amount closing New Zealand property – opening New Zealand property. Definition of items in formula
2: In the formula,—
a: closing New Zealand property sections CD 36 to CD 40
b: opening New Zealand property sections CD 36 to CD 40 Positive amounts
3: The New Zealand repatriation amount can never be negative. CFC's unrepatriated income balance
4: The New Zealand repatriation amount can never be more than the unrepatriated income balance of the CFC for the accounting period, calculated under section CD 41 accounting period amount CFC New Zealand New Zealand repatriation amount 1994 No 164 s CG 8(2)
CD 36: New Zealand property amount
Formula
1: The amount of New Zealand property of a CFC at any time is calculated using the formula— tangible property + associated party equity + associated party debt. Definition of items in formula
2: In the formula,—
a: tangible property
b: associated party equity
i: resident in New Zealand; and
ii: associated with the CFC:
c: associated party debt section CD 39
i: the CFC is a party; and
ii: a New Zealand resident associated with the CFC at the time is a party. Acquisitions from associates below market value
3: If the CFC acquires any property from a person who is associated (at the time of acquisition) with the CFC for a cost that is less than the market value of the property at the time, the cost to the CFC of acquiring the property is treated as being equal to the market value at the time. Specific calculation rules in sections CD 37 to CD 40
4: There are specific calculation rules in sections CD 37 to CD 40 amount associated person CFC company financial arrangement New Zealand New Zealand resident resident in New Zealand share 1994 No 164 s CG 8(3), (5), (14) tangible property
CD 37: Cost of tangible property
Capital expenditure
1: The cost of any item of tangible property (except trading stock) includes each of the following expenditures if no deduction would have been allowed under this Act for it (except for an amount of depreciation loss) had the CFC been a New Zealand resident:
a: the original purchase price of the property :
b: other expenditure incurred on purchasing the property :
c: expenditure incurred before the relevant time in improving the property :
d: expenditure incurred before the relevant time in establishing or improving the CFC's legal right to the property. Outstanding third party funding
2: The cost of any item of tangible property is reduced (but not to less than zero) by the balance outstanding at the time of a loan to the extent to which—
a: the loan is secured over the property; and
b: the lender is not associated at the time with the CFC; and
c: the balance is attributable to expenditure on the property included in the cost under subsection (1) Temporary New Zealand property
3: Subject to section CD 40(3) and (4) tangible property section CD 36(1)
a: situated in New Zealand for less than 365 days in total; or
b: disposed of by the CFC—
i: by the later of 364 days after its acquisition and 9 months after the end of the CFC's accounting period in which it was acquired; and
ii: to a person that is either a New Zealand resident or is not associated with the CFC at the time of the disposal. CFC's business operations assets excluded
4: The amount of the tangible property section CD 36(1) What exclusion does not apply to
5: Subsection (4) does not apply if the business—
a: is carried on solely or mainly for the purpose of defeating the application of section CD 13
b: is of the same nature as a business also carried on in New Zealand at the time of the acquisition by a person that is—
i: a New Zealand resident; and
ii: associated at the time with the CFC; and
iii: not a company in which the CFC holds at the time shares that are excluded from the New Zealand repatriation amount measurement by section CD 38(1) accounting period associated person business CFC company deduction depreciation loss New Zealand New Zealand repatriation amount New Zealand resident share trading stock 1994 No 164 s CG 8(6), (14) qualified transitory property Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
CD 38: Cost of associated party equity
Shares in subsidiaries engaged in same business
1: The cost of associated party equity at any time excludes the cost of shares or options over shares acquired in a company if—
a: the CFC and the company are a wholly-owned group of companies at the time; and
b: the company carries on a business of the same nature as a substantial business carried on by the CFC before the acquisition; and
c: the CFC (or another CFC associated with it at the time) has a significant involvement in managing the company's business; and
d: neither the company's business nor the CFC's business is carried on solely or mainly for the purpose of defeating the application of section CD 13
e: neither the company's business nor the CFC's business is of the same nature as a business also carried on in New Zealand at the time of the acquisition by a person that is—
i: a New Zealand resident; and
ii: associated at the time with the CFC; and
iii: not a company in which the CFC holds at the time shares that are excluded from the New Zealand repatriation amount measurement by this subsection. Currency conversions
2: If any shares or options are not denominated in New Zealand dollars, the cost is calculated by converting the amount in the relevant foreign currency at the rate of exchange applying on the date the shares or options were acquired. associated person business CFC company New Zealand New Zealand resident New Zealand repatriation amount share wholly-owned group of companies 1994 No 164 s CG 8(7)
CD 39: Outstanding balances of financial arrangements
Rules for attributed repatriation calculation only
1: The rules in this section apply only for the purposes of calculating the amount of the associated party debt section CD 36(1) Balance: amounts due
2: The outstanding balance of a financial arrangement to which the CFC is a party is the amount due to or by the CFC under the financial arrangement, whether or not payable at the time. Calculation under CFC rules
3: The amount due is calculated by applying section EX 21 Currency conversion
4: If the amount is not due in New Zealand dollars, the amount is converted by applying the exchange rate between the foreign currency and New Zealand dollars that applies on the date the financial arrangement is entered into. All arrangements with same associate
5: In calculating the net outstanding balance of a financial arrangement to which the CFC and an associated person are parties, all financial arrangements entered into by those parties are treated as a single financial arrangement, with outstanding balances aggregated and netted off. Short-term financial arrangements
6: No account is taken of a financial arrangement that, on the date it is entered into, is reasonably expected to and does mature within 365 days of the day on which it was entered into. Aggregation of consecutive or successive arrangements
7: For the purposes of subsection (6), if 2 or more consecutive or successive financial arrangements may, having regard to the tenor of this section, fairly be regarded as 1 financial arrangement, those financial arrangements are to be regarded as 1 financial arrangement. Accruing amounts
8: For the purposes of subsections (6) and (10)(c)(i), an amount accrued (including interest and discount on issue) on a financial arrangement is treated as—
a: a new financial arrangement entered into on the date of accrual; and
b: having been paid only when previous accruals on the financial arrangement have been paid. Temporary adjustments
9: A temporary reduction or increase in the outstanding balance, at the end of an accounting period of the CFC, of any financial arrangement is disregarded if it has a purpose or effect of defeating the application of section CD 13 When financial arrangement matures within 5 years or is remitted
10: Subsections (11) and (12) apply if—
a: a CFC is party to a financial arrangement; and
b: the outstanding balance of the financial arrangement has been or, but for subsection (11), would be taken into account in calculating the New Zealand repatriation amount of the CFC for an accounting period; and
c: either—
i: the financial arrangement matures within 5 years of the date on which it was entered into; or
ii: an amount owing under the financial arrangement is remitted or released and, as a result, a person derives a dividend; and
d: section CZ 10(4) Retrospective exclusion of amounts
11: If a person with an income interest in the CFC notifies the Commissioner in writing of the maturity or dividend, for the purposes of calculating the dividend amount which the person has derived under section CD 13
a: the financial arrangement is disregarded, if subsection (10)(c)(i) applies; or
b: the amount remitted or released is disregarded, if subsection (10)(c)(ii) applies. Amendment of assessments and refunds
12: In order to give effect to subsection (11), the Commissioner must—
a: amend any relevant assessment under section 113C
b: refund any income tax, dividend withholding payment, dividend withholding payment penalty tax, or late payment penalty, despite section MD 1 Substitution of financial arrangements
13: For the purposes of subsection (10)(c)(i), a financial arrangement ( first financial arrangement
a: on or after the date of maturity, another financial arrangement ( second financial arrangement
b: the second financial arrangement is a substitute, in whole or part, for the first financial arrangement; and
c: the second financial arrangement was entered into with a purpose of ensuring that subsections (11) and (12) apply. accounting period amount associated person attributed repatriation branch equivalent income CFC Commissioner dividend dividend withholding payment dividend withholding payment penalty tax financial arrangement financial arrangements rules income interest income tax interest loss maturity New Zealand New Zealand repatriation amount pay year 1994 No 164 ss CF 2(17), (18), CG 8(8) Subsection (12)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression 113C 113B
CD 40: Property transfers between associated persons
Transfers between associated CFCs
1: Subsection (2) applies if—
a: a CFC disposes of any property to another CFC; and
b: the first CFC held the property at the start of the accounting period in which the disposal occurs; and
c: the 2 CFCs are associated persons at the time of the disposal. Calculation as if property held by second CFC for whole period
2: A person can choose to calculate their attributed repatriation from both CFCs as if the disposal had occurred at the start of each CFC's accounting period in which the disposal in fact occurs. The election is made by the person preparing their return of income accordingly. Transfers to non-residents with mismatching accounting periods
3: Subsection (4) applies if—
a: a CFC disposes of property to an associated person who is not a New Zealand resident during an accounting period ( transfer period
b: the CFC did not own the property at the end of the previous accounting period; and
c: the associated person has an accounting period that ends on a later date than the CFC's transfer period ends; and
d: the associated person holds the property at the end of the CFC's transfer period; and
e: the associated person does not hold the property at the end of its own accounting period in which the disposal occurs. Calculation as if CFC holding property at the end of period
4: For the purposes of calculating the CFC's New Zealand repatriation amount, it is treated as if it still held the property at the end of the transfer period. accounting period associated person attributed repatriation CFC New Zealand repatriation amount New Zealand resident return of income 1994 No 164 s CG 8(4), (10)
CD 41: Unrepatriated income balance
Formula
1: The unrepatriated income balance of a CFC for an accounting period is calculated using the formula— shareholders' funds – available subscribed capital – previous New Zealand repatriation amounts. Definition of items in formula
2: In the formula,—
a: shareholders' funds
b: available subscribed capital
i: a bonus issue by the CFC derived by a person who is not a resident of New Zealand; or
ii: direct or indirect reinvestment of a distribution by the CFC after 2 July 1992 to a person not resident in New Zealand:
c: previous New Zealand
i: New Zealand repatriation amount of the CFC for a previous accounting period, reduced under any amended assessment under section CD 39(12)
ii: specified repatriation amount of the CFC for a previous accounting period ending after 2 July 1992 and before the 2003-04 tax year calculated under section CG 8 of the Income Tax Act 1994 section CF 2(17) of the Income Tax Act 1994 Positive amounts
3: The unrepatriated income balance can never be negative. accounting period assessment available subscribed capital bonus issue CFC generally accepted accounting practice New Zealand repatriation amount resident in New Zealand resident of New Zealand tax year 1994 No 164 s CG 8(11) Prevention of double taxation
CD 42: Prevention of double taxation of share cancellation dividends
Application of this section
1: This section applies if—
a: a person derives an amount from the cancellation of a share in a company; and
b: the amount is income of the person under 1 of the following provisions ( other rules
i: section CB 1
ii: section CB 2
iii: section CB 3
iv: section CB 4
v: any other provision of this Act outside this subpart. Treatment of amount
2: For the purposes of the other rules, the amount derived by the person from the company is treated as if it were reduced (but not below zero) by the amount of any dividend derived by the person in relation to the cancellation (excluding any attached imputation credit or dividend withholding payment credit). Non-taxable dividends
3: Subsection (2) does not apply to the extent to which—
a: the dividend is exempt income of the person under sections CW 9 to CW 11
b: section NH 1 Subsection (3)(b): formula
4: For the purposes of subsection (3)(b), the extent to which a person is required to deduct a dividend withholding payment is calculated using the formula— Definition of items in formula
5: In the formula,—
a: dividend withholding payment section NH 2(1)
b: tax rate schedule 1, part A, clause 5 Relationship of dividend exclusions to other provisions
6: Subject to subsection (2), the amount derived by the person from the company may be income of the person despite the fact that the amount is excluded from being a dividend by any of sections CD 14 to CD 19 Relationship with section FC 3
7: This section is overridden by section FC 3 amount cancellation company dividend dividend withholding payment dividend withholding payment credit exempt income imputation credit income income tax share tax year 1994 No 164 s CF 2(15) Returning share transfers This heading was inserted 1 July 2006 section 14 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CD 43: Replacement payments
The amount of a replacement payment derived by a person under a returning share transfer is income of the person when it is paid to the person. income pay replacement payment returning share transfer Section CD 43 inserted 1 July 2006 section 14 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CE: Employee or contractor income
Contents
Employment income
CE 1: Amounts derived in connection with employment
Income
1: The following amounts derived by a person in connection with their employment or service are income of the person:
a: salary or wages or an allowance, bonus, extra pay, or gratuity :
b: expenditure on account of an employee that is expenditure on account of the person :
c:
d: a benefit received under a share purchase agreement :
e: directors' fees :
f: compensation for loss of employment or service :
g: any other benefit in money. Benefit of accommodation
1B: The market value of the following benefits provided to a person is income of the person if the benefit is provided in relation to an office or position held by them:
a: the provision of accommodation:
b: the provision of an accommodation allowance instead of accommodation. Meaning of accommodation
2: For the purposes of this section and section CX 24 accommodation accommodation amount expenditure on account of an employee extra pay income salary or wages share purchase agreement 1994 No 164 ss CH 3, OB 1 monetary remuneration Section CE 1(1) heading inserted 6 October 2009 section 741(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 1(1)(c) repealed 21 December 2010 section 164(1) Taxation (GST and Remedial Matters) Act 2010 Section CE 1(1B) heading inserted 21 December 2010 section 164(2) Taxation (GST and Remedial Matters) Act 2010 Section CE 1(1B) inserted 21 December 2010 section 164(2) Taxation (GST and Remedial Matters) Act 2010 Section CE 1(2) heading added 6 October 2009 section 741(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 1(2) added 6 October 2009 section 741(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Paragraphs (a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Section CE 1 list of defined terms accommodation inserted 6 October 2009 section 741(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CE 2: Value and timing of benefits under share purchase agreements
What this section does
1: This section determines the value of a benefit that an employee receives under a share purchase agreement and the allocation of the benefit to a particular tax year. If restrictions apply to the disposal of shares received under a share purchase agreement, section CE 3 If employees acquire shares
2: If an employee acquires shares under a share purchase agreement, the value of the benefit to the employee is the amount by which the value of the shares when they were acquired is more than the amount paid or payable for them. The employee receives the benefit in the tax year in which they acquire the shares. If employees dispose of rights to non-associates
3: If an employee disposes of their rights under a share purchase agreement to a person who is not associated with them, the value of the benefit is the consideration for the disposal of the rights. The employee receives the benefit in the tax year in which they dispose of the rights. If associates acquire shares
4: If, following 1 or more transactions between associated persons, an associated person acquires the shares under a share purchase agreement, the value of the benefit is the difference between the value of the shares on the date of acquisition by the associated person and the amount paid or payable for them. If the difference is negative, the value is zero. The employee receives the benefit in the tax year in which the associated person acquires the shares. If associates dispose of rights to non-associates
5: If, following 1 or more transactions between associated persons, a person who is not an associated person acquires the rights under a share purchase agreement, the value of the benefit is the consideration paid for that disposal. The employee receives the benefit in the tax year in which the last associated person disposes of the rights. If shares transferred when employees end employment or die
6: The value of the benefit is zero if a share purchase agreement provides unconditionally that, when the employee ends their employment or service or dies, the shares must be transferred to the employer or to the person from whom they were acquired, either without consideration or for a consideration no more than that paid by the employee. If benefits arise under approved schemes
7: The value of the benefit is zero if the benefit arises under a share purchase scheme. Disposal of rights under share purchase option
8: For the purposes of subsection (3), a disposal of rights under a share purchase agreement includes the cancellation of a share option in return for a cash payment. Reduction of value of benefit in circumstances relating to non-resident
9: The value of a benefit arising from a period of employment is reduced, from the value that the benefit would have in the absence of this subsection,—
a: if, when the employee acquires the shares under the share purchase agreement or disposes of the rights under the share purchase agreement, the employee is a transitional resident; and
b: by an amount given by the following formula: amount associated person employee employer non-resident share share purchase agreement share purchase scheme tax year transitional resident 1994 No 164 s CH 2(2), (3) Subsection (8) inserted 1 April 2006 section 15(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (9) inserted 1 October 2005 section 15(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 15(5) and (6) The list of defined terms was amended 1 October 2005 section 15(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting the word non-resident See section 15(5) and (6) The list of defined terms was amended 1 October 2005 section 15(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 15(5) and (6)
CE 3: Restrictions on disposal of shares under share purchase agreements
Effect of restrictions
1: When the benefit to an employee under a share purchase agreement is being valued, a restriction in the agreement on the disposal of the shares is taken into account only if the restriction is of a kind described in subsection (2) or (3). First restriction
2: The first restriction is one that applies for a period that ends—
a: at least 8 years after the end of the tax year in which the employee receives the benefit; or
b: with the date of the employee's death. Second restriction
3: The second restriction is one that—
a: applies for a period that ends—
i: at least 8 years after the end of the tax year in which the employee receives the benefit; or
ii: with the date of the employee's death; and
b: provides that an employee who ends their employment or service before the end of the period must unconditionally transfer some or all of the shares to the employer or to the person from whom the employee acquired them, either without consideration or for a consideration that is no more than that paid by the employee. Transfers of shares under relationship agreements
4: If a share purchase agreement does not restrict an employee from transferring the shares under a relationship agreement employee employer matrimonial agreement share share purchase agreement tax year year 1994 No 164 s CH 2(3)(a), (b) The heading to subsection (4) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreements matrimonial agreements Subsection (4) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreements matrimonial agreements
CE 4: Adjustments to value of benefits under share purchase agreements
The Commissioner may at any time adjust the previously determined value of a benefit under a share purchase agreement if the value is reduced because—
a: a restriction on disposal exists when the employee disposes of the shares that was not taken into account in valuing the benefit; or
b: further consideration is required for the shares; or
c: the shares are reacquired either without consideration or for a consideration no more than that paid by the employee. Commissioner employee share share purchase agreement 1994 No 164 s CH 2(4) Definitions
CE 5: Meaning of expenditure on account of an employee
Meaning
1: Expenditure on account of an employee Inclusion
2: Expenditure on account of an employee spouse, civil union partner or de facto partner Exclusions
3: Expenditure on account of an employee
a: expenditure for the benefit of an employee, or a payment made to reimburse an employee, under section CW 13 :
b: an allowance for additional transport costs under section CW 14 :
bb: an amount paid under section CW 13B section CW 13C meals and certain other allowances)
c: expenses that an employee pays in connection with their employment or service to the extent to which the expenditure is their employer's liability, if the employee undertakes to discharge the liability in consideration of the making of the payment by the employer :
d: expenditure on an employment-related loan to which the FBT rules apply :
e: an employer's superannuation contribution :
f: a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner
i: the premium cannot be refunded to, or converted to cash by, the employee or an associated person; and
ii: the only benefits that are payable under the policy are those payable on the death of the employee (or their spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner :
g: a premium that an employer that is a close company pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner subpart CD :
h: a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner :
i: a premium that an employer pays on a life insurance policy taken out for the benefit of the employee (or their spouse, civil union partner or de facto partner scheme:
j: a premium for income protection insurance that an employer is liable to pay or make a contribution towards for the benefit of an employee. additional transport costs associated person close company dividend employee employer employer's superannuation contribution employment-related loan expenditure on account of an employee FBT rules life insurance policy premium superannuation category 1 scheme superannuation category 2 scheme superannuation category 3 scheme trustee 1994 No 164 s OB 1 expenditure on account of an employee specified fund Section CE 5(1) replaced 2 November 2012 section 241(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (2) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(a) (h) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section CE 5(3)(bb) inserted 6 October 2009 section 742 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CE 5(3)(bb) amended 7 December 2009 section 150 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Subsection (3)(f) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(f) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(f)(ii) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(f)(ii) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(g) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(g) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(h) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(h) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(i) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(i) amended 1 April 2006 section 16(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting scheme: scheme. Subsection (3)(i) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(j) inserted 1 April 2006 section 16(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 1 April 2006 section 16(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting contribution
CE 6: Meaning of share
: when share acquired Meaning
1: In sections CE 2 to CE 4 CE 7 share Use in sections CE 2 to CE 4 and CE 7
2: For the purposes of sections CE 2 to CE 4 CE 7
a: shares are treated as having been acquired on the date on which the right or option to buy them is exercised; and
b: if shares or rights are acquired or transferred under an agreement by a trustee for the benefit of an employee to whom section CE 2 convertible note employee share trustee 1994 No 164 s CH 2(5), (6), (8) The heading to section CE 6 amended 1 April 2005 section 6 Taxation (Savings Investment and Miscellaneous Provisions Act 2006 by adding : when share acquired
CE 7: Meaning of share purchase agreement
In sections CE 1 to CE 4 share purchase agreement company employee share share purchase agreement 1994 No 164 s CH 2(1), (7) Attributed income
CE 8: Attributed income from personal services
When this section applies
1: This section applies when, under sections GC 14B to GC 14E Income
2: The amount attributed is income of the person to whom it is attributed. Timing of income
3: The amount is allocated to the income year in which it is attributed. amount income income year 1994 No 164 ss CD 7, EN 8 Restrictive covenants and exit inducement payments
CE 9: Restrictive covenants
When this section applies
1: This section applies when—
a: a person ( person A
b: a person, whether or not person A, derives an amount for the undertaking. Income
2: The amount is income of person A. Exclusion
3: Subsection (2) does not apply if—
a: person A derives the amount because person A or an associated person sells a business to another person ( person B
b: person A or the associated person and person B agree in writing that the transaction is the sale of a business; and
c: person A derives the amount as consideration for an undertaking by person A not to provide goods or services in competition with the goods or services that person B provides from the business; and
d: person A does not provide services to person B after the sale of the business, other than temporarily providing services incidental to the sale. Sale of all shares in company
4: For the purposes of subsection (3),—
a: the sale of a business includes the sale of shares in a company, but only if the sale is of all the shares in the company and the company—
i: carries on a business; or
ii: directly or indirectly wholly owns another company that carries on a business; and
b: in that case, the words person B Sale of part of business
5: For the purposes of subsection (3), the sale of a business includes the sale of part of a business, if the part can be operated separately. amount associated person business company employee income share 1994 No 164 s CHA 1
CE 10: Exit inducements
An amount is income of a person if they derive it for—
a: the loss of a vocation; or
b: the loss of a position; or
c: leaving a position; or
d: loss of status. amount income 1994 No 164 s CHA 2 Income protection insurance This heading was inserted 1 April 2006 section 17 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CE 11: Proceeds from claims under policies of income protection insurance
When this section applies
1: This section applies if an employer is liable to pay, or contribute to the payment of, a premium under a policy of income protection insurance for the benefit of a person who is their employee. Income
2: An amount that is or would be derived under the policy is income of the person. amount employee employer income pay Section CE 11 inserted 1 April 2006 section 17 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Tax credits Heading added 1 July 2008 section 14 Taxation (Business Taxation and Remedial Matters) Act 2007
CE 12: Tax credits under section LD 1B added to provider's income
When this section applies
1: This section applies when a person is allowed under section LD 1B Income
2: An amount equal to the credit is income of the person in the income year, if the amount is not income under any other provision. income income year payment Section CE 12 added 1 July 2008 section 14 Taxation (Business Taxation and Remedial Matters) Act 2007
CF: Income from living allowances, compensation, and government grants
Contents
CF 1: Benefits, pensions, compensation, and government grants
Income
1: The following amounts are income:
a: an accident compensation payment :
b: an education grant :
c: an income-tested benefit :
d: a living alone payment :
e: a New Zealand superannuation payment :
f: a parental leave payment paid under Part 7A Parental Leave and Employment Protection Act 1987 :
g: a pension :
h: a veteran's pension. Some definitions
2: In this section,— accident compensation payment
a: a payment under the Accident Compensation Act 1982 Social Security Act 1964 :
b: a payment under section 80(4) of the Accident Compensation Act 1982 Social Security Act 1964 :
c: a payment of any of the following kinds under the Accident Rehabilitation and Compensation Insurance Act 1992
i: a vocational rehabilitation allowance under section 25
ii: compensation for loss of earnings under any of sections 38, 39, and 43
iii: compensation for loss of potential earning capacity under section 45 or 46
iv: weekly compensation under any of sections 58, 59, and 60
v: continued compensation under section 138
d: a payment under the Accident Insurance Act 1998 :
e: a payment under a policy of personal accident or sickness insurance under section 188(1)(a) of the Accident Insurance Act 1998 section 7 of the Accident Insurance Amendment Act 2000 :
f: a payment under the Injury Prevention, Rehabilitation, and Compensation Act 2001 section 248
g: a payment under section 81(1)(b) of the Injury Prevention, Rehabilitation, and Compensation Act 2001 schedule 1, clause 12 of that Act education grant section 303 pension
a: includes a gratuitous payment made to a person in return for services that the person (or their parent, child, spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner
b: does not include a payment made to the person because of, and within 1 year after, the death of that parent, child, spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner pension: this definition was amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse pension: this definition was amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner accident compensation payment amount chief executive of the department currently responsible for administering the Social Security Act 1964 education grant income income-tested benefit living alone payment New Zealand superannuation pension personal service rehabilitation payment veteran's pension year 1994 No 164 s CC 1 Subsection (1)(a) (g) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and accident compensation payment: paragraphs (a) (b) (d) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section CF 1(2) accident compensation payment substituted 6 October 2009 section 743 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CF 1(2) accident compensation payment substituted 6 October 2009 section 743 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CF 1 list of defined terms personal service rehabilitation payment inserted 1 July 2008 section 15(2) Taxation (Business Taxation and Remedial Matters) Act 2007
CF 2: Remission of specified suspensory loans
When this section applies
1: This section applies when a public authority—
a: grants a loan to a person for a business that the person carries on; and
b: designates the loan as a specified suspensory loan. Income
2: An amount remitted on the specified suspensory loan is income of the person. Timing of income
3: The amount is allocated in equal parts to the income year of remission and the following 2 income years. However, the person may choose to allocate some or all of the amount in the following 2 income years to a previous income year that is 1 of the 3 income years. Business ceasing
4: If the person ceases to carry on the business for which the specified suspensory loan was granted, an amount remitted that is allocated to a later income year is allocated to the income year in which the person ceases business. amount business income income year public authority 1994 No 164 s DC 2
CF 3: Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014
When this section applies
1: This section applies when a person—
a: derives an amount, other than a pension or annuity, as a withdrawal from a foreign superannuation scheme in the period beginning with the beginning of the 2005–06 income year and ending with the end of the 2007–08 income year; and
b: does not include all or part of the withdrawal (the omitted withdrawal
c: is not assessed before 1 April 2014 for income included in the omitted withdrawal; and
d: chooses to include in a return of income for an income year (the return year Law applying at time of withdrawal overridden
2: In the circumstances described in subsection (1), the provisions of this Act applying to the taxation of the omitted withdrawal when the person derived the omitted withdrawal, and of the person’s interest in the foreign superannuation scheme for the period ending by 31 March 2014 in which the person had the interest, are overridden by section CZ 21B (Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014) of the Income Tax Act 2007. amount assessable income income income year return of income superannuation fund Section CF 3 inserted 1 April 2014 section 141 Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014
CF 4: Person deriving pension from foreign superannuation scheme and returning as income before 1 April 2014
When this section applies
1: This section applies when a person has, before 1 April 2014, an interest in a foreign superannuation scheme and—
a: the interest would, in the absence of this provision, be an attributing interest; and
b: on and after 1 April 2014 the interest is not an attributing interest; and
c: the person—
i: does not derive from the foreign superannuation scheme, in the period beginning with 1 January 2000 and ending before 1 April 2014, a payment that is a withdrawal:
ii: derives payments, each of which is a pension, from the foreign superannuation scheme in the period beginning with 1 January 2000 and ending before 1 April 2014 and includes each payment in a return of income, for the income year of the payment, that is received by the Commissioner by the due date for the return of income. No FIF income or FIF loss from interest
2: The person is treated as having no FIF income or FIF loss from the interest for the period beginning with the start of the 2005–06 income year and ending with the finish of the 2007–08 income year. attributing interest Commissioner FIF income FIF loss foreign superannuation scheme income year pension return of income Section CF 4 inserted 24 February 2016 section 284 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
CG: Recoveries
Contents
CG 1: Amount of depreciation recovery income
An amount of depreciation recovery income that a person has is income of the person. amount depreciation recovery income income
CG 2: Remitted amounts
When this section applies
1: This section applies when—
a: a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
b: the person's liability for the amount is later remitted or cancelled, wholly or partly; and
c: the remission or cancellation is not a dividend; and
d: the person is not required to calculate a base price adjustment by section EW 29 Income
2: The amount to which the remission or cancellation applies is income of the person. Timing of income
3: The income is allocated to the income year in which the remission or cancellation occurs. How remission or cancellation occurs
4: Remission or cancellation occurs, for the purposes of this section, in 1 of the following ways:
a: a liability is remitted to the extent to which the person is discharged from it without fully adequate consideration in money or money's worth :
b: a liability is cancelled to the extent to which the person is released from it under the Insolvency Act 2006 Companies Act 1993 :
c: a liability is cancelled to the extent to which the person is released from it by a deed or agreement of composition with the person's creditors :
d: a liability is cancelled to the extent to which it is irrecoverable or unenforceable through lapse of time. amount deduction dividend income income year New Zealand 1994 No 164 ss CE 4(1), (2), IE 1(4)(d) Subsection (4)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Section CG 2(4)(b) amended 3 December 2007 section 445 Insolvency Act 2006
CG 3: Bad debt repayment
An amount received by a person for a bad debt for which the person has been allowed a deduction is income of the person. amount deduction income 1994 No 164 s CE 1(1)(d)
CG 4: Recovered expenditure or loss
When this section applies
1: This section applies when—
a: a person is allowed a deduction for expenditure or loss; and
b: the person recovers some or all of the expenditure or loss, whether through insurance, indemnity, or otherwise; and
c: the amount recovered, to the extent of the deduction, is not income of the person under any other provision of this Act. Income
2: The amount recovered is, to the extent of the deduction, income of the person. Timing of income
3: The income is allocated to the income year in which the amount is recovered. amount deduction income year loss 1994 No 164 ss DJ 1(c), DJ 5(2), DJ 7, DJ 8(1), DL 1(6), (12), DL 4 The list of defined terms was amended 1 October 2005 section 10 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting , loss income year
CG 5: Recoveries or receipts by employers from superannuation schemes
When this section applies
1: This section applies when—
a: an employer makes an employer's superannuation contribution to a superannuation scheme for their employee's benefit; and
b: the employer is allowed a deduction for the contribution; and
c: the employer—
i: recovers the contribution from the superannuation scheme; or
ii: receives a benefit in money or money's worth from the superannuation scheme, other than an amount paid to the employer under the scheme in return for contributions made by or for the employer in a personal capacity. Income
2: The amount recovered or received is, to the extent of the deduction, income of the employer. Timing of income
3: The income is allocated to the income year in which the amount is recovered or received. amount deduction employee employer employer's superannuation contribution income income year superannuation scheme 1994 No 164 s DF 3(3), (4)
CG 6: Receipts from insurance, indemnity, or compensation for trading stock
When this section applies
1: This section applies when a person receives an amount of insurance, indemnity, or compensation for the loss or destruction of, or damage to,—
a: trading stock :
b: anything acquired, manufactured, or produced for a purpose ancillary to a business of manufacturing or producing goods for sale or exchange. Income
2: The part of the insurance, indemnity, or compensation that is attributable to the asset is income if—
a: the person is allowed a deduction in a tax year for the cost of the asset; and
b: the deduction is not for an amount of depreciation loss. Timing of income
3: The income is allocated to the income year in which the amount is received. amount business deduction depreciation loss income income year tax year trading stock 1994 No 164 s EE 19 Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CH: Adjustments
Contents
Matching rules: revenue account property, prepayments, and deferred payments
CH 1: Adjustment for closing values of trading stock, livestock, and excepted financial arrangements
When this section applies
1: This section applies when a person has some or all of the following at the end of an income year:
a: trading stock valued under subpart EB :
b: livestock valued under subpart EC :
c: excepted financial arrangements that are revenue account property valued under subpart ED arrangements):
d: a share supplier's share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c). Income: closing value of trading stock
2: The value of the trading stock, calculated under section EB 3 Income: closing value of livestock
3: The value of the livestock, calculated under section EC 2 Income: closing value of excepted financial arrangements
4: The value of the excepted financial arrangements or share-lending right, section ED 1 excepted financial arrangement income income year original share revenue account property share-lending right share supplier trading stock 1994 No 164 s EE 2(4) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (1)(c) amended 1 July 2006 section 20(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting arrangements): arrangements). Subsection (1)(d) inserted 1 July 2006 section 20(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (4) amended 1 July 2006 section 20(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting arrangements or share-lending right, arrangements, The list of defined terms was amended 1 July 2006 section 20(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting original share The list of defined terms was amended 1 July 2006 section 20(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share-lending right The list of defined terms was amended 1 July 2006 section 20(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share supplier
CH 2: Adjustment for prepayments
When this section applies
1: This section applies when a person has, under section EA 3 Income
2: The unexpired amount is income of the person in the income year. amount income income year 1994 No 164 s EF 1(1)(b)
CH 3: Adjustment for deferred payment of employment income
When this section applies
1: This section applies when a person has, under section EA 4 Income
2: The unpaid amount is income of the person in the income year. amount employment income income income year 1994 No 164 s EF 1(1)(b) Change to accounting practice
CH 4: Adjustment for change to accounting practice
When this section applies
1: This section applies when a person has, under section EG 2(2)(a) or (3)(a) Income
2: An amount quantified and allocated under section EG 2(2)(a) or (3)(a) amount income 1994 No 164 s EC 1 GST
CH 5: Adjustment for GST
Income
1: An amount calculated under sections 21F 21G Exclusion
2: This section does not apply to an amount that relates to the application of a capital asset—
a: for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies :
b: other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies :
c: other than for the purpose of deriving income. Timing of income
3: The income is allocated to the income year in which the amount is calculated. amount income income year taxable supply 1994 No 164 s ED 4(3) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CP: Income from portfolio investment entities
Subpart CP inserted 1 October 2007 section 7 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CP 1: Portfolio investor allocated income
The amount of portfolio investor allocated income of a person who is an investor in a portfolio tax rate entity is income of the person in the income year that includes the end of the entity's income year for which the person is allocated the amount. income income year investor portfolio investor allocated income portfolio tax rate entity Section CP 1 substituted 1 October 2007 section 5 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CP 1 inserted 1 October 2007 section 7 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CQ: Attributed income from foreign equity
Contents
Attributed controlled foreign company income
CQ 1: Attributed controlled foreign company income
Attributed CFC income of a person is income. attributed CFC income income 1994 No 164 s CG 1(a)
CQ 2: When attributed CFC income arises
General rule
1: A person has attributed CFC income
a: the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7
b: the accounting period ends during the income year; and
c: the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13
d: at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
e: the person's income interest is 10% or more for the part of the accounting period during which the person is a New Zealand resident who is not a transitional resident sections EX 14 to EX 17
f: either—
i: the CFC has branch equivalent income for the accounting period under section EX 21
ii: the special rule in section EX 19
g: the CFC is not an unqualified grey list CFC for the accounting period, under section EX 22 Special rule: branch equivalent FIF with taxable distribution
2: A person also has attributed CFC income section EX 43(5)
a: the person has an attributing interest in a FIF; and
b: the person is using the branch equivalent method to calculate FIF income; and
c: the FIF receives a taxable distribution from a non-qualifying trust. Treated as derived while person New Zealand resident
3: Attributed CFC income of a person who has ceased to be a New Zealand resident is treated as being derived while the person was a New Zealand resident. Dividend income can arise
4: A person with an income interest of 10% or more in a CFC can also have dividend income under section CD 13 sections CD 34 to CD 41 accounting period attributed CFC income attributed repatriation attributing interest branch equivalent income branch equivalent method CFC distribution dividend FIF FIF income foreign company grey list income income interest income year New Zealand resident non-qualifying trust taxable distribution transitional resident 1994 No 164 ss CG 6(1)(a), CG 7(1), (6), CG 13(1), CG 21(2)(a) Subsection (1)(d) substituted 1 October 2005 section 21(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 21(4) and (5) Subsection (1)(e) amended 1 October 2005 section 170 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting EX 17 EX 16 Subsection (1)(e) amended 1 October 2005 section 21(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting part of the accounting period during which the person is a New Zealand resident who is not a transitional resident accounting period See section 21(4) and (5) The list of defined terms was amended 1 October 2005 section 21(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 21(4) and (5)
CQ 3: Calculation of attributed CFC income
The amount of attributed CFC income is calculated under the rules in sections EX 18 to EX 20 amount attributed CFC income Foreign investment fund income
CQ 4: Foreign investment fund income
FIF income of a person is income. FIF income income 1994 No 164 s CG 1(b)
CQ 5: When FIF income arises
General rule
1: A person has FIF income
a: at any time in the year, the person has—
i: rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 4, part A
ii: rights under a life insurance policy issued by a non-resident; and
b: at that time, the rights are an attributing interest in a FIF under sections EX 30 EX 31
c: at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
i: the CFC rules exemption in section EX 32 :
ii: the grey list exemption in section EX 33 (Exemptions: direct income interests in FIF in grey list country) :
iib: the exemptions limited by income years in section EX 33B
iic: the exemption for shares in a listed Australian company in section EX 33C
iid: the exemption for units in certain Australian unit trusts in section EX 33D
iie: the Australian superannuation fund exemption in section EX 33E
iii: the foreign exchange control exemption in section EX 34 :
iv: the exemption for a non-resident or transitional resident in section EX 35
v: the immigrant's accrued superannuation entitlement exemption in section EX 36 :
vi: the non-resident's annuity or pension exemption in section EX 37
d: if the person is a natural person and not acting as a trustee, the person holds, at any time in the year
i: if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56
ii: if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section DN 6(1)(d)(ii)
db: if the person is acting as a trustee of a trust that meets the requirements of subsection (5), the person holds , at any time in the year,
i: if subparagraph (ii) section EX 56
ii: if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section DN 6(1)(d)(ii)
e: at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
f: under the relevant calculation method chosen by the person, an income amount is calculated for the year under sections EX 38 to EX 45B EX 48 EX 49 Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
1B: If a person is treated under section EX 51(5) EX 53 EX 54B Look-through calculation methods
2: Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
a: FIF income arises in the income year only if the relevant accounting period of the FIF ends during the year; and
b: the tests in subsection (1)(a), (b), (c), and (e) are applied on the basis that references in subsection (1)(a), (b), (c), and (e) to any time in the year are read as references to any time in the relevant accounting period. Special rule: CFC with FIF interest
3: A person with an income interest of 10% or more in a CFC can also have FIF income section EX 46 section EX 22 Treated as derived while person New Zealand resident
4: FIF income of a person who has ceased to be a New Zealand resident is treated as being derived while the person was a New Zealand resident. When application of subsection (1) affected by subsection (1)(db)
5: Subsection (1)(db) applies to the trustee of a trust for an income year if—
a: the settlor of the trust—
i: is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust under section OD 7
ii: is required by a court order to pay damages or compensation to the beneficiary:
b: the settlor of the trust—
i: is the estate of a deceased person; and
ii: is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
c: the settlor of the trust is the Accident Compensation Corporation:
d: the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person's death. accounting period accounting profits method amount associated person attributing interest branch equivalent method calculation method CFC FIF FIF income foreign company foreign superannuation scheme grey list income income interest income year life insurance policy New Zealand resident non-resident relative transitional resident trustee 1994 No 164 ss CG 7(5), CG 15(1), (2), CG 16(2), (5) Subsection (1)(c)(i) (v) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (1)(c)(ii) amended 18 December 2006 section 8(1)(a) Taxation (Savings Investment and Miscellaneous Provisions Act 2006 by substituting (Exemptions: direct income interests in FIF in grey list country) (Grey list exemption) Subsection (1)(c)(iib) to (iie) inserted 18 December 2006 section 8(1)(b) Taxation (Savings Investment and Miscellaneous Provisions Act 2006 Subsection (1)(c)(iv) substituted 1 October 2005 section 22(1)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 22(3) and (4) Subsection (1)(d) substituted 1 April 2007 section 8(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 8(7) Section CQ 5(1)(d) amended 19 December 2007 section 16(1)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1)(db) inserted 1 April 2007 section 8(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 8(7) Section CQ 5(1)(db) amended 19 December 2007 section 16(1)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1)(e) substituted 1 October 2005 section 22(1)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 22(3) and (4) Subsection (1)(f) substituted 1 April 2007 section 8(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 8(7) Section CQ 5(1)(f) amended 19 December 2007 section 16(1)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CQ 5(1B) heading inserted 19 December 2007 section 16(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CQ 5(1B) inserted 19 December 2007 section 16(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (5) inserted 1 April 2007 section 8(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 8(7) The list of defined terms was amended 1 October 2005 section 22(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 22(3) and (4) The list of defined terms was amended 1 April 2007 section 8(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting associated person relative
CQ 6: Calculation of FIF income
The amount of any FIF income is calculated, using the relevant calculation method, under sections EX 38 amount calculation method FIF income Section CQ 6 amended 1 October 2005 section 171 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting EX 38 EX 42
CR: Income from life insurance
Contents
CR 1: Income of life insurer
Income: premium loading
1: The premium loading that a life insurer has in an income year is income of the life insurer in the income year. Income: mortality profit
2: The mortality profit that a life insurer has in an income year is income of the life insurer in the income year. Income: discontinuance profit
3: The discontinuance profit that a life insurer has in an income year is income of the life insurer in the income year. Income: policyholder income
4: The policyholder income that a life insurer has in an income year is income of the life insurer in the income year. Income: disposal amount
5: An amount that a life insurer derives from disposing of any property of their life insurance business is income of the life insurer. amount business discontinuance profit income income year life insurance life insurer mortality profit policyholder income premium loading property 1994 No 164 ss CM 5(1), CM 6(1), CM 7(1), CM 10, CM 15(3)
CR 2: Amount of income of life insurer
Premium loading
1: The premium loading that a life insurer has in an income year is quantified under sections EY 14 to EY 23 Mortality profit
2: The mortality profit that a life insurer has in an income year is quantified under sections EY 24 to EY 33 Discontinuance profit
3: The discontinuance profit that a life insurer has in an income year is quantified under sections EY 34 to EY 40 Policyholder income
4: The policyholder income that a life insurer has in an income year is quantified under sections EY 41 to EY 44 Disposal of property
5: The amount of income that a life insurer derives from disposing of any property of their life insurance business is quantified under section EY 45 amount business discontinuance profit income income year life insurance life insurer mortality profit policyholder income premium loading property
CR 3: Income for general insurance outstanding claims reserve
When this section applies
1: This section applies for—
a: an insurer who uses IFRS 4, Appendix D for general insurance contracts; and
b: general insurance contracts, excluding contracts having premiums to which section FC 14 When this section does not apply
1B: This section does not apply for contracts that section DZ 10 Formula for insurer's OCR income
2: For an income year (the current year The following table is small in size and contains a formula. opening outstanding claims reserve Definition of items in formula
3: In the formula,—
a: opening outstanding claims reserve
i: the amount of the insurer’s closing outstanding claims reserve for the income year before the current year (the prior year
ii: the amount of the insurer's reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer:
b: closing outstanding claims reserve amount general insurance contract IFRS 4 income income year insurer life insurer outstanding claims reserve Section CR 3 added 6 October 2009 section 744(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CR 3(1B) heading inserted 17 July 2013 section 153(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section CR 3(1B) inserted 17 July 2013 section 153(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CS: Superannuation funds
Contents
Withdrawals
CS 1: Withdrawals
When this section applies
1: This section applies when a withdrawal is made from a superannuation fund if—
a: the fund is—
i: a fund to which the member's employer has made specified superannuation contributions for the member's benefit; or
ii: a fund that has received a transfer from another superannuation fund for the member; and
b: the withdrawal is related to the member's membership of the fund; and
c: the application of this section to the withdrawal is not excluded by any of sections CS 2 to CS 9 Income of superannuation fund from withdrawal
2: The superannuation fund derives from the withdrawal an amount of assessable income that is given by the following formula: Definition of items in formula
3: The items in the formula are defined in subsections (4) to (5) Withdrawal
4: Withdrawal is the total of—
a: the amount of money that is withdrawn from the superannuation fund:
b: the market value of the part of the withdrawal that is not an amount of money, on the date of the withdrawal. Other contributions
4B: Other contributions Tax rate
5: Tax rate schedule 1, part A, clause 4 Reduction of income
6: The superannuation fund may reduce the income by 25% for each tax year to which both the following apply:
a: the tax year is 1 of the 4 tax years before the tax year in which the withdrawal is made; and
b: in the tax year, the total of the member's taxable income and the employer's specified superannuation contributions to the fund for the member's benefit is less than $60,000. Timing of income
7: The income is allocated as follows:
a: if the superannuation fund is wound up or becomes a foreign superannuation scheme, the income is allocated to the tax year in which the withdrawal is made :
b: in any other case, the income is allocated to the tax year following the tax year in which the withdrawal is made. Application of Tax Administration Act 1994
8: Sections 32A to 32C amount employer employer's contributions to superannuation savings foreign superannuation scheme income income tax member specified superannuation contribution superannuation fund tax year taxable income trustee withdrawal 1994 No 164 ss CL 4, EN 6 Subsection (2) substituted 1 October 2005 section 172(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (2) amended 18 December 2006 section 9(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting withdrawal withdrawn Subsection (3) amended 1 October 2005 section 172(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting subsections (4) to (5) subsections (4) and (5) Subsection (4) substituted 1 October 2005 section 172(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (4B) inserted 1 October 2005 section 172(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (7)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Exclusions
CS 2: Exclusions of withdrawals of various kinds
Withdrawal of member's contributions
1: Section CS 1 Withdrawal of employer's contributions
2: Section CS 1
a: the employer increases the level of the employer's specified superannuation contributions on and after 1 April 2000, as compared with the level in the last pay period ending before 1 April 2000; and
b: the employer does not come within any of subsection (3)(a) to (c). Increase not treated as such
3: An employer who increases the level of specified superannuation contributions is treated as not doing so—
a: to the extent to which the employer increases the level by making additional specified superannuation contributions for the member's benefit to compensate for underpaying specified superannuation contributions for the member's benefit; or
b: if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
c: if the level of specified superannuation contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000. Superannuation fund administration costs
4: Section CS 1 Withdrawals from KiwiSaver schemes for purpose of purchase of first home
4B: Life, health, sickness, or accident insurance
5: Section CS 1
a: a withdrawal for the payment of premiums for life insurance, health insurance, sickness insurance, or accident insurance held by or for a member of the superannuation fund, whether the insurance is group insurance or individual insurance; or
b: a withdrawal to pay an amount claimed under insurance described in paragraph (a). Transfer between funds
6: Section CS 1 Transfer from wound-up fund
7: Section CS 1 Amount in fund on certain dates
8: Section CS 1
a: on the fund's balance date that precedes 1 April 2000, if a trustee of the fund calculates the amount in the fund on the balance date; or
b: at the close of business on 31 March 2000, in any other case. Interpretation of subsection (8)
9: For the purposes of subsection (8),—
a: the amount that is in the superannuation fund is calculated according to market value :
b: an amount in a superannuation fund includes specified superannuation contributions received after the fund's balance date that precedes 1 April 2000 or 31 March 2000, as applicable, if the contributions relate to a pay period ending on or before the fund's balance date or 31 March 2000, as applicable. Application of Tax Administration Act 1994
10: Section 32C amount employer employer's contributions to superannuation savings ife insurance member member's contribution pay pay period premium specified superannuation contribution superannuation fund trustee withdrawal 1994 No 164 ss CL 3, CL 21 Section CS 2(4B) heading repealed 19 December 2007 section 17 Taxation (Business Taxation and Remedial Matters) Act 2007 Section CS 2(4B) repealed 19 December 2007 section 17 Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (4B) inserted 1 December 2006 section 231 KiwiSaver Act 2006 See section 232 See clause 2(2) KiwiSaver Act Commencement Order 2006 Subsection (9)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CS 3: Exclusion of withdrawal on grounds of hardship
Significant financial hardship
1: Section CS 1 Meaning of significant financial hardship
2: In this section, significant financial hardship
a: a member's inability to meet minimum living expenses; or
b: a member's inability to carry out their usual occupation because of their temporary or permanent illness, injury, or disability; or
c: a member's inability to meet mortgage repayments on their principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence; or
d: the cost of modifying a residence to meet special needs arising from a disability of a member or a member's dependant; or
e: the cost of medical treatment for an illness or injury of a member or a member's dependant; or
f: the cost of palliative care for a member or a member's dependant; or
g: the cost of a funeral for a deceased member or a member's deceased dependant. member mortgage significant financial hardship withdrawal 1994 No 164 s CL 5
CS 4: Exclusion of withdrawal to settle division of relationship property
Section CS 1 Property (Relationships) Act 1976 sections 2A(2) 2AB(2) 2D(4) Section CS 4 substituted 26 April 2005 section 3(1) Income Tax Amendment Act 2005
CS 5: Exclusion of withdrawal paid as annuity or pension
Section CS 1
a: used to buy an annuity that is payable for life or over 10 or more years; or
b: payable as an annuity for life or over 10 or more years; or
c: payable as a pension for life or over 10 or more years. amount withdrawal year 1994 No 164 s CL 7
CS 6: Exclusion of withdrawal on partial retirement
Partial retirement
1: Section CS 1
a: the member is employed for 30 hours per week or less; and
b: the member has reduced their working hours because they are nearing full retirement; and
c: the member stops contributing to the superannuation fund; and
d: the member's employer stops making specified superannuation contributions to the superannuation fund for the member's benefit; and
e: the member gives a notice as described in subsection (2) to the trustees of the superannuation fund. Notice
2: The member's notice to the trustees of the superannuation fund must—
a: state that the member does not intend to increase their hours in paid employment in the future; and
b: state that the member's employer understands that the member's hours in paid employment will not increase in the future; and
c: be signed by the employer to acknowledge that the employer's understanding is as described in paragraph (b). Later withdrawals
3: A member who makes a withdrawal after giving notice as required by subsection (2) is not required to give notice for each later withdrawal if their intention has not changed. employer member notice specified superannuation contribution superannuation fund trustee withdrawal 1994 No 164 s CL 12
CS 7: Exclusion of withdrawal when member ends employment
Ending employment because of injury, disability, or death
1: Section CS 1 Ending employment after period of specified superannuation contributions
2: Section CS 1
a: the member has been in employment throughout the period that—
i: starts on the 1st day of the tax year that starts 2 tax years before the start of the tax year in which the member ends their employment; and
ii: ends on the day on which the member ends their employment; and
b: the specified superannuation contributions are made to the superannuation fund or to a superannuation fund that has transferred, whether directly or indirectly, the funds relating to its members to the superannuation fund; and
c: the specified superannuation contributions have not been part of a withdrawal, other than a transfer between superannuation funds that is referred to in paragraph (b); and
d: the withdrawal—
i: satisfies subsections (3) and (4):
ii: satisfies subsection (4B):
iii: does not include employer contributions to superannuation savings of more than the amount found by multiplying $5,000 by the number of income years for which the specified superannuation contributions were made on behalf of the member; and
e: the withdrawal is made at the time described in subsection (5). Limited increase in employer contributions between income years
3: A withdrawal satisfies this subsection if, at the time of the withdrawal, specified superannuation contributions have been made for the member by the employer, or another employer, such that—
a: the contributions relate to some or all of a period of employment that—
i: starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
ii: ends on the day on which the member ends their employment; and
b: in each of the first 2 tax years in the period referred to in paragraph (a), the contributions—
i: are in total less than 150% of the total of specified superannuation contributions made for the member in the previous tax year:
ii: satisfy subparagraph (i) after the application of subsection (4); and
c: in the tax year in which the member ends their employment, the contributions—
i: have an annualised value that is less than 150% of the specified superannuation contributions made for the member in the previous tax year:
ii: satisfy subparagraph (i) after the application of subsection (4). Increases disregarded under subsection (3)(b)(i) or (c)(i)
4: For the purposes of subsection (3), specified superannuation contributions to a superannuation fund that are 150% or more of the specified superannuation contributions made in the previous tax year are treated as not being so—
a: to the extent to which the employer increases the level by making additional specified superannuation contributions for the member's benefit to compensate for underpaying specified superannuation contributions for the member's benefit; or
b: if the increase occurs before 1 April 2000; or
c: if the increase is required by a trust deed or a contract, or an amendment to a trust deed or a contract, and the requirement existed before 1 April 2000; or
d: if the employer starts making specified superannuation contributions for a member's benefit under a contract, or an amendment to a contract, that was signed before 1 April 2000; or
e: if the level of specified superannuation contributions does not change as a percentage of salary as between the level on and after 1 April 2000 and the level in the last pay period ending before 1 April 2000. Increases in employer contributions considered consistent by Commissioner
4B: A withdrawal satisfies this subsection if, at the time of the withdrawal, specified superannuation contributions have been made for the member by the employer, or another employer, such that—
a: the contributions relate to some or all of the period that—
i: starts on the 1st day of the tax year that starts 2 tax years before the tax year in which the member ends their employment; and
ii: ends on the day on which the member ends their employment; and
b: the Commissioner considers that the contributions are consistent in size and frequency with the employer's specified superannuation contributions for other employees in comparable positions; and
c: the Commissioner considers that the contributions are consistent in size and frequency during the period or periods to which the employer's specified superannuation contributions for the member relate. Time for purposes of subsection (2)
5: For the purposes of subsection (2), the times are—
a: on or after the date on which a member ends their employment with an employer; or
b: shortly before the date on which the member ends their employment, in anticipation of the member's ending their employment. Ending employment in any other case
6: If a withdrawal is made on or after the date on which a member ends their employment with an employer and the application of section CS 1 subsection (1) or (2), section CS 1 What is not ending employment
7: Section CS 10 amount employer employer's contributions to superannuation savings member pay period specified superannuation contribution superannuation fund tax year withdrawal 1994 No 164 s CL 8(1)-(6) Subsections (2) (3) substituted 1 October 2005 section 173(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 The heading to subsection (4) substituted 1 October 2005 section 173(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 The heading to subsection (4B) inserted 1 October 2005 section 173(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (4B) substituted 1 October 2005 section 23(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CS 8: Exclusion of withdrawal when member ends employment: lock-in rule
Deferral of withdrawal
1: Section CS 1 What is not ending employment
2: Section CS 10 amount employer member withdrawal year 1994 No 164 s CL 9
CS 9: Exclusion of withdrawal from defined benefit fund when member ends employment
Defined benefit fund
1: Section CS 1
a: on or after the date on which a member ends their employment with an employer, irrespective of the member's length of service; or
b: shortly before the date on which a member ends their employment with an employer, in anticipation of the member's ending their employment, irrespective of the member's length of service. What is not ending employment
2: Section CS 10 defined benefit fund employer member withdrawal 1994 No 164 s CL 10(1)
CS 10: When member treated as not ending employment
When this section applies
1: This section applies for the purposes of sections CS 7 to CS 9 Transfer to related employer
2: A member is treated as not ending their employment with an employer ( employer A employer B Related employer
3: Employer B is a related employer of employer A if employer B—
a: is treated as a separate employer from employer A; and
b: is—
i: a branch or division of employer A; or
ii: associated with employer A. associated person employer member 1994 No 164 s CL 11
CS 10B: Exclusion of permitted withdrawals from KiwiSaver schemes and complying superannuation funds
Section CS 1 complying superannuation fund KiwiSaver scheme permitted withdrawal Section CS 10B inserted 19 December 2007 section 4 Taxation (KiwiSaver) Act 2007 Transfers to or from superannuation funds and superannuation schemes
CS 11: Transfer by superannuation fund to another superannuation fund
Notification of nature of amount transferred
1: An amount transferred by a superannuation fund ( transferor fund transferee fund
a: the transferee fund is not a defined benefit fund; and
b: the trustees of the transferor fund, the member's past employer, or the member's present employer give notice to the transferee fund of the nature of the amount transferred. No notification of nature of amount transferred
2: If the trustees of the transferor fund, the member's past employer, or the member's present employer do not give notice to the transferee fund of the nature of the amount transferred, the amount transferred is treated as being, in the transferee fund, the employer's contributions to superannuation savings. Notification of nature of amounts transferred to defined benefit fund
3: Amounts to which section CS 2(1) or (8) No notification of nature of amounts transferred to defined benefit fund
4: If the trustees of the superannuation fund do not give notice to the defined benefit fund of the nature of the amounts to which section CS 2(1) or (8) section CS 1 section CS 1 sections CS 2 to CS 9 amount defined benefit fund employer employer's contributions to superannuation savings member notice notify superannuation fund trustee 1994 No 164 s CL 14
CS 12: Transfer from superannuation scheme to superannuation fund
An amount transferred directly from a superannuation scheme to a superannuation fund is treated as being, in the superannuation fund, the member's contribution. amount member's contribution superannuation fund superannuation scheme 1994 No 164 s CL 15
CS 13: Investment by superannuation fund in another superannuation fund
Superannuation fund investing in another superannuation fund
1: If a superannuation fund ( superannuation fund A superannuation fund B
a: superannuation fund A's investment in superannuation fund B is not a transfer; and
b: a withdrawal of an amount related to superannuation fund A's investment in superannuation fund B is not a transfer; and
c: a withdrawal of an amount related to superannuation fund A's investment in superannuation fund B is not a withdrawal to which section CS 2 Superannuation fund investing in superannuation scheme
2: If a superannuation fund is a member of a superannuation scheme,—
a: the fund's investment in the scheme is not a transfer; and
b: a withdrawal by the fund related to the investment is not a transfer. amount member superannuation fund superannuation scheme withdrawal 1994 No 164 s CL 16 Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa
CS 14: Superannuation fund becomes superannuation scheme
Effect of change
1: If a superannuation fund becomes a superannuation scheme, other than a foreign superannuation scheme,—
a: an amount in the fund at the time it becomes a superannuation scheme retains its nature; and
b: the following sections apply to a withdrawal from the superannuation scheme as if the scheme were a superannuation fund:
i: sections CS 1 to CS 17 NEA 1
ii: sections 32A 32B 32C Market value of amounts
2: The amount in the superannuation fund at the time it becomes a superannuation scheme is calculated according to market value. amount foreign superannuation scheme superannuation fund superannuation scheme withdrawal 1994 No 164 s CL 17
CS 15: Superannuation fund becomes foreign superannuation scheme
If a superannuation fund becomes a foreign superannuation scheme, every amount in the superannuation fund is treated as if it had been withdrawn immediately before the fund became a foreign superannuation scheme. amount foreign superannuation scheme superannuation fund 1994 No 164 s CL 18
CS 16: Superannuation scheme becomes superannuation fund
If a superannuation scheme becomes a superannuation fund, every amount in the superannuation scheme at the time it becomes a superannuation fund is treated as being a member's contribution to the superannuation fund. amount member's contribution superannuation fund superannuation scheme 1994 No 164 s CL 19 Treatment of distributions when superannuation fund wound up
CS 17: Superannuation fund wound up
When a superannuation fund is wound up, a distribution related to a member's membership is treated as being a withdrawal. member superannuation fund withdrawal 1994 No 164 s CL 20
CT: Income from petroleum mining
Contents
CT 1: Disposal of exploratory material or petroleum mining asset
Income: disposal of exploratory material
1: The consideration that a petroleum miner derives from disposing of exploratory material is income of the petroleum miner. Income: disposal of petroleum mining asset
2: The consideration that a petroleum miner derives from disposing of a petroleum mining asset is income of the petroleum miner. Relationship with section CX 37
3: This section is overridden by section CX 37 consideration dispose exploratory material income petroleum miner petroleum mining asset 1994 No 164 s CJ 3
CT 2: Damage to assets
The consideration that a petroleum miner derives for damage to an asset of the kind described in section CT 7(1)(b) or (c) consideration income petroleum miner 1994 No 164 s CJ 5
CT 3: Exploratory well used for commercial production
When this section applies
1: This section applies when a petroleum miner uses an exploratory well for commercial production of petroleum, whether or not the well has been sealed and abandoned previously. Income
2: An amount equal to the amount of expenditure described in subsection (3) is treated as income of the petroleum miner. Exploratory well expenditure
3: The expenditure is exploratory well expenditure to which all the following apply:
a: it is directly attributable to drilling or acquiring the exploratory well; and
b: the petroleum miner or a holder of a previous interest in the well is or has been allowed a deduction for it as petroleum exploration expenditure; and
c: it is incurred in relation to the permit held currently by the petroleum miner, or a previous permit surrendered in exchange for the permit currently held under section 32(3) Timing of income
4: The amount is allocated to the income year in which commercial production from the well starts. Part interest
5: If the petroleum miner has a part interest in the exploratory well when that well is first used for commercial production, the amount of expenditure treated as income under this section must bear the same proportion to the exploratory well expenditure specified in subsection (3) as that part interest bears to all interests in the well. amount commercial production deduction exploratory well exploratory well expenditure income income year permit petroleum petroleum exploration expenditure petroleum miner seal and abandonment 1994 No 164 s DM 1(9)(a)
CT 4: Partnership interests and disposal of part of asset
In this subpart, and in sections CX 36 CX 37
a: a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership :
b: references to the disposal of an asset apply equally to the disposal of part of an asset. income petroleum permit 1994 No 164 ss DM 9, DM 10 Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CT 5: Petroleum mining operations outside New Zealand
This subpart, and sections CX 36 CX 37
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by this subpart and sections CX 36 CX 37 controlled foreign company New Zealand petroleum miner petroleum mining operations 1994 No 164 s DM 7(1) Definitions
CT 6: Meaning of petroleum miner
Meaning
1: Petroleum miner Exclusion
2: Petroleum miner petroleum mining operations
a: the production of petroleum from the permit area; or
b: profits from the production of petroleum from the permit area; or
c: an interest or a right to an interest in the petroleum permit. Activities: inclusions
3: Activities: exclusions
4: consideration permit area petroleum petroleum miner petroleum mining operations petroleum permit 1994 No 164 s OB 1 development operations further processing petroleum miner Section CT 6(1) substituted 19 December 2007 section 18(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(2) amended 19 December 2007 section 18(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(3) heading repealed 19 December 2007 section 18(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(3) repealed 19 December 2007 section 18(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (3)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section CT 6(4) heading repealed 19 December 2007 section 18(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6(4) repealed 19 December 2007 section 18(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6 list of defined terms petroleum mining operations inserted 19 December 2007 section 18(4)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CT 6 list of defined terms removal or restoration operations omitted 19 December 2007 section 18(4)(b) Taxation (Business Taxation and Remedial Matters) Act 2007
CT 6B: Meaning of petroleum mining operations
Meaning
1: Petroleum mining operations subsection (2) subsection (3) Activities: inclusions
2: The activities are those carried out in connection with—
a: prospecting or exploring for petroleum:
b: developing a permit area for producing petroleum:
c: producing petroleum:
d: processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
e: removal or restoration operations. Activities: exclusions
3: The activities do not include further treatment to which all the following apply:
a: it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
b: it is done—
i: by liquefaction or compression; or
ii: for the extraction of constituent products; or
iii: for the production of derivative products; and
c: it is not treatment at the production facilities. permit area petroleum petroleum mining operations removal or restoration operations Section CT 6B inserted 19 December 2007 section 19 Taxation (Business Taxation and Remedial Matters) Act 2007
CT 7: Meaning of petroleum mining asset
Meaning
1: Petroleum mining asset
a: a petroleum permit :
b: an asset that—
i: is acquired by a petroleum miner for the purpose of carrying on an activity described in subsection (3) in a permit area or areas; and
ii: has an estimated useful life that depends on, and is no longer than, the remaining life of the petroleum permit for the area or areas :
c: a share or partial interest in an asset described in paragraph (a) or (b). Exclusion
2: Petroleum mining asset Activities: inclusions
3: The activities are those carried out in connection with—
a: developing a permit area for producing petroleum :
b: producing petroleum :
c: processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user :
d: removal or restoration operations. Activities: exclusions
4: The activities do not include further treatment to which all the following apply:
a: it occurs after the well stream has been separated and stabilised into crude oil, condensate, or natural gas; and
b: it is done—
i: by liquefaction or compression; or
ii: for the extraction of constituent products; or
iii: for the production of derivative products; and
c: it is not treatment at the production facilities. land permit area petroleum petroleum miner petroleum mining asset petroleum permit removal or restoration operations 1994 No 164 s OB 1 development operations further processing permit specific asset petroleum mining asset Subsection (1)(a) (b)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CU: Income from mineral mining
Contents
Introductory provision
CU 1: Mining company's 2 kinds of income
Income derived by a mining company is either income from mining or income other than income from mining. income income from mining mining company 1994 No 164 s DN 1(2) Income from mining
CU 2: Mining company that processes or manufactures
When this section applies
1: This section applies when—
a: a mining company—
i: obtains specified minerals from its mining operations; or
ii: through a combination of its mining operations and its associated mining operations, brings specified minerals to the stage at which they are ready to be processed or used in a manufacturing operation; and
b: the company produces products by processing the specified minerals or using them in a manufacturing operation; and
c: the company disposes of the products. Income classified
2: For the income year in which the mining company disposes of the products, the Commissioner must classify the mining company's income from the disposal as income from mining or income other than income from mining. The Commissioner must classify the income by apportioning it under subsection (3) or by making a decision under subsection (4). Apportionment
3: In apportioning the income, the Commissioner must make an appropriate apportionment of the value of the stock of products on hand at the start and end of the income year and must take into account the matters the Commissioner considers relevant and appropriate, including—
a: the capital employed, or the expenditure or losses incurred, in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation :
b: the extent of the steps involved in the mining operations, associated mining operations, and processing of the specified minerals or the use of the specified minerals in a manufacturing operation. Decision
4: In making a decision, the Commissioner must take into account the amount that would have been—
a: the value received or receivable for the specified minerals if they had been disposed of in the income year to a wholly independent person in the state in which they resulted from the mining operations or the combination of mining operations and associated mining operations; and
b: the value of the products on hand at the end of the income year if the specified minerals from which they came had been valued for the purposes of subpart EB amount associated mining operations Commissioner income income from mining income year mining company mining operations specified mineral 1994 No 164 s DN 1(4) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CU 3: Disposal of assets
When this section applies
1: This section applies when—
a: a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
b: the company, whether or not still a mining company, disposes of the asset. Exclusion
2: This section does not apply when—
a: a mining company acquires an asset, including mining prospecting information or a mining or prospecting right, by incurring mining exploration expenditure or mining development expenditure; and
b: the company, whether or not still a mining company, passes the ownership of the asset to another person; and
c: the passing of ownership is not because the asset is sold to the other person; and
d: the company does not receive, and is not entitled to receive, consideration for the passing of ownership; and
e: the company and the other person deal with each other over the passing of ownership at arm's length, even if they are associated persons at a time relevant to the passing of ownership. Income
3: The following are income from mining of the mining company:
a: the consideration that the company derives from the disposal of the asset, unless paragraph (b) applies :
b: in the cases described in subsections (4) to (7), the consideration specified in subsection (4) or (5) or (7). Consideration other than in cash
4: If some or all of the consideration for the disposal is other than in cash, and the disposal is not to an associated person, the consideration that is not in cash has the value agreed between the company and the person to whom the asset is disposed of. If the company and the person do not agree, or if the Commissioner considers that the value agreed is unreasonable, the consideration that is not in cash has the value that the Commissioner decides. Disposal to associated person
5: If the disposal is to an associated person, the consideration for the disposal is the market value that the asset has on the date of the disposal. When subsection (7) applies
6: Subsection (7) applies when—
a: the company disposes of the asset to a person acquiring it for use in carrying on their mining operations or associated mining operations or a mining venture; and
b: the company and the person give notice to the Commissioner that they have agreed to apply subsection (7); and
c: the notice is given to the Commissioner within 1 of the following times:
i: the time within which the company is required to file a return of income for the income year in which it disposes of the asset :
ii: a further time allowed by the Commissioner; and
d: the notice specifies an amount that—
i: is no more than the market value that the asset has at the date of the disposal; and
ii: is not less than the amount of any part of the consideration that is in cash. Amount specified by parties to disposal
7: The consideration for the disposal is the amount that the company and the person specify in the notice. amount asset associated mining operations associated person Commissioner company income year mining company mining development expenditure mining exploration expenditure mining operations mining or prospecting right mining prospecting information mining venture notice return of income 1994 No 164 s DN 1(9)-(12)(b) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (6)(c)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CU 4: Compensation for lost, destroyed, or damaged assets
When sections CU 5 to CU 8 apply
1: Sections CU 5 to CU 8
a: a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
b: the company is allowed a deduction for the expenditure under—
i: section DU 1
ii: section DZ 12(1)(a)
c: the asset is lost, destroyed, or damaged; and
d: the company, whether or not still a mining company,—
i: is paid insurance, indemnity, or compensation for the loss, destruction, or damage; or
ii: is entitled to receive payment for any scrap of the asset that it disposes of. What sections CU 5 to CU 8 apply to
2: Sections CU 5 to CU 8 asset A asset B section CU 10 Sections CU 5 to CU 8 section DU 5 asset company deduction income income from mining mining company mining development expenditure mining exploration expenditure 1994 No 164 s DN 1(13)
CU 5: Compensation and scrap payment: income from mining
Income
1: When, under section CU 4
a: the amount of insurance, indemnity, or compensation paid; and
b: the amount (if any) payable to the company for the disposal of any scrap of the asset. Timing of income
2: The income from mining is allocated to the income year in which the insurance, indemnity, or compensation is paid. Relationship with sections CU 6 to CU 8
3: This section is overridden by sections CU 6 to CU 8 amount asset income from mining income year mining company 1994 No 164 s DN 1(13), (14)
CU 6: Compensation and scrap payment: use to replace or repair asset
Choice between section CU 5 and sections CU 7 and CU 8
1: If the mining company wants sections CU 7 CU 8 section CU 5 Choice of sections CU 7 and CU 8
2: The company must—
a: give notice to the Commissioner that the insurance, indemnity, or compensation will be used to replace or repair the asset; and
b: give the notice within the time within which the company must file a return of income for the income year in which the loss, destruction, or damage occurred; and
c: start the replacement or repair by the end of the second income year after the income year in which the loss, destruction, or damage occurred. asset Commissioner income year mining company notice return of income 1994 No 164 s DN 1(14)
CU 7: Compensation and scrap payment: not income from mining
When, under sections CU 4 CU 6
a: the amount of insurance, indemnity, or compensation paid; or
b: the amount (if any) payable to the company for the disposal of any scrap of the asset. amount asset income from mining mining company 1994 No 164 s DN 1(14)(a), (b)
CU 8: Compensation and scrap payment: more than expenditure
When this section applies
1: This section applies when—
a: the mining company complies with section CU 6(2)
b: the company incurs expenditure in replacing or repairing the asset; and
c: the company has an excess amount because the expenditure is less than the total of the following:
i: the amount of insurance, indemnity, or compensation paid; and
ii: the amount (if any) payable to the company for the disposal of any scrap of the asset. Income
2: The excess amount is income from mining of the company, whether or not the company is still a mining company when the excess amount is determined. Timing of income
3: The income from mining is allocated to the income year in which the replacement or repair of the asset is completed or is treated as completed. When replacement or repair treated as completed
4: The replacement or repair, even if not completed, is treated as completed—
a: on the last day of the period (if any) considered by the Commissioner to be a reasonable period within which to complete the replacement or repair; or
b: on the day on which work on the replacement or repair stops; or
c: on the day on which the asset is transferred from the company's mining operations and used, wholly or mainly, to derive income other than income from mining; or
d: on the day on which the company disposes of the asset other than for scrap; or
e: on the day on which the company stops being a mining company. Limitation on calculation of excess amount
5: Expenditure incurred after the day on which the work is treated as completed is not taken into account to determine the existence or amount of an excess amount for the purposes of subsection (1)(c). amount asset Commissioner company income income from mining income year mining company mining operations 1994 No 164 s DN 1(14)(e), (g), (i)
CU 9: Previous deduction for income appropriated
Income
1: An amount equal to the amount for which a mining company is allowed a deduction under section DU 4 Timing of income
2: The income is allocated to the income year following the income year in which the mining company is allowed the deduction. Company stops mining
3: A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year. amount deduction income from mining income year mining company 1994 No 164 s DN 1(6)
CU 10: Mining asset used to derive income other than income from mining
When this section applies
1: This section applies when—
a: a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure; and
b: the company uses the asset, wholly or mainly, to derive income other than income from mining. Income
2: An amount equal to the market value that the asset has on the first day of each period in which it is used, wholly or mainly, to derive income other than income from mining is income from mining of the mining company. Timing of income
3: The income is allocated to the income year in which each first day falls. Company stops mining
4: A mining company that stops being a mining company before the end of the income year to which the income is allocated is treated as if it were still a mining company in the income year. asset income income from mining income year mining company mining development expenditure mining exploration expenditure 1994 No 164 s DN 1(8)
CU 11: Meaning of asset for sections CU 3 to CU 10
Mining company's share or interest in asset
1: Sections CU 3 to CU 10
a: to the extent to which the mining company acquired the share or interest by incurring—
i: mining exploration expenditure or mining development expenditure; or
ii: the exploration expenditure or development expenditure referred to in section DZ 12(2)(a)
b: to the extent to which the mining company uses the share or interest for the purpose of deriving income from mining. Partner's share or interest in asset
2: For the purposes of sections CU 3 to CU 10 Replaced or repaired asset
3: For the purposes of sections CU 3 to CU 10
a: an asset that a mining company acquires by incurring expenditure in replacing or repairing the asset is the same asset as the one that was lost, destroyed, or damaged :
b: part of an asset that a mining company acquires by incurring expenditure in repairing the asset is part of the asset that was damaged. asset income from mining mining company mining development expenditure mining exploration expenditure 1994 No 164 s DN 1(14)(f), (16), (17) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CU 12: Application of sections to resident mining operators
Sections in this subpart applying to resident mining operators
1: Sections CU 1 to CU 8 CU 10 CU 11 Additional modification of sections CU 4 and CU 11
2: For the purposes of subsection (1),—
a: section CU 4(1)(b)(ii) section DZ 12(1)(b)
b: section CU 11(1)(a)(ii) section DZ 12(2)(b) mining company resident mining operator 1994 No 164 s DN 4(1), (5), (7)
CU 13: Application of sections to non-resident mining operators
Sections in this subpart applying to non-resident mining operators
1: Sections CU 3 to CU 11 Additional modification of sections CU 4 and CU 11
2: For the purposes of subsection (1),—
a: section CU 4(1)(b)(ii) section DZ 12(1)(b)
b: section CU 11(1)(a)(ii) section DZ 12(2)(b) associated mining operations income from mining mining company mining operations mining venture non-resident mining operator 1994 No 164 s DN 5(2)(a), (c)
CU 14: Recovery of reinvestment profit on disposal of mining shares
When this section applies
1: This section applies when—
a: a company derives an amount from disposing of a mining share, including a disposal described in section CU 20
b: an amount of the company's reinvestment profit is used in calculating the deduction for the cost of the mining share under section DU 11(2)(b) Income
2: The lesser of the following amounts is income of the company:
a: the amount derived from the disposal of the mining share minus the deduction for the cost of the mining share; and
b: the amount of reinvestment profit used in calculating the deduction for the cost of the mining share. Timing of income
3: The income is allocated to the income year in which the mining share is disposed of. Relationship with sections CX 38 and CX 39
4: This section is overridden by sections CX 38 CX 39 amount company deduction income income year mining share reinvestment profit 1994 No 164 s DN 2(7), (8)(c)
CU 15: Recovery of reinvestment profit not used for mining purposes
When subsections (2) and (3) apply
1: Subsections (2) and (3) apply when some or all of a company's reinvestment profit—
a: is used for purposes other than mining purposes within the prescribed period; and
b: will not be used for mining purposes within the prescribed period. Income
2: The amount of reinvestment profit described by subsection (1) is income of the company. Timing of income
3: The income is allocated to the income year in which the amount is used for purposes other than mining purposes. When subsections (5) and (6) apply
4: Subsections (5) and (6) apply when some or all of a company's reinvestment profit is not used for mining purposes within the prescribed period. Income
5: The reinvestment profit is income of the company. Timing of income
6: The income is allocated to the last income year of the prescribed period. No longer reinvestment profit
7: The amount referred to in subsection (2) and the reinvestment profit referred to in subsection (5) cease to be reinvestment profit. amount company income income year mining purposes prescribed period reinvestment profit 1994 No 164 s DN 2(3), (4)
CU 16: Recovery of reinvestment profit on repayment of loans
When this section applies
1: This section applies when—
a: a company ( lender company
b: the loan is made wholly or partly out of the lender company's reinvestment profit; and
c: the loan is wholly or partly repaid. Income
2: The amount calculated using the formula in subsection (3) is income of the lender company. Formula
3: The formula is— Definition of items in formula
4: In the formula,—
a: reinvestment profit amount
b: loan amount
c: repayment Timing of income
5: The income is allocated to the income year in which the repayment is made. Relationship with section CX 40
6: This section is overridden by section CX 40 amount company income income year mining company mining holding company reinvestment profit 1994 No 164 s DN 2(5)
CU 17: Repayment by mining company of amount written off
When this section applies
1: This section applies when—
a: a holding company of a mining company is allowed, under section DU 12
b: the mining company—
i: repays, to the holding company or any other person, some or all of the amount written off; or
ii: is treated, under section CU 18 CU 19 Income
2: The amount repaid, to the extent of the deduction, is income of the holding company. Timing of income
3: The income is allocated to the income year in which the mining company repays the amount or is treated as repaying the amount. amount deduction holding company income income year loan mining company 1994 No 164 s DN 3(7), (8)
CU 18: Amount treated as repayment for purposes of section CU 17: excess
When this section applies
1: This section applies when,—
a: in a tax year, a holding company of a mining company is allowed, under section DU 12
b: in a later tax year, the holding company disposes of shares in the mining company or an interest in shares in the mining company; and
c: the holding company has an excess amount because the amount it derives from the disposal is more than the amount paid up in cash on the shares. Repayment amount
2: For the purposes of section CU 17 amount deduction holding company loan mining company share tax year 1994 No 164 s DN 3(6), (8)
CU 19: Amount treated as repayment for purposes of section CU 17: net income
When this section applies
1: This section applies when—
a: a holding company of a mining company is allowed, under section DU 12
b: the deduction is allocated to an income year; and
c: the mining company would have had net income in a later tax year if—
i: the situation described in subsection (2) had existed; and
ii: the situation described in subsection (3) had existed. First situation
2: The first situation is that in the later tax year no person is allowed a deduction for the mining company's mining exploration expenditure or mining development expenditure. Second situation
3: The second situation is that in the later tax year the mining company disposes of an asset in circumstances to which section CU 3 CZ 2(1)(b) Amount for which asset disposed of: most cases
4: If any of section CU 3(3)(a), (4), or (5) Amount for which asset disposed of: election of section CU 3(7)
5: If section CU 3(7)
a: the part of the amount specified in the notice under section CU 3(7)
b: the total amount of loans made on or before the date of disposal by all holding companies of the mining company to the mining company to the extent to which the loans—
i: relate to the asset (including a part not disposed of); and
ii: have been written off and allowed as a deduction under section DU 12
iii: have not been repaid, and have not been treated as repaid under this section or section CU 18 Asset
6: For the purposes of subsections (3) to (5),—
a: a reference to an asset means the part of the asset that is disposed of, which may be some of it or all of it, and a reference to an amount received or receivable for an asset means the amount for the part that is disposed of :
b: a reference to an asset includes a reference to a share or interest in the asset :
c: a partner's share or interest in each asset of the partnership is the same as the partner's interest in the totality of the assets of the partnership :
d: every member of any other association of persons who receive income jointly or carry on activities jointly has a share or interest in each asset of the association that is the same as the member's interest in the totality of the assets of the association. Amount of net income
7: For the purposes of section CU 17 amount deduction holding company income income year loan mining company mining development expenditure mining exploration expenditure net income notice prescribed proportion tax year 1994 No 164 s DN 3(4), (5), (8), (9) Subsection (6)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CU 20: Mining company or mining holding company liquidated
Treatment of shares
1: If a mining company or a mining holding company is liquidated,—
a: a mining share held in the company is treated as disposed of to the company; and
b: a distribution received for the share on the liquidation is treated as an amount received for the disposal. Relationship with section CU 14
2: Section CU 14 amount liquidation mining company mining holding company mining share reinvestment profit 1994 No 164 s DN 2(8) Definitions
CU 21: Meaning of income from mining
Meaning
1: Income from mining Resident mining operators and non-resident mining operators
2: This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures. associated mining operations income income from mining mining company mining operations mining venture resident mining operator non-resident mining operator tax year 1994 No 164 ss DN 4(4), DN 5(1), OB 1 gross income from mining
CU 22: Meaning of mining company
Meaning
1: Mining company
a: the company's only source of income is the business described in subsection (2); or
b: the company's main source of income is the business described in subsection (2); or
c: the company's only activity is 1 of the activities described in subsection (3); or
d: the company's main activity is 1 of the activities described in subsection (3); or
e: the company proposes that its only activity or its main activity be 1 of the activities described in subsection (3). Business
2: The business referred to in subsection (1)(a) and (b) is the business of mining a specified mineral in New Zealand. Activities
3: The activities referred to in subsection (1)(c), (d), and (e) are—
a: exploring, searching, or mining for a specified mineral in New Zealand; or
b: performing development work for exploring, searching, or mining for a specified mineral in New Zealand. Service for reward
4: An activity described in subsection (3) does not include an activity done or to be done as a service to another person for reward unless the reward—
a: is wholly or mainly related to and dependent on the production of the specified mineral; or
b: arises wholly or mainly through participation in profits from the production of the specified mineral. business income mining company New Zealand New Zealand company specified mineral 1994 No 164 s DN 1(1)
CU 23: Meaning of mining development expenditure
Meaning
1: Mining development expenditure Inclusions
2: Mining development expenditure
a: on acquiring land as a site for its mining operations or associated mining operations :
b: on preparing the site for its mining operations or associated mining operations :
c: on restoring the site during or after its mining operations or associated mining operations :
d: on any of the following for its mining operations or associated mining operations:
i: buildings, mineshafts, platforms, tunnels, wells, or other improvements :
ii: plant or machinery, including vehicles :
iii: production equipment or facilities :
iv: storage facilities :
e: on vessels or aircraft for use wholly or mainly in its mining operations or associated mining operations :
f: on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the site of its mining operations or associated mining operations :
g: on buildings or facilities that—
i: are situated at, or adjacent to, the site of any of its mining operations or associated mining operations; and
ii: are for use in the education, housing, or welfare of, or the supply of meals to, its employees in or connected with its mining operations or associated mining operations or in the education, housing, or welfare of, or the supply of meals to, the employees' dependants :
h: on providing, or contributing to the cost of providing, communication equipment, fuel, light, power, or water for the buildings or facilities described in paragraph (g). Exclusions
3: Mining development expenditure
a: on a building or facility provided for the purpose of deriving income; or
b: on or in relation to an office building that is not situated at, or adjacent to, the site of any of its mining operations or associated mining operations. Resident mining operators and non-resident mining operators
4: This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures. associated mining operations employee income mining company mining development expenditure mining operations mining venture non-resident mining operator resident mining operator 1994 No 164 ss DN 4(4), DN 5(1), OB 1 development expenditure Subsection (2)(a) (c) (d)(i) (iv) (e) (f) (g)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CU 24: Meaning of mining exploration expenditure
Meaning
1: Mining exploration expenditure Inclusions
2: Mining exploration expenditure
a: on acquiring mining prospecting information :
b: on acquiring a mining or prospecting right :
c: on geological mapping and geophysical surveys :
d: on systematic searches for areas containing specified minerals :
e: on searching by drilling in areas containing specified minerals :
f: on searching for ore containing a specified mineral within or in the vicinity of an ore body by crosscuts, drilling, drives, rises, shafts, or winzes. Exclusions
3: Mining exploration expenditure
a: mining development expenditure :
b: expenditure on operations in the course of working a mining property. Resident mining operators and non-resident mining operators
4: This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures. associated mining operations mining company mining development expenditure mining exploration expenditure mining operations mining or prospecting right mining prospecting information mining venture New Zealand non-resident mining operator resident mining operator specified mineral 1994 No 164 ss DN 4(4), DN 5(1), OB 1 exploration expenditure Subsection (2)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CU 25: Meaning of mining operations
Meaning
1: Mining operations
a: are carried on by a mining company on a mining property in New Zealand for the purpose of deriving income; and
b: consist of—
i: exploring, searching, or mining for 1 or more specified minerals; or
ii: performing development work for exploring, searching, or mining for 1 or more specified minerals. Resident mining operators and non-resident mining operators
2: This definition applies to resident mining operators as if they were mining companies, and to non-resident mining operators as if they were mining companies, mining operations were mining ventures, and associated mining operations were mining ventures. associated mining operations income mining company mining operations mining venture New Zealand non-resident mining operator resident mining operator 1994 No 164 ss DN 4(4), DN 5(1), OB 1 mining operations
CU 26: Meaning of mining venture
Meaning
1: Mining venture
a: is carried on, or is proposed to be carried on,—
i: in New Zealand; and
ii: as a business; and
iii: under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 section 106
b: consists, or is proposed to consist, wholly or mainly of—
i: exploring, searching, or mining for a specified mineral in New Zealand; or
ii: performing development work for exploring, searching, or mining for a specified mineral in New Zealand. Service for reward
2: An activity described in subsection (1)(b) does not include an activity done or to be done as a service to another person for reward unless the reward—
a: is wholly or mainly related to and dependent on the production of the specified mineral; or
b: arises wholly or mainly through participation in profits from the production of the specified mineral. Activities not carried on jointly
3: If 2 or more persons carry on, or propose to carry on, a joint mining venture, but 1 or more of them carries on an activity of the kind described in subsection (1)(b) outside the joint mining venture, the carrying on of the activity is not part of the joint mining venture. business mining venture New Zealand specified mineral 1994 No 164 s OB 1 mining venture
CU 27: Meaning of resident mining operator
Meaning
1: Resident mining operator
a: is resident in New Zealand; and
b: is not a mining company or a petroleum mining company; and
c: carries on, or proposes to carry on, the activities of—
i: exploring, searching, or mining for a specified mineral in New Zealand; or
ii: performing development work for exploring, searching, or mining for a specified mineral in New Zealand. How activities carried on
2: The person must carry on the activities described in subsection (1)(c), or propose to carry them on,—
a: personally and actively in the field; and
b: as a business; and
c: under an exploration permit, prospecting permit, or mining permit granted under the Crown Minerals Act 1991 section 106 Service for reward
3: An activity described in subsection (1)(c) does not include an activity done or to be done as a service to another person for reward unless the reward—
a: is wholly or mainly related to and dependent on the production of the specified mineral; or
b: arises wholly or mainly through participation in profits from the production of the specified mineral. business mining company New Zealand petroleum mining company resident in New Zealand specified mineral 1994 No 164 s OB 1 active miner resident mining operator
CU 28: Meaning of specified mineral
Meaning
1: Specified mineral
a: means alumina minerals (for example, bauxite, corundum, diaspore, and gibbsite), aluminous refractory clays containing over 30% alumina in the fired state, aluminous refractory fireclays containing over 30% alumina in the fired state, andalusite, antimony, asbestos, barite, bentonite (except bentonite mined in the area formerly known as Malvern County), bituminous shale, chromite, copper, diatomite, dolomite, feldspar, fluorite, gold, halloysite, kaolin, kyanite, lead, magnesite, manganese, mercury, mica, molybdenite, nickel, perlite, phosphate, platinum group, pyrite, silica in lump form used only in producing silicon carbide or silicon metal or ferro silicon, silica in sand form used only in producing silicon carbide, sillimanite, silver, sodium chloride, sulphur, talc, tin, titanium, titanomagnetite, tungsten, uranium, wollastonite, zeolite, zinc, and zircon :
b: includes a mineral that is declared to be a specified mineral in a Gazette Minister to consider
2: Before giving a Gazette
a: in the industrial development of New Zealand :
b: as a means of reducing the quantity of industrial minerals or industrial rock required to be imported into New Zealand :
c: as an item of export from New Zealand. mineral Minister New Zealand 1994 No 164 s OB 1 specified mineral Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CU 29: Other definitions
In this Act,— associated mining operations
a: are carried on in New Zealand in association with mining operations; and
b: consist of the accumulation, initial treatment, and transport of specified minerals, up to the stage at which the minerals—
i: are in a saleable form and in a location suitable for a person to acquire them; or
ii: are ready to be processed beyond the initial treatment or to be used in a manufacturing operation holding company initial treatment
a: means—
i: breaking, cleaning, crushing, grading, grinding, leaching, screening, or sizing; or
ii: a treatment that is applied before concentration or, for a specified mineral not requiring concentration, that would have been applied before concentration if the specified mineral had required concentration; or
iii: concentration; and
b: does not include—
i: calcining or sintering; or
ii: the production of, or processes carried on in connection with the production of, alumina, or pellets or other agglomerated forms of iron loan mining holding company
a: holding shares in a mining company or a petroleum mining company; or
b: investing money in a mining company or a petroleum mining company; or
c: making loans to a mining company or a petroleum mining company mining or prospecting right
a: means an authority, concession, easement, lease, licence, option, permit, privilege, right, or title relating to exploring, searching, or mining for, or carrying on an operation to recover, a specified mineral; and
b: includes a share or interest in any such authority, concession, easement, lease, licence, option, permit, privilege, right, or title mining prospecting information
a: that is about the presence, absence, extent, or volume of specified minerals in an area; or
b: that is likely to assist in determining the presence, absence, extent, or volume of specified minerals in an area mining purposes
a: subscribing for shares in a mining company or in a mining holding company; or
b: paying calls on shares in a mining company or in a mining holding company; or
c: making loans to a mining company to enable it—
i: to finance its mining exploration expenditure or mining development expenditure; or
ii: to carry on its mining operations or associated mining operations; or
d: making, to a mining holding company, loans that are to be used—
i: to finance a mining company's mining exploration expenditure or mining development expenditure; or
ii: to finance a mining company's mining operations or associated mining operations mining share non-resident mining operator
a: is not resident in New Zealand; and
b: carries on, personally and actively in the field, a mining venture prescribed period
a: for an amount derived from a disposal of a mining share, the tax year in which the disposal occurs and the next 6 tax years; or
b: for an amount repaid for a loan made to a mining company or a mining holding company, the tax year in which the amount is repaid and the next 6 tax years prescribed proportion amount A amount B
a: amount A is the amount owing on all loans made by a holding company to a mining company; and
b: amount B is the amount owing on all loans by all holding companies to the mining company reinvestment profit
a: is excluded income of a company under any of sections CX 38 to CX 40
b: has not ceased to be reinvestment profit under section CU 15(7) amount associated mining operations company excluded income holding company initial treatment lease loan mining company mining development expenditure mining exploration expenditure mining holding company mining operations mining share mining venture New Zealand New Zealand company petroleum mining company resident in New Zealand share specified mineral tax year 1994 No 164 ss DN 2(10), DN 3(12), OB 1
CV: Income specific to certain entities
Contents
CV 1: Group companies
An amount that a company derives in an income year and that would not otherwise be income of the company is treated as its income if—
a: the company is for that income year a member of a wholly-owned group of companies; and
b: had the group of companies been a single company, the amount would have been income of that single company. amount company income income year wholly-owned group of companies 1994 No 164 s CK 1
CV 2: Crown Research Institutes
An amount that a Crown Research Institute derives is income of the institute if the amount is for the purpose of producing outputs relating to public good science and technology, as defined in section 2 amount Crown Research Institute income 1994 No 164 s CK 4(1)
CV 3: Australian wine producer rebate
An amount of Australian wine producer rebate derived by a New Zealand resident wine producer is income of the wine producer. amount Australian wine producer rebate income New Zealand resident Sections CV 3 CV 4 inserted 21 December 2005 section 4 Taxation (Urgent Measures) Act 2005
CV 4: Regulations: Australian wine producer rebate
Order in Council
1: For the purpose of enabling the Commissioner to administer the entitlement of New Zealand resident wine producers to Australian wine producer rebates in respect of wine produced in New Zealand, the Governor-General may from time to time, by Order in Council, make regulations relating to—
a: the claim by a New Zealand resident wine producer for payment of an Australian wine producer rebate in respect of wine produced in New Zealand that is sold in Australia:
b: the approval or verification of the entitlement of a New Zealand resident wine producer to a payment of an Australian wine producer rebate:
c: any matter necessary to give effect to a provision relating to Australian wine producer rebates in the agreement for the time being in force between the Government of New Zealand and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Force and effect
2: An Order in Council under subsection (1)—
a: has force and effect despite any provision in this Act or any other Inland Revenue Act:
b: may come into force On or after 1 July 2005:
c: may apply for Australian financial years commencing on or after 1 July 2005. Definitions
3: In this section,— Australian financial year wine amount Australian financial year Australian wine producer rebate Inland Revenue Acts New Zealand resident wine Sections CV 3 CV 4 inserted 21 December 2005 section 4 Taxation (Urgent Measures) Act 2005
CW: Exempt income
Contents
Income from business or trade-like activities
CW 1: Forestry companies established by Crown, Maori owners, and holding companies buying land with standing timber from founders
When this section applies
1: This section applies when a forestry company buys land with standing timber on it from a seller who is the Crown, the Maori owners, or a holding company of the forestry company. Land sold by Maori Trustee, trustee for Maori owners, or Maori incorporation
2: For the purposes of subsection (1),—
a: land sold to the forestry company by the Maori Trustee or by a trustee for a Maori owner is treated as if it had been sold by the beneficial owners :
b: land sold to the forestry company by a Maori incorporation is treated as if it had been sold by the members of the incorporation. Exempt income
3: The amount described in section CB 23(3) Relationship with section DP 8
4: Section DP 8 amount exempt income forestry company holding company Maori incorporation Maori owners standing timber trustee 1994 No 164 s DL 5(1)(d)(i)-(iii) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CW 1B: Treaty of Waitangi claim settlements: rights to take timber
When this section applies
1: This section applies when a person's right to take timber (the old right new rights
a: the sole reason for the new rights replacing the old right is to facilitate a Treaty of Waitangi claim settlement process; and
b: the rights and obligations of the new rights are equivalent to the old right, ignoring differences that are solely for the reason in paragraph (a). Exempt income
2: An amount under section CB 22(1)(b) Exception
3: Subsection (2) does not apply to an amount to the extent it is compensation paid, for the new rights replacing the old right, to the person who is granted the new rights. Relationship with section DP 8B
4: Section DP 8B amount exempt income income pay person right to take timber Section CW 1B inserted 29 August 2011 section 192 Taxation (Tax Administration and Remedial Matters) Act 2011
CW 2: Forestry encouragement agreements
When this section applies
1: This section applies when a person makes a forestry encouragement agreement under the Forestry Encouragement Act 1962 Exempt income: advance
2: An amount of income advanced to the person under the agreement is exempt income, even if the person is later relieved from some or all of their liability to repay the principal. Exempt income: interest
3: The amount from which the person is relieved in the circumstances described in subsection (4) is exempt income. Circumstances for purposes of subsection (3)
4: The circumstances are that—
a: the person is liable to pay interest on an advance made under the agreement; and
b: the interest has not been paid; and
c: the person has been denied a deduction for the interest; and
d: the person is relieved from some or all of their liability to pay the interest. amount deduction exempt income income interest 1994 No 164 s DL 6(2)(a), (3)
CW 3: Forestry companies and Maori investment companies
When this section applies
1: This section applies when a forestry company or a Maori investment company issues a qualifying debenture. Exempt income
2: Interest derived from the qualifying debenture is exempt income to the extent to which it is paid by the issue of a further qualifying debenture. exempt income forestry company interest Maori investment company pay qualifying debenture 1994 No 164 s DL 5(1)(a)
CW 3B: Pre-1990 forest land units: emissions trading scheme
Section CW 3B repealed 6 October 2009 section 745 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Income from holding property (excluding equity)
CW 4: Annuities under life insurance policies
When this section applies
1: This section applies when—
a: a person is paid an annuity under a life insurance policy offered or entered into in New Zealand by a life insurer; or
b: a person is paid an annuity under a life insurance policy offered or entered into outside New Zealand by a life insurer resident in New Zealand. Exempt income
2: The annuity is exempt income. Excluded annuities
3: An annuity that is excluded income of a superannuation fund under section CX 34 excluded income exempt income life insurance policy life insurer New Zealand offered or entered into in New Zealand resident in New Zealand superannuation fund 1994 No 164 s CB 9(f)
CW 5: Payments of interest: post-war credits
Interest derived by a person under section 2 of the Income Tax (Repayment of Post-War Credits) Act 1959 of the United Kingdom Parliament is exempt income. exempt income interest 1994 No 164 s CB 1(1)(b)
CW 6: Payments of interest: farm mortgages
Exempt income
1: Fifty percent of the interest that a person derives from a mortgage securing a loan made by a seller of a farm is exempt income, if—
a: the Rural Banking and Finance Corporation of New Zealand approves the mortgage; and
b: the Corporation gives the Commissioner notice of the approval and each variation. Exclusions
2: This section does not apply if the person is—
a: an absentee; or
b: a company; or
c: a Maori authority; or
d: a public authority; or
e: a trustee liable for income tax under sections HH 3 to HH 6 HZ 2
f: an unincorporated body. Relationship with section KE 1
3: A person who derives interest that is exempt income under this section is not entitled to a rebate for the interest under section KE 1 absentee Commissioner company exempt income income tax interest Maori authority mortgage notice public authority trustee 1994 No 164 s CB 1(1)(c), (2)
CW 7: Foreign-sourced interest
Interest that a person derives from a country or territory outside New Zealand is exempt income if—
a: the person was not resident in New Zealand during the period for which the interest was payable; and
b: the interest was exempt under the laws of the overseas country or territory from a tax that is substantially the same as income tax imposed under this Act. exempt income income tax interest New Zealand pay resident in New Zealand 1994 No 164 s CB 2(1)(e)
CW 8: Money lent to government of New Zealand
What this section applies to
1: This section applies to—
a: interest derived from money lent under a binding contract entered into on or after 29 July 1983; and
b: a redemption payment made on a commercial bill to which both the following apply; issue is defined in section 2
i: it was issued on or after 29 July 1983; and
ii: it was not issued under a binding contract entered into before that date. Exempt income
2: Interest or a redemption payment that is payable outside New Zealand is exempt income if—
a: it is derived by a person who is a non-resident; and
b: it is derived from or in relation to money lent to—
i: the government of New Zealand; or
ii: a local authority or a public authority; and
c: in the case of money lent to a local or public authority,—
i: it is lent for the purposes of a non-commercial activity carried on in New Zealand by the local or public authority; and
ii: the government of New Zealand has approved the exempt status of the interest or redemption payment. commercial bill exempt income interest local authority money lent New Zealand non-resident pay public authority redemption payment 1994 No 164 ss CB 2(1)(b), CZ 2 Income from equity
CW 9: Dividend derived by company from overseas
Exempt income
1: A dividend from a foreign company is exempt income if derived by a company that is—
a: resident in New Zealand; and
b: not a portfolio tax rate entity. Dividend withholding payment rules apply
2: The dividend withholding payment rules apply to the dividend. company dividend dividend withholding payment rules exempt income foreign company portfolio tax rate entity resident in New Zealand 1994 No 164 s CB 10(1) Section CW 9(1) substituted 1 October 2007 section 10(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section CW 9 list of defined terms portfolio tax rate entity inserted 1 October 2007 section 10(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CW 10: Dividend within New Zealand wholly-owned group
Exempt income
1: A dividend is exempt income if—
a: it is derived by a company ( recipient
b: it is derived from a company ( payer
c: the payer is not a foreign company; and
d: the payer is not a company that can derive only exempt income; and
e: the requirements in subsections (2) to (7) are met. Aligned balance dates
2: At the time the dividend is derived,—
a: the recipient and the payer have income years that end on the same date; or
b: a difference in balance dates—
i: is necessary to avoid a material distortion in the net income of 1 of them because aspects of a single business cycle would otherwise be split between 2 income years; and
ii: is not part of a tax avoidance arrangement. Exclusion: dividends from council-controlled organisations
3: The dividend must not be derived by a local authority from—
a: a council-controlled organisation; or
b: a port company, subsidiary company of a port company, or energy company that would be a council-controlled organisation if section 6(4) Exclusion: debt release dividends
4: The dividend must not be the release of an obligation to repay an amount lent, treated as a dividend under section CD 4(2) Exclusion: certain friendly society dividends
5: The dividend must not be derived by a friendly society from a company registered as an insurer under the Accident Insurance Act 1998 Exclusion: certain sickness, accident, or death benefit fund dividends
6: The dividend must not be derived by a trustee in trust for a sickness, accident, or death benefit fund from a company registered as an insurer under the Accident Insurance Act 1998 Relationship with section FZ 1
7: This dividend must not be a dividend for which a deduction arises under section FZ 1 amount company council-controlled organisation deduction dividend exempt income foreign company friendly society income year local authority net income New Zealand resident in New Zealand sickness accident or death benefit fund tax avoidance arrangement trustee wholly-owned group of companies 1994 No 164 s CB 10(2), (3)
CW 11: Dividend of conduit tax relief holding company
Exempt income: credit
1: If a conduit tax relief holding company derives a dividend with a conduit tax relief credit attached, the dividend is exempt income to the extent to which it is fully conduit tax relief credited. Exempt income: additional dividend
2: If a conduit tax relief holding company derives a conduit tax relief additional dividend, the conduit tax relief additional dividend is exempt income. conduit tax relief additional dividend conduit tax relief credit conduit tax relief holding company dividend exempt income fully conduit tax relief credited 1994 No 164 s CB 10(4), (5)
CW 11B: Proceeds of share disposal by qualified foreign equity investor
1: An amount that a person derives from the sale or other disposal by a qualifying foreign equity investor of a share, or option to buy a share, in a company (called the resident company
a: the resident company is resident in New Zealand; and
b: the share or option, or an option or convertible note relating to the share, is bought on a day that is 12 months or more before the day of the sale or other disposal; and
c: the person who buys the share or option, or the option or convertible note relating to the share, and disposes of the share or option is a qualifying foreign equity investor from the time of the purchase to the time of the disposal; and
d: at some time in the 12-month period that starts from the time of the purchase referred to in paragraph (b), the shares of the resident company are quoted on no official list of a recognised exchange; and
e: the resident company satisfies either or both of subsections (2) and (3). Requirements relating to main activity of resident company
2: A resident company satisfies this subsection if, throughout the period referred to in subsection (1)(c), the resident company does not have as a main activity 1 or more of—
a: land development:
b: land ownership:
c: mining:
d: provision of financial services:
e: insurance:
f: construction of public infrastructure assets:
g: acquisition of public infrastructure assets:
h: investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties. Requirements relating to resident company that provides capital to others
3: A resident company that has a main activity of providing capital in the form of debt or equity funding to other companies satisfies this subsection if—
a: throughout the period referred to in subsection (1)(c), each other company that is resident in New Zealand—
i: does not have, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
ii: does not have, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
iii: does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (c) and (e) to (g); and
iv: does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(d) and (h) and is not the provision of capital to other companies; and
b: throughout the period referred to in subsection (1)(c), each other company that is not resident in New Zealand does not provide capital, directly or indirectly, to a company that is resident in New Zealand and has, as a main activity, an activity that is referred to in subsection (2)(a) to (h); and
c: for each other company there is a time in the period referred to in subsection (1)(c) at which—
i: the shares of the other company are quoted on no official list of a recognised exchange; and
ii: the shares of the resident company are quoted on no official list of a recognised exchange. Some definitions
4: In this section— foreign exempt entity
a: is established as a legal entity under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
b: has persons (called in this definition members
c: under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the members; and
d: is resident in no territory that has laws that treat the legal entity as being subject to a tax on income other than as a body that handles income of the members; and
e: does not have a member who—
i: has, when treated as holding the interests of any person who is associated with the member under section OD 8(1)
ii: is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
f: does not have a member who, when treated as holding the interests of any person who is associated with the member under section OD 8(1)
i: would be entitled to receive an amount derived from a disposal to which this section would apply; and
ii: would receive an amount referred to in subparagraph (i) that, in the absence of this section, would have been reduced by a tax imposed by the Act on the amount or on the proceeds of the disposal in the hands of the legal entity; and
iii: would in any circumstances, under the laws laws subparagraph (ii); and
g: does not have a holder of a direct or indirect interest in the capital of the legal entity who—
i: is a resident of New Zealand; and
ii: holds a total direct or indirect interest of 10% or more in the capital of the legal entity, when treated as holding the interests of any person who is associated with the holder under section OD 8(1) foreign exempt partnership
a: is established under the laws of a territory that is approved for the purposes of this section by the Governor-General by an Order in Council or under the laws of a part of such a territory; and
b: consists of persons (called in this definition partners
c: under the laws of the territory, or of the part of the territory, is not subject to a tax on income other than as a body that handles income of the partners; and
d: has at least 1 partner (called in this definition a general partner
e: has at least 1 partner (called in this definition a special partner
f: does not have a general partner who is resident in no territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
g: does not have a partner who—
i: has, when treated as holding the interests of any person who is associated with the partner under section OD 8(1)
ii: is resident in no territory that is approved for the purpose of this section by the Governor-General by an Order in Council; and
h: does not have a partner who, when treated as holding the interests of any person who is associated with the partner under section OD 8(1)
i: would, under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
ii: would in any circumstances, under the laws laws subparagraph (i)
i: does not have a holder of a direct or indirect interest in the capital of the unincorporated body who—
i: is a resident of New Zealand; and
ii: holds a total direct or indirect interest of 10% or more in the capital of the unincorporated body, when treated as holding the interests of any person who is associated with the holder under section OD 8(1) foreign exempt person
a: is resident in a territory that is approved for the purposes of this section by the Governor-General by an Order in Council; and
b: is not part of an unincorporated body that satisfies paragraphs (a) to (c) of the definition of foreign exempt partnership
c: is not a legal entity that satisfies paragraphs (a) to (c) of the definition of foreign exempt entity
d: under the laws of the territory, or of the part of the territory, derives the proceeds from a disposal of shares or options that are held by the person; and
e: is not a person who—
i: would, under the Act in the absence of this section, be subject to tax on an amount derived from a disposal to which this section would apply; and
ii: would in any circumstances, under the laws laws subparagraph (i)
f: does not have a holder of a direct or indirect interest in the person who—
i: is a resident of New Zealand; and
ii: holds a total direct or indirect interest of 10% or more in the capital of the person, when treated as holding the interests of any person who is associated with the holder under section OD 8(1) qualifying foreign equity investor
a: a foreign exempt entity:
b: a person who is part of a foreign exempt partnership:
c: a foreign exempt person. Residency of territory
5: For the purpose of this section, whether a person is resident in a territory other than New Zealand is determined—
a: under a double tax agreement between New Zealand and the territory that is in force under the terms of the double tax agreement, if—
i: there is such a double tax agreement; and
ii: the double tax agreement provides for the residency of the person:
b: under the laws of the territory, if paragraph (a) does not apply. Approval and withdrawal of approval for territory
6: The Governor-General may, from time to time by Order in Council—
a: approve a territory for the purpose of this section:
b: withdraw the approval of a territory for the purpose of this section. amount business company dividend double tax agreement exempt income foreign exempt entity foreign exempt partnership foreign exempt person income insurance interest land payment personal property lease payment qualifying foreign equity investor recognised exchange resident in New Zealand royalty share tax Section CW 11B inserted 1 October 2005 section 174 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Section CW 11B(4) foreign exempt entity substituted 19 December 2007 section 20(1)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt entity amended 19 December 2007 section 20(1)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt entity amended 19 December 2007 section 20(1)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt entity added 19 December 2007 section 20(1)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt partnership substituted 19 December 2007 section 20(2)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt partnership amended 19 December 2007 section 20(2)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt partnership amended 19 December 2007 section 20(2)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt partnership added 19 December 2007 section 20(2)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt person substituted 19 December 2007 section 20(3)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt person amended 19 December 2007 section 20(3)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt person amended 19 December 2007 section 20(3)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(4) foreign exempt person added 19 December 2007 section 20(3)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(5)(a) substituted 19 December 2007 section 20(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CW 11B(5)(b) substituted 19 December 2007 section 20(4) Taxation (Business Taxation and Remedial Matters) Act 2007
CW 11C: Proceeds from share or option acquired under venture investment agreement
Exempt income: proceeds from share or option
1: An amount of income that a non-resident derives from the sale or other disposal of a share, or option to buy a share, in a company is exempt income if the requirements of subsections (2) to (5) are satisfied. Requirement relating to company at time of acquisition
2: The first requirement is that, when the non-resident first acquires a share, or option to buy a share, in the company in a way that satisfies subsection (3), the company must have in New Zealand—
a: more than 50% in value of the company's assets; and
b: more than 50% in number of the company's employees. Requirement relating to acquisition of first share or option
3: The second requirement is that, when the non-resident first acquires a share or option to buy a share ( first interest venture capital manager
a: the first interest, on behalf of the non-resident; and
b: another share or option that confers the same rights and imposes the same obligations as the first interest—
i: on behalf of the Venture Investment Fund or a company owned by the Venture Investment Fund; and
ii: under a venture investment agreement. Continuing requirement relating to company
4: The third requirement is that, while the non-resident holds the share or option, the company must not have 1 or more of the following as a main activity:
a: land development:
b: land ownership:
c: mining:
d: provision of financial services:
e: insurance:
f: construction of public infrastructure assets:
g: acquisition of public infrastructure assets:
h: investing with a main aim of deriving, from the investment, income in the form of interest, dividends, rent, or personal property lease payments that are not royalties. Requirement relating to situation at disposition of share or option
5: The fourth requirement is that, when the non-resident disposes of the share or option,—
a: the venture capital manager must have complied with the venture capital manager's obligations under the venture investment agreement; and
b: the non-resident must have complied with the non-resident's obligations under any agreement between the non-resident and the Venture Investment Fund or a company owned by the Venture Investment Fund; and
c: no person who is resident in New Zealand and no group of associated persons who are resident in New Zealand has a direct or indirect interest of more than 10% in the share or option. Venture investment agreement
6: In this section, venture investment agreement
a: is an agreement, relating to investment in companies, between parties that include—
i: a venture capital manager; and
ii: the Venture Investment Fund or a company owned by the Venture Investment Fund; and
b: provides for investments under the agreement to be managed by the venture capital manager; and
c: provides that an investment under the agreement must be in a company that, when the first investment in the company under the agreement is made, has in New Zealand—
i: more than 50% in value of the company's assets; and
ii: more than 50% in number of the company's employees. employee income interest non-resident resident in New Zealand share venture investment agreement Venture Investment Fund Section CW 11C inserted 3 April 2006 section 24(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Employee or contractor income
CW 12: Income of Governor-General
The following are exempt income:
a: the salary and allowance of the Governor-General paid under section 3 :
b: the salary of a person acting as the Administrator of the Government paid under section 8 exempt income 1994 No 164 s CB 7(a), (b) Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CW 13: Expenditure on account, and reimbursement, of employees
Exempt income: expenditure on account
1: Expenditure on account of an employee, being a payment to which section CE 5 Exempt income: reimbursement
2: An amount that an employer pays to an employee in connection with the employee's employment or service is exempt income of the employee to the extent to which it reimburses the employee for expenditure for which the employee would be allowed a deduction if the employment limitation did not exist. Estimated expenditure of employees
3: For the purposes of subsection (2),—
a: the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
b: the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates. Relationship with sections CW 13B and CW 13C
4: This section does not apply to an amount referred to in section CW 13B CW 13C Depreciation loss included
5: In this section, expenditure includes an amount of depreciation loss. amount deduction depreciation loss employee employer employment limitation exempt income expenditure on account of an employee 1994 No 164 s CB 12(1), (3), (3B), (3C) Section CW 13(1) amended 2 November 2012 section 242(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section CW 13(4) heading added 6 October 2009 section 746(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 13(4) added 6 October 2009 section 746(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 13(4) amended 7 December 2009 section 151 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section CW 13(5) heading added 6 October 2009 section 746(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 13(5) added 6 October 2009 section 746(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CW 13 list of defined terms depreciation loss inserted 6 October 2009 section 746(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 13B: Relocation payments
Exempt income
1: An amount that an employer pays to or on behalf of an employee in connection with the expenses of the employee in a work-related relocation is exempt income of the employee. Actual expenditure
2: The amount paid must be no more than the actual cost incurred by or on behalf of the employee on an expense that the Commissioner lists as an eligible relocation expense in a determination made under subsection (6). Time limit
3: Subsection (1) applies only to expenditure incurred to the end of the tax year following that in which the relocation occurs. For the purposes of this subsection, a temporary move that has not been treated as a work-related relocation under this section is ignored. Meaning of work-related relocation
4: For the purposes of this section, work-related relocation
a: because the employee's workplace is not within reasonable daily travelling distance of their residence; and
b: as a result of the employee—
i: taking up new employment with a new employer; or
ii: taking up new duties at a new location with their existing employer; or
iii: continuing in their current position but at a new location. Exemption from distance test
5: The requirement in subsection (4)(a) for a workplace to be beyond reasonable travelling distance of the person's residence does not apply to a person whose accommodation forms an integral part of their work. Determinations
6: The Commissioner may issue a determination for the purposes of this section under section 91AAR amount Commissioner employee employer exempt income tax year work-related relocation Section CW 13B inserted 6 October 2009 section 747 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 13C: Payments for overtime meals and certain other allowances
Exempt income: overtime meals
1: An amount that an employer pays to or on behalf of an employee for a meal for the employee when the employee is working overtime is exempt income of the employee. Exempt income: certain sustenance allowances
2: An amount that an employer pays to an employee as a sustenance allowance for the employee for a day is exempt income of the employee if—
a: the employee works a minimum of 7 hours on the day; and
b: their employment requires them—
i: to work outdoors and away from their employment base for most of the day; and
ii: to undertake a long period of physical activity in travelling through a neighbourhood or district on foot or by bicycle; and
c: it is not practicable for the employer to provide sufficient sustenance on the day for the period when the employee is working outdoors; and
d: the allowance recognises—
i: the arduous physical nature of the employee's work as described in paragraph (b); and
ii: that the employer would normally provide tea, coffee, water, or similar refreshments at the employment base in the course of their business. Eligibility requirements: overtime meals
3: Subsection (1) applies only if—
a: the employee has worked at least 2 hours' overtime on the day of the meal; and
b: either—
i: the employee's employment agreement provides for pay for overtime hours worked; or
ii: the employer has an established policy or practice of paying for overtime meals. Eligibility requirements: sustenance allowances
4: Subsection (2) applies only if the employer has an established policy or practice of paying a sustenance allowance. Actual cost or reasonable estimate
5: The amount paid must be—
a: the actual cost to the employee, and for an overtime meal referred to in subsection (1), with documentation required for amounts over $20 per meal; or
b: a reasonable estimate of the expenditure likely to be incurred by the employee or a group of employees for whom an amount is payable. Meaning of overtime
6: For the purposes of this section, overtime amount employee employer exempt income overtime pay Section CW 13C inserted 6 October 2009 section 747 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 14: Allowance for additional transport costs
Exempt income
1: An allowance that an employee receives from an employer to reimburse the employee's additional transport costs is exempt income to the extent to which the employee incurs the costs in connection with their employment and for the employer's benefit or convenience. Estimated expenditure of employees
2: For the purposes of subsection (1),—
a: the employer may make, for a relevant period, a reasonable estimate of the amount of expenditure likely to be incurred by the employee or a group of employees for which reimbursement is payable; and
b: the amount estimated is treated as if it were the amount incurred during the period to which the estimate relates. Meaning of additional transport costs
3: In this section, additional transport costs
a: the day or time of day when the work duties are performed :
b: the need to transport any goods or material for use or disposal in the course of the employee's work :
c: the requirement to fulfil a statutory obligation :
d: a temporary change in the employee's place of work while in the same employment :
e: any other condition of the employee's work :
f: the absence of an adequate public passenger transport service that operates fixed routes and a regular timetable for the employee's place of work. Quantifying additional transport costs
4: Additional transport costs are quantified as follows:
a: when the additional transport costs are attributed to a factor described in any of subsection (3)(a) to (e), the amount by which the costs are more than the employee's ordinarily expected travel costs without reference to that factor :
b: when the additional transport costs are attributed to the factor described in subsection (3)(f), the amount by which the costs are more than $5 for each day on which the employee attends work :
c: except in special circumstances, the costs of travelling any distance over 70 kilometres in 1 day are not taken into account in calculating additional transport costs. additional transport costs amount employee employer exempt income 1994 No 164 s CB 12(2)-(4) Subsection (3)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (4)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CW 15: Amounts derived during short-term visits
Exempt income
1: Income that a non-resident person derives in a tax year from performing personal or professional services in New Zealand during a visit is exempt income if—
a: the visit is for 92 or fewer days (counting the days of arrival and departure as a whole day each); and
b: the total number of days on which the person is present in New Zealand in the tax year is 92 or fewer; and
c: the services are performed for or on behalf of a person who is not resident in New Zealand; and
d: the amount derived from the personal or professional services is chargeable in the country or territory in which the person is resident with a tax that is substantially the same as income tax imposed under this Act. Exclusion
2: This section does not apply to the income of a public entertainer. Meaning of public entertainer
3: In this section, public entertainer
a: circus performers, dancers, lecturers, motion picture artists, musicians, radio artists, singers, television artists, and theatre artists; and
b: athletes, boxers, wrestlers, and other professional sportspersons. amount exempt income income income tax New Zealand non-resident public entertainer resident in New Zealand tax year 1994 No 164 s CB 2(1)(c)
CW 16: Amounts derived by visiting entertainers (including sportspersons)
Exempt income: cultural activities
1: Income that a non-resident entertainer derives from carrying out their activity or performance in New Zealand during a visit is exempt income if—
a: the activity or performance occurs under a cultural programme of the New Zealand government or an overseas government; or
b: the activity or performance occurs under a cultural programme wholly or partly sponsored by the New Zealand government or an overseas government; or
c: the activity or performance occurs as part of a programme of an overseas foundation, trust, or other organisation that—
i: exists wholly or partly to promote cultural activity; and
ii: is not carried on for the private pecuniary profit of any member, proprietor, or shareholder. Exempt income: sporting activities
2: Income that a non-resident entertainer derives from carrying out an activity or performance that relates to a game or sport in New Zealand during a visit is exempt income if the participants are the official representatives of a body that administers the game or sport in an overseas country. Exempt income: employer of non-resident entertainer
3: If income derived from an activity or performance of a non-resident entertainer would be exempt income under this section if derived by the non-resident entertainer, that amount is exempt income if derived by a person who—
a: provides the services of the non-resident entertainer during the visit to New Zealand; and
b: is 1 of the following:
i: the entertainer's employer; or
ii: a company of which the entertainer is an officer; or
iii: a firm of which the entertainer is a principal. Meaning of non-resident entertainer
4: In this section, non-resident entertainer subpart OE
a: a solo or group performance by actors, compères, dancers, entertainers, musicians, singers, or other artists, whether for cultural, educational, entertainment, religious, or other purposes; or
b: lectures, speeches, or talks for any purpose; or
c: a sporting event or sporting competition of any nature. amount company employer exempt income income New Zealand non-resident non-resident entertainer 1994 No 164 s CB 2(1)(a)
CW 17: Amounts derived by visiting crew of pleasure craft
Exempt income
1: Income that a non-resident crew member derives from performing services in New Zealand relating to a pleasure craft while it is in New Zealand is exempt income if—
a: the services are performed for a person who is not resident in New Zealand; and
b: the pleasure craft is the subject of a security given under section 116
c: the pleasure craft is not owned, wholly or partly or directly or indirectly, by—
i: a resident of New Zealand; or
ii: a controlled foreign company. Some definitions
2: In this section,— non-resident crew member
a: is a crew member of a pleasure craft; and
b: is a non-resident, a matter determined without applying section OE 1(2)
c: is not present in New Zealand on more than 365 days in any 2 year period that starts on or after 28 May 2002; and
d: is not in New Zealand unlawfully under the Immigration Act 1987 pleasure craft section 2 amount controlled foreign company exempt income income New Zealand non-resident non-resident crew member pleasure craft resident in New Zealand year 1994 No 164 s CB 2(1)(f), (3B), (4)
CW 18: Amounts derived by overseas experts and trainees in New Zealand by government arrangement
Exempt income: personal services
1: Income that a non-resident person derives from performing personal services, including professional services, in New Zealand during a visit is exempt income if—
a: the services are performed for or on behalf of a non-resident employer; and
b: the purpose of the visit is all or any of the following:
i: providing professional or expert advice or assistance :
ii: teaching or lecturing :
iii: making investigations :
iv: receiving education, training, or experience; and
c: the visit occurs under an arrangement for assistance entered into by the government of New Zealand. Exempt income: maintenance or bursaries
2: An amount of income that a non-resident person derives from a payment of maintenance or of an allowance, or from a bursary or scholarship, provided for or paid to the person during or in relation to their presence in New Zealand during a visit, is exempt income if—
a: the purpose of the visit is all or any of the following:
i: providing professional or expert advice or assistance :
ii: teaching or lecturing :
iii: making investigations :
iv: receiving education, training, or experience; and
b: the visit occurs under an arrangement for assistance entered into by the government of New Zealand. Some definitions
3: In this section,— arrangement for assistance entered into by the government of New Zealand
a: in relation to or under—
i: the Commonwealth Education Scheme; or
ii: a programme of the United Nations, or any specialised agency of the United Nations, for cultural, economic, educational, expert, professional, or technical assistance; or
b: for the purpose of providing education, training, or experience for officers of the Samoan, Cook Islands, Niuean, or Tokelauan public services, or for persons resident in Samoa, the Cook Islands, Niue, or Tokelau; or
c: with the government of any other country or with any international organisation, if it is an arrangement that—
i: is for the purpose of providing cultural, economic, educational, expert, professional, or technical assistance, or administrative or other training, or the means or facilities for making investigations, whether upon a bilateral, co-operative, multilateral, mutual, or unilateral basis; and
ii: is in principle similar to any arrangement to which paragraph (a) or (b) applies international organisation non-resident person section OE 1(2) amount arrangement arrangement for assistance entered into by the government of New Zealand Commonwealth employer exempt income income international organisation New Zealand non-resident person resident in New Zealand 1994 No 164 s CB 2(1)(d), (3), (4) Subsection (1)(b)(i) (iii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (2)(a)(i) (iii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CW 19: Income for military or police service in operational area
When this section applies
1: This section applies if a member of the New Zealand Defence Force or the police (the member Exempt income
2: The following amounts are exempt income of the member:
a: an amount of operational allowance:
b: an amount exempted by a decision of the ministerial committee under subsection (3). Ministerial committee
3: A ministerial committee that includes the Prime Minister, the Minister of Defence, the Minister of Police, the Minister of Finance, and the Minister of Foreign Affairs may, for the purposes of subsection (2)(b), decide to exempt an amount of income derived by a member for being in an operational area. Some definitions
4: In this section,— operational allowance
a: is paid directly and solely for being in an operational area; and
b: is not—
i: a regular force gratuity:
ii: a bonus or bounty for re-engagement in a regular force operational area
a: to which the Minister of Defence has ordered the deployment of New Zealand Defence Force members for a specific mission authorised by the Government; and
b: that the Chief of Defence Force delineates for that mission. amount exempt income income New Zealand operational allowance operational area Section CW 19 substituted 18 March 2007 section 11 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CW 20: Deferred military pay for active service
Exempt income
1: Deferred military pay that is granted or paid under the Defence Act 1990 Some definitions
2: In this section,— active service area deferred military pay active service area deferred military pay exempt income New Zealand 1994 No 164 s CB 9(b)
CW 21: Value of board for religious society members
The value of personal board and lodging and other basic personal necessities received by a member of a religious society or order is exempt income if—
a: the member's sole occupation is service in a religious society or order; and
b: it is in the nature of the service that members are not paid for their work and do not receive a reward for it, other than those necessities. exempt income 1994 No 164 s CB 6(b)
CW 22: Jurors' and witnesses' fees
Fees paid by the Crown to jurors and to witnesses, other than expert witnesses, are exempt income. exempt income 1994 No 164 s CB 6(c) Certain income of transitional resident This heading was inserted 1 October 2005 section 25(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 25(2)
CW 22B: Certain income derived by transitional resident
Income derived by a person who is a transitional resident is exempt income if the income is a foreign-sourced amount that is none of the following:
a: employment income of a type described in section CE 1
b: income from a supply of services. employment income exempt income foreign-sourced amount income transitional resident Section CW 22B inserted 1 October 2005 section 25(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 25(2) Income from living allowances, compensation, and government grants
CW 23: Pensions
Exempt income
1: The following are exempt income:
a: a pension or allowance under the War Pensions Act 1954 :
b: a pension or allowance of any other kind granted in New Zealand or overseas by any government relating to any war or to disability attributable to or aggravated by service in the armed forces or the police :
c: a payment of portable New Zealand superannuation :
d: a payment of portable veteran's pension :
e: an overseas pension. Meaning of overseas pension
2: In this section, overseas pension
a: an overseas pension, to the extent of sums subtracted under section 70
i: a monetary benefit paid under Part 1
ii: a monetary benefit, other than New Zealand superannuation or a veteran's pension, paid under the Social Welfare (Transitional Provisions) Act 1990 :
b: an overseas pension to the extent to which it is subject to an arrangement under section 70(3) section 70(3)(b) amount exempt income income-tested benefit New Zealand superannuation overseas pension portable New Zealand superannuation portable veteran's pension veteran's pension 1994 No 164 s CB 5(1)(a), (f), (fa), (o) Subsection (1)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(a)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CW 23B: Reinvested amount from foreign superannuation scheme in Australia
An amount of income derived in an income year by a natural person as a withdrawal from a foreign superannuation scheme is exempt income if—
a: the person in the income year invests the amount in another foreign superannuation scheme; and
b: each foreign superannuation scheme is constituted in Australia and is—
i: an Australian approved deposit fund:
ii: an Australian exempt public sector superannuation scheme:
iii: an Australian regulated superannuation fund:
iv: an Australian retirement savings account. Australian approved deposit fund Australian exempt public sector superannuation scheme Australian regulated superannuation fund Australian retirement savings account exempt income foreign superannuation scheme income income year Section CW 23B inserted 1 April 2005 section 12(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CW 24: Annuities from Crown Bank Accounts
An annuity is exempt income if—
a: it is granted by the Executive Council of New Zealand; and
b: it is paid from the Crown Bank Account; and
c: it is not designated as being subject to tax. exempt income New Zealand tax 1994 No 164 s CB 7(c)
CW 25: Services for members of Parliament
An amount is exempt income of a person to the extent to which it is income of the person and is not exempt income under another provision of subpart CW section 20A(7)
a: the amount is—
i: referred to in section 20A
ii: paid under section 25
b: the amount is—
i: provided to a person to whom any of section 25(1)(b) to (e)
ii: provided to a member of the family of a person described in subparagraph (i). amount exempt income income Section CW 25 replaced 17 July 2013 section 154(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CW 26: Maintenance payments
The following are exempt income:
a: child support or spousal maintenance under the Child Support Act 1991 :
b: a payment in the nature of maintenance out of money belonging to a person's spouse, civil union partner, de facto partner, former spouse, former civil union partner or former de facto partner exempt income 1994 No 164 s CB 9(a) Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Paragraph (b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse, civil union partner, former spouse or former civil union partner spouse or former spouse Paragraph (b) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner, de facto partner, former spouse, former civil union partner or former de facto partner spouse, civil union partner, former spouse or former civil union partner
CW 27: Allowances and benefits
Exempt income
1: The following are exempt income:
a: a monetary benefit under the Social Security Act 1964 :
b: a payment under Part 5 or 13 of the Accident Insurance Act 1998 Part 11 of the Injury Prevention, Rehabilitation, and Compensation Act 2001
i: a payment to an insured person for treatment or rehabilitation :
ii: an independence allowance :
iii: a funeral grant :
iv: a survivor's grant :
v: a childcare payment :
c: a participation allowance under regulations made under the Social Security Act 1964 :
d: a disabled workshop payment :
e: an amount derived by a trustee of a trust created for the benefit of persons harmed by thalidomide, or a distribution to a beneficiary from the trust :
f: an amount derived by a trustee of the New Zealand Agent Orange Trust that represents the settlement fund and income attributable to the fund, or a distribution to a beneficiary from the trust. Meaning of disabled workshop payment
2: In this section, disabled workshop payment Disabled Persons Employment Promotion Act 1960 amount disabled workshop payment exempt income income income-tested benefit tax year trustee 1994 No 164 ss CB 5(1)(e), (l), (m), (q), CB 6(a), (e) Subsection (1)(a) (b)(v) (c) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(b)(i) (iv) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CW 28: Compensation payments
Exempt income
1: An amount of income from the following payments is exempt income:
a: a payment relating to incapacity for work :
b: a payment under the Workers Compensation Act 1956 :
c: a payment under the Criminal Injuries Compensation Act 1963 :
d: a distribution from funds approved by the Minister in charge of War Pensions to ex-prisoners of war held in German concentration camps in World War 2 :
e: a payment under the laws of a State of the Federal Republic of Germany or the Republic of Austria to the victims of National Socialist persecution :
f: payments under schedule 1 clause 3(b) :
g: payments of compensation, solatium payments, or payments to lessors for the purchase of leases under the Maori Reserved Land Amendment Act 1997 section 23 Some definitions
2: In this section,— accident insurance contract section 13 of the Accident Insurance Act 1998 payment relating to incapacity for work
a: a payment under section 25 of the National Provident Fund Act 1950 :
b: a payment by a friendly society, but not a payment referred to in paragraph (d) or (e) of the definition of the term accident compensation payment section CF 1(2) :
c: a payment from a sickness, accident, or death benefit fund to which the person was a contributor when the period of incapacity began, but not a payment referred to in paragraph (d) or (e) of the definition of the term accident compensation payment section CF 1(2) :
d: a payment under a policy of personal sickness or accident insurance, or an accident insurance contract, but neither a payment referred to in paragraph (d) or (e) or
f: of the definition of the term accident compensation payment section CF 1(2) payment relating to incapacity for work: paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or accident insurance contract exempt income friendly society interest lease payment relating to incapacity for work sickness accident or death benefit fund 1994 No 164 s CB 5(1)(b), (c), (g), (h), (j), (k), (n), (p) Subsection (1)(a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CW 28B: Payment of certain accident compensation payments
The amount paid to a person (the claimant Injury Prevention, Rehabilitation, and Compensation Act 2001
a: the claimant pays an amount to another person for providing a key aspect of social rehabilitation referred to in the definition of personal service rehabilitation payment in section OB 1
b: the amount paid by the claimant for a key aspect of social rehabilitation for the income year is equal to or more than the amount of personal service rehabilitation payments, after any deduction of tax under this Act, paid to the claimant for the year. exempt income income year payment personal service rehabilitation payment Section CW 28B inserted 1 July 2008 section 21 Taxation (Business Taxation and Remedial Matters) Act 2007
CW 29: Scholarships and bursaries
A basic grant or an independent circumstances grant under regulations made under section 303 exempt income 1994 No 164 s CB 9(d)
CW 30: Film production grants
An amount derived by a company as a large budget screen production grant is exempt income. company exempt income large budget screen production grant 1994 No 164 s CB 9(i) Income of certain entities
CW 31: Public authorities
Exempt income
1: An amount of income derived from sinking funds relating to the debt of a public authority is exempt income. Exempt income
2: Any other amount of income derived by a public authority is exempt income. Exclusion: amounts received in trust
3: Subsection (2) does not apply to an amount of income that a public authority derives as a trustee. Exclusion: superannuation schemes
4: Subsection (2) does not apply to a public authority to the extent to which it is a superannuation scheme. Exclusion: certain public authorities
5: Subsection (2) does not apply to an amount of income derived by the following public authorities:
a: Public Trust :
b: State enterprises :
c: Crown Research Institutes :
d: the department or ministry that is currently responsible for administering the Marketing Act 1936 Meaning of public authority
6: In this section, public authority amount Crown Research Institute exempt income income public authority State enterprise superannuation scheme trustee 1994 No 164 s CB 3(a), (c), (e) Subsection (5)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CW 32: Local authorities
Exempt income
1: An amount of income derived from sinking funds relating to the debt of a local authority is exempt income. Exempt income
2: Any other amount of income derived by a local authority is exempt income. Exclusion: amounts received in trust
3: Subsection (2) does not apply to an amount of income that a local authority derives as a trustee. Exclusion: certain amounts from commercial undertakings
4: Subsection (2) does not apply to an amount of income that—
a: is derived by a local authority; and
b: is not rates; and
c: is derived from—
i: a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority:
ii: an organisation that is a port company, a subsidiary of a port company, or an energy company and that would be a council-controlled organisation if section 6(4) Exclusion: local authority as port operator
5: Subsection (2) does not apply to an amount of income derived by a local authority in its capacity as a port operator from a port-related commercial undertaking. Port operator port-related commercial undertaking section 38(4) amount council-controlled organisation exempt income income local authority trustee 1994 No 164 s CB 3(b), (c) Section CW 32(4)(c)(i) substituted 19 December 2007 section 22 Taxation (Business Taxation and Remedial Matters) Act 2007
CW 33: Local and regional promotion bodies
Exempt income: beautification societies
1: An amount of income derived by an association or society is exempt income if—
a: the association or society is established mainly to—
i: advertise, beautify, or develop a city or other district so as to attract population, tourists, trade, or visitors :
ii: create, develop, or increase amenities for the general public in a city or other district; and
b: none of the funds of the association or society is used, or is or may become available to be used, for any other purpose that is not a charitable purpose. Exclusion: council-controlled organisation
2: Subsection (1) does not apply to an amount of income derived—
a: by a council-controlled organisation :
b: by a local authority from a council-controlled organisation. Exempt income: trustees of Cornwall Park
3: An amount of income that the trustees of Cornwall Park, Auckland, derive from the property of the trust is exempt income. amount charitable purpose council-controlled organisation exempt income income local authority trustee 1994 No 164 s CB 4(1)(j), (l), (3) Subsections (1)(a)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section CW 33 list of defined terms associated person repealed 6 October 2009 section 748 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CW 34: Charities: non-business income
Exempt income
1: The following are exempt income:
a: an amount of income derived by a trustee in trust for charitable purposes :
b: an amount of income derived by a society or institution established and maintained exclusively for charitable purposes and not carried on for the private pecuniary profit of any individual. Exclusion: trustees, society, or institution not registered
1B: This section does not apply to an amount of income if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity. Exclusion: business income
2: This section does not apply to an amount of income derived from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in subsection (1). Exclusion: council-controlled organisation income
3: This section does not apply to income derived by—
a: a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
b: a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority. amount business charitable purpose council-controlled organisation exempt income income local authority trustee 1994 No 164 s CB 4(1)(c), (e), (3) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section CW 34(1B) heading inserted 1 July 2008 section 65 Charities Act 2005 Section CW 34(1B) inserted 1 July 2008 section 65 Charities Act 2005 Section CW 34(3) substituted 19 December 2007 section 23 Taxation (Business Taxation and Remedial Matters) Act 2007
CW 35: Charities: business income
Exempt income
1: Income derived directly or indirectly from a business carried on by, or for, or for the benefit of a trust, society, or institution of a kind referred to in section CW 34(1)
a: the trust, society, or institution carries out its charitable purposes in New Zealand; and
ab: the trustee or trustees of the trust, the society, or the institution is or are, at the time that the income is derived, registered as a charitable entity; and.
b: no person with some control over the business is able to direct or divert, to their own benefit or advantage, an amount derived from the business. Subsections (3) to (8) expand on this subsection. Exclusion
2: This section does not apply to income derived by—
a: a council-controlled organisation, other than a council-controlled organisation operating a hospital as a charitable activity:
b: a local authority from a council-controlled organisation, other than from a council-controlled organisation operating a hospital as a charitable activity on behalf of the local authority. Carrying on a business: trustee
3: For the purposes of subsection (1), a trustee is treated as carrying on a business if—
a: the trustee derives rents, fines, premiums, or other revenues from an asset of the trust; and
b: the asset was disposed of to the trust by a person of a kind described in subsection (5)(b); and
c: either—
i: the person retains or reserves an interest in the asset; or
ii: the asset will revert to the person. Charitable purposes in New Zealand and overseas
4: For the purposes of subsection (1)(a), if the charitable purposes of the trust, society, or institution are not limited to New Zealand, income derived from the business in a tax year is apportioned reasonably between those purposes in New Zealand and those outside New Zealand. Only the part apportioned to the New Zealand purposes is exempt income. Control over business
5: For the purposes of subsection (1)(b) for a tax year, a person is treated as having some control over the business, and as being able to direct or divert amounts from the business to their own benefit or advantage if, in the tax year,—
a: they are, in any way, whether directly or indirectly, able to determine, or materially influence the determination of,—
i: the nature or extent of a relevant benefit or advantage; or
ii: the circumstances in which a relevant benefit or advantage is, or is to be, given or received; and
b: their ability to determine or influence the benefit or advantage arises because they are—
i: a settlor or trustee of the trust by which the business is carried on; or
ii: a shareholder or director of the company by which the business is carried on; or
iii: a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
iv: a person associated with a settlor, trustee, shareholder, or director referred to in any of subparagraphs (i) to (iii). Control: settlor asset disposed of to trust
6: For the purposes of subsection (5), a person is treated as a settlor of a trust, and as gaining a benefit or advantage in the carrying on of a business of the trust, if—
a: they have disposed of an asset to the trust, and the asset is used by the trust in the carrying on of the business; and
b: they retain or reserve an interest in the asset, or the asset will revert to them. No control
7: For the purposes of subsection (1)(b), a person is not treated as having some control over the business merely because—
a: they provide professional services to the trust or company by which the business is carried on; and
b: their ability to determine, or materially influence the determination of, the nature or extent of a relevant benefit or advantage arises because they—
i: provide the services in the course of and as part of carrying on, as a business, a professional public practice; or
ii: are a trustee company; or
iii: are Public Trust; or
iv: are the Maori Trustee. Benefit or advantage
8: For the purposes of subsection (1)(b), a benefit or advantage to a person—
a: may or may not be something that is convertible into money :
b: unless excluded under paragraph (d), includes deriving an amount that would be income of the person under 1 or more of the following provisions:
i: section CA 1(2) :
ii: sections CB 1 to CB 21 :
iii: section CB 28 :
iv: sections CC 1 CC 3 to CC 8 CC 9 :
v: section CD 1 Dividend :
vi: sections CE 1 CE 8 :
vii: section CF 1 :
viii: section CG 3 :
ix: sections CQ 1 CQ 4 :
c: includes retaining or reserving an interest in an asset in the case described in subsection (3), if the person has disposed of the asset to the trust or the asset will revert to them; and
d: does not include earning interest on money lent, if the interest is payable at no more than the current commercial rate, given the nature and term of the loan. Non-exempt business income
9: If an amount derived from the carrying on of a business by or for a trust is not exempt income because of a failure to comply with subsection (1)(b), the amount is trustee income. amount associated person business charitable purpose company council-controlled organisation director exempt income income interest local authority money lent New Zealand shareholder tax year trustee trustee company trustee income 1994 No 164 s CB 4(1)(e), (3) Section CW 35(1)(ab) inserted 1 July 2008 section 66 Charities Act 2005 Section CW 35(2) substituted 19 December 2007 section 24 Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (8)(a) (b)(ix) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (8)(b)(i) (viii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (8)(b)(v) amended 1 April 2005 section 13(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting Dividend Income
CW 36: Charitable bequests
Exempt income
1: An amount of income derived by a deceased's executor or administrator is exempt income to the extent to which the requirements in subsections (2) and (3) are met, having regard to all relevant matters including—
a: the terms of the deceased's will, including the rights of annuitants, legatees, and other beneficiaries; and
b: the nature and extent of the debts and liabilities of, and other charges against, the estate and their likely effect on the income and assets available for distribution to the beneficiaries; and
c: the shares and prospective shares of the beneficiaries in the income and assets of the estate. Gift to charity
2: The first requirement is that the amount arises from or is attributable to assets of the estate that have been left to a trust, society, or institution of a kind referred to in section CW 34(1) Exempt in hands of charity
3: The second requirement is that the amount, if derived by the trust, society, or institution or by a business carried on by, or for, or for the benefit of it, would be exempt income under section CW 34 CW 35 Registration as charitable entity not required until end of income year that follows income year in which deceased died
4: An amount of income derived by a deceased's executor or administrator that is derived during the period beginning on the deceased's date of death and ending at the end of the income year that follows the income year in which the deceased died is not prevented from being exempt income under this section merely because the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity.
5: For the purposes of subsection (4) sections CW 34 CW 35
6: This section does not apply to an amount of income derived after the end of the income year that follows the income year in which the deceased died if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, registered as a charitable entity. amount business distribution exempt income income New Zealand 1994 No 164 s CB 4(1)(d) Section CW 36(4) heading added 1 July 2008 section 67 Charities Act 2005 Section CW 36(4) added 1 July 2008 section 67 Charities Act 2005 Section CW 36(5) added 1 July 2008 section 67 Charities Act 2005 Section CW 36(6) added 1 July 2008 section 67 Charities Act 2005
CW 37: Friendly societies
An amount of income derived by a friendly society is exempt income, except to the extent to which the amount is derived from—
a: a business carried on beyond the membership of the friendly society; or
b: a company registered as an insurer under the Accident Insurance Act 1998 amount business company exempt income friendly society income 1994 No 164 s CB 4(1)(a)
CW 38: Funeral trusts
Interest or a dividend derived by a trustee in trust for a fund is exempt income if, when the interest or dividend is derived by the trustee,—
a: the sole purpose of the fund is the payment of the expenses associated with the funerals of—
i: employees of an employer :
ii: spouses, civil union partners, de facto partners :
iii: surviving spouses, civil union partners and de facto partners
b: the employer has at least 10 employees; and
c: all persons eligible for benefits from the fund are eligible equally for benefits from the fund; and
d: no contributions to the fund are made by a person who is not the employer or an employee of the employer; and
e: the fund is approved by the Commissioner. Commissioner dividend employee employer exempt income interest trustee 1994 No 164 s CB 5(1)(ib) Paragraph (a)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Paragraph (a)(ii) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouses, civil union partners spouses Paragraph (a)(ii) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouses, civil union partners, de facto partners spouses, civil union partners Paragraph (a)(iii) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouses and civil union partners spouses Paragraph (a)(iii) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouses, civil union partners and de facto partners spouses and civil union partners
CW 39: Bodies promoting amateur games and sports
An amount of income derived by a club, society, or association is exempt income if—
a: the club, society, or association is established mainly to promote an amateur game or sport; and
b: the game or sport is conducted for the recreation or entertainment of the general public; and
c: no part of the funds of the club, society, or association is used or is available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them. amount associated person exempt income income 1994 No 164 s CB 4(1)(h), (2)
CW 40: TAB and racing clubs
Exempt income: racing organisations
1: An amount of income derived by any of the following bodies is exempt income:
a: the New Zealand Racing Board :
b: New Zealand Thoroughbred Racing :
c: Harness Racing New Zealand :
d: the New Zealand Greyhound Racing Association (Incorporated). Exempt income: racing clubs
2: An amount of income derived by a racing club, as defined in section 5 Racing Act 2003 amount associated person exempt income income 1994 No 164 s CB 4(1)(i), (2) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CW 40B: Income from conducting gaming-machine gambling
An amount of income derived by a person that is gross gambling proceeds from gaming-machine gambling is exempt income if—
a: the person is authorised to conduct the gaming-machine gambling under the Gambling Act 2003
b: the person complies with the Gambling Act 2003 exempt income gaming-machine gambling gaming-machine operator's licence gaming-machine venue licence gross gambling proceeds net gambling proceeds Section CW 40B inserted 3 April 2006 section 27 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CW 41: Bodies promoting scientific or industrial research
Exempt income
1: An amount of income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income if—
a: the society or association is approved by the Royal Society of New Zealand; and
b: none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them. Exclusion
2: This section does not apply to a Crown Research Institute. amount associated person Crown Research Institute exempt income income 1994 No 164 ss CB 4(1)(b), (2), CK 4(2)
CW 42: Veterinary services bodies
Exempt income: veterinary clubs
1: An amount of income derived by a veterinary association, club, or society is exempt income if—
a: the association, club, or society was established mainly to promote efficient veterinary services in New Zealand; and
b: none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them. Exempt income: Veterinary Council
2: An amount of income derived by the Veterinary Council of New Zealand is exempt income. amount associated person exempt income income New Zealand 1994 No 164 s CB 4(1)(f), (2)
CW 43: Herd improvement bodies
An amount of income derived by a herd improvement association or society is exempt income if—
a: the association or society was established mainly to promote the improvement of the standard of dairy cattle in New Zealand; and
b: none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them. amount associated person exempt income income New Zealand 1994 No 164 s CB 4(1)(g), (2)
CW 44: Community trusts
An amount of income derived by the trustee of a community trust is exempt income. amount community trust exempt income income trustee 1994 No 164 s CB 4(1)(m) Income from certain activities
CW 45: Non-resident aircraft operators
Exempt income
1: An amount of income derived by a non-resident aircraft operator from air transport from New Zealand, or from air transport to New Zealand, is exempt income Determination
2: A determination by the Commissioner for the purposes of subsection (1) may relate to a class of non-resident aircraft operators or a class of resident aircraft operators. Some definitions
3: In this section,— air transport from New Zealand
a: means the carriage outside New Zealand by an aircraft of cargo, mail, or passengers emplaned or embarked on the aircraft at an airport in New Zealand; and
b: includes a flight by the aircraft between the airport in New Zealand where the emplaning or embarking occurred and another airport in New Zealand at which the aircraft calls before leaving New Zealand on the international flight for which the emplaning or embarking occurred air transport to New Zealand
a: means the carriage to an airport in New Zealand by an aircraft of cargo, mail, or passengers emplaned or embarked on the aircraft at an airport in a country or territory outside New Zealand; and
b: includes a flight by the aircraft to the airport in New Zealand for carriage to which the emplaning or embarking occurred from another airport in New Zealand at which the aircraft calls en route non-resident aircraft operator
a: is engaged in the business of operating an aircraft for air transport from an airport; and
b: is resident in a country or territory outside New Zealand and is not resident in New Zealand. air transport from New Zealand air transport to New Zealand amount business Commissioner exempt income income income tax New Zealand non-resident aircraft operator resident in New Zealand 1994 No 164 s CB 14 Section CW 45(1) amended 23 March 2020 section 256(1) section 256(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 45(3) air transport from New Zealand replaced 23 March 2020 section 256(2) section 256(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 45(3) air transport to New Zealand inserted 23 March 2020 section 256(3) section 256(5) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 Section CW 45 list of defined terms air transport to New Zealand inserted 23 March 2020 section 256(4) Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020
CW 45B: Non-resident company involved in exploration and development activities
Exempt income
1: An amount of income derived by a non-resident company from exploration and development activities in an offshore permit area is exempt income if it is derived in the period that—
a: starts on the beginning of the 2005-06 income year for the non-resident company; and
b: ends on 31 December 2009. Some definitions
2: In this section,— exploration and development activities
a: operating a ship to provide seismic survey readings:
b: drilling an exploratory well or other well offshore permit area
a: in New Zealand; and
b: on the seaward side of the mean high-water mark; and
c: a permit area or part of a permit area. amount exempt income exploration and development activities exploratory well New Zealand non-resident company offshore permit area permit area Section CW 45B inserted 1 October 2005 section 11 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CW 46: Disposal of companies' own shares
An amount of income derived by a company from disposing of shares in the company is exempt income if—
a: the company acquired the shares; and
b: the acquisition was treated under section 67A(1) amount cancellation company exempt income income share 1994 No 164 s CB 15
CW 47: New Zealand companies operating in Niue
Exempt income: income wholly or mainly from Niue
1: An amount of income derived in a tax year by a New Zealand company that derives its income wholly or mainly from Niue is exempt income. Exclusion
2: Subsection (1) does not apply if the company, if it were a foreign company, would at any time during the tax year be a controlled foreign company. Exempt income: dividends
3: A dividend derived in a tax year from a New Zealand company that derives its income wholly or mainly from Niue is exempt income, unless the dividend is derived by—
a: a person who is resident in New Zealand; or
b: a company that is a controlled foreign company at any time during the tax year; or
c: a trustee of a trust of which a settlor or beneficiary is resident in New Zealand during the tax year. Exempt income: Niue development projects
4: An amount of income derived by a New Zealand company from a business or enterprise that the company carries on in Niue is exempt income if—
a: the business or enterprise is declared by an Order in Council made under subsection (7) to be a development project for the purposes of this section; and
b: the company's income is derived wholly or mainly from that business or enterprise; and
c: the amount is derived from sources in Niue; and
d: the amount is derived while the Order in Council is in force. Exclusions
5: Subsections (1), (3), and (4) do not apply to—
a: an amount of income derived from sources in New Zealand; or
b: a dividend, to the extent to which it constitutes distribution of an amount derived by the company from sources in New Zealand. Attributed CFC income and FIF income
6: This section does not restrict the application of section CQ 1 CQ 4 Order in Council declaring Niue development project
7: The Governor-General may make an Order in Council declaring a business or enterprise to be a development project for the purposes of this section if satisfied that the business or enterprise—
a: has been or will be entered upon wholly or mainly for the purpose of developing Niue; or
b: is or will be important in the development of Niue. amount attributed CFC income business company controlled foreign company dividend exempt income FIF FIF rules foreign company income New Zealand company resident in New Zealand settlor source in New Zealand tax year trustee 1994 No 164 s CB 8
CW 48: Stake money
Stake or prize money for a dog race, horse race, or trotting race is exempt income if—
a: it is paid by a club that is licensed to use the totalisator under the Racing Act 2003
b: the race is held outside New Zealand. exempt income New Zealand 1994 No 164 s CB 9(c), (ca)
CW 49: Providing standard-cost household service
An amount of income derived in an income year by a natural person from providing a standard-cost household service is exempt income if—
a: the amount is exempt income under a determination made under section 91AA(2)(a)
b: the person—
i: may be treated, under a determination made under section 91AA
ii: in calculating the person's income tax liability for the income year, elects to include in the taxpayer's annual total deduction no amount that, in the absence of this paragraph, would be a deduction incurred by the taxpayer in providing the standard-cost household service. amount annual total deduction exempt income income income tax liability income year standard-cost household service Section CW 49 substituted 1 October 2005 section 175 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
CW 49B: Interest paid under KiwiSaver Act 2006
Interest paid by the Commissioner under section 84 Section CW 49B inserted 1 December 2006 section 231 KiwiSaver Act 2006 See section 232 See clause 2(2) KiwiSaver Act Commencement Order 2006 Income of, and distributions by, certain international funds Heading inserted 19 December 2007 section 25(1) Taxation (Business Taxation and Remedial Matters) Act 2007
CW 49C: Income of certain international funds
An amount of income derived by a person is exempt income if the person is—
a: the trustee of the Niue International Trust Fund:
b: the trustee of the Tokelau International Trust Fund. amount exempt income income Niue International Trust Fund Tokelau International Trust Fund trustee Section CW 49C inserted 19 December 2007 section 25(1) Taxation (Business Taxation and Remedial Matters) Act 2007
CW 49D: Distributions by certain international funds
An amount of income derived by a person is exempt income if the income is a distribution by—
a: the trustee of the Niue International Trust Fund:
b: the trustee of the Tokelau International Trust Fund. amount distribution exempt income income Niue International Trust Fund Tokelau International Trust Fund trustee Section CW 49D inserted 19 December 2007 section 25(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Income exempt under other Acts
CW 50: Exemption under other Acts
An amount of income expressly exempted from income tax by any other Act is exempt income. amount exempt income income income tax 1994 No 164 s CB 9(e) Income exempt under Parts F to I
CW 51: Exemption under Parts to be rewritten
An amount of income is exempt income if it is exempt under a provision in any of Parts F to I amount exempt income income 1994 No 164 s BD 1(2)(a)
CX: Excluded income
Contents
Goods and services tax
CX 1: GST
The following are excluded income of a registered person:
a: output tax on goods and services they supply :
b: GST payable to them by the Commissioner. Commissioner excluded income goods GST payable output tax registered person services 1994 No 164 s ED 4(1), (3)(b), (g), (7) Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and KiwiSaver and complying superannuation fund tax credits This heading was inserted 1 July 2007 section 6 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007
CX 1B: KiwiSaver and complying superannuation fund tax credits
A payment by the Commissioner of an amount of a tax credit under subpart KJ amount Commissioner excluded income Section CX 1B inserted 1 July 2007 section 6 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Fringe benefits Introductory provisions
CX 2: Meaning of fringe benefit
Meaning
1: A fringe benefit
a: is provided by an employer to an employee in connection with their employment; and
b: either—
i: arises in a way described in any of sections CX 6 CX 8 CX 9 CX 11 to CX 15
ii: is an unclassified benefit; and
c: is not a benefit excluded from being a fringe benefit by any provision of this subpart. Arrangement to provide benefit
2: A benefit that is provided to an employee through an arrangement made between their employer and another person for the benefit to be provided is treated as having been provided by the employer. Past, present, or future employment
3: It is not necessary to the existence of a fringe benefit that an employment relationship exists when the employee receives the benefit. Relationship with subpart ND
4: Subpart ND arrangement employee employer employment fringe benefit unclassified benefit 1994 No 164 ss CI 1, CI 2(1)
CX 3: Excluded income
A fringe benefit is excluded income of the employee. employee excluded income fringe benefit
CX 4: Relationship with assessable income
To the extent to which a benefit that an employer provides to an employee in connection with their employment is assessable income, the benefit is not a fringe benefit. assessable income employee employer employment fringe benefit 1994 No 164 s CI 1(o)(i)
CX 5: Relationship with exempt income
Exempt income not fringe benefit
1: To the extent to which a benefit that an employer provides to an employee in connection with their employment is exempt income, the benefit is not a fringe benefit. Exclusions
2: Subsection (1) does not apply to—
a: a payment of a premium on a life insurance policy that is excluded from being expenditure on account of an employee under section CE 5(3)(f) to (i) :
b: an allowance that is exempt income under section CW 13 Exempt cash payment not fringe benefit
3: To the extent to which a benefit that an employer provides to an employee in connection with their employment would have been exempt income if it had been paid in cash, the benefit is not a fringe benefit. Exclusion
4: Subsection (3) does not apply to interest, dividends, or an allowance under subsection (2)(b). dividend employee employer employment exempt income expenditure on account of an employee fringe benefit interest life insurance policy premium 1994 No 164 s CI 1(o)(ii), (iii) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Fringe benefits
CX 6: Private use of motor vehicle
When fringe benefit arises
1: A fringe benefit arises when—
a: a motor vehicle is made available to an employee for their private use; and
b: the person who makes the vehicle available to the employee—
i: owns the vehicle:
ii: leases or rents the vehicle:
iii: has a right to use the vehicle under an agreement or arrangement with the employee or a person associated with the employee. Exclusion: work-related vehicles
2: Subsection (1) does not apply when the vehicle is a workrelated vehicle. Exclusion: emergency calls
3: Subsection (1) does not apply when the vehicle is used for an emergency call. Exclusion: absences from home
4: Subsection (1) does not apply when the employee is absent from home, with the vehicle, for a period of at least 24 hours continuously, if the employee is required, in the performance of their duties, to use a vehicle and regularly to be absent from home. Use on part of day
5: For the purposes of subsections (3) and (4), the whole of the day on which a motor vehicle is used as described in the applicable subsection is treated as a day on which the vehicle is not available for private use. emergency call employee fringe benefit lease motor vehicle private use work-related vehicle 1994 No 164 ss CI 1(a), (b), CI 11(16), OB 1 private use or enjoyment Subsection (1)(b) substituted 1 April 2006 section 28 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CX 6B: Employer or associated person treated as having right to use vehicle under arrangement
When this section applies
1: This section applies for the application of the FBT rules to an agreement or arrangement—
a: between an employer, or a person associated with the employer, and an employee, or a person associated with the employee; and
b: transferring to the employer or person associated with the employer a right to use a motor vehicle under terms agreed between the parties. Person treated as having right to use vehicle
2: The employer or associated person is treated as having a right to use the motor vehicle for a period during which the employee—
a: uses the vehicle privately:
b: has a right to use the vehicle privately. employee employer FBT rules lease motor vehicle Section CX 6B inserted 1 April 2006 section 29(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 29(2) subpart ND
CX 7: Private use of motor vehicle: use by more than 1 employee
If, on any day, a motor vehicle is made available by an employer for the private use of more than 1 employee, this availability is treated as a single instance. The taxable value of the fringe benefit is reduced by the total amount of any contributions paid by an employee or employees. amount employee employer fringe benefit motor vehicle private use 1994 No 164 s CI 2(4)
CX 8: Subsidised transport
A fringe benefit arises when an employer provides subsidised transport to an employee. employee employer fringe benefit subsidised transport 1994 No 164 s CI 1(d)
CX 9: Employment-related loans
When fringe benefit arises
1: A fringe benefit arises when an employer provides a loan to an employee. Exclusions
2: Subsection (1) does not apply to a loan made—
a: as an employee share loan :
b: under a share purchase scheme :
c: by a superannuation fund to the extent to which the value of the loan constitutes income of the fund under section GD 6 fund):
d: as an advance of salary and wages, if,—
i: in the period for which the employer is required to forward a return to the Commissioner under subpart ND
ii: the contract of employment does not require the employer to make the advance. Loan owing
3: The employer provides a fringe benefit in a tax year in which the loan is owing. The circumstances in which a loan is owing include a case in which, under the arrangement for the loan, an amount is payable in the future, or would be payable in the future if a particular event happened, and the employee or an associated person is or would be liable to pay the amount. amount arrangement associated person employee employee share loan employer employment-related loan fringe benefit income share purchase scheme superannuation fund tax year 1994 No 164 ss CI 1(c), (i), (ia), (j), OB 1 owing Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (2)(c) amended 1 April 2006 section 30(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting fund): fund). See section 29(2) subpart ND Subsection (2)(d) inserted 1 April 2006 section 30(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 29(2) subpart ND
CX 10: Employment-related loans: loans by life insurers
When fringe benefit treated as arising
1: A life insurer provides a benefit that is treated as an employment-related loan if—
a: the life insurer makes a loan to a person who holds a life insurance policy ( person A
b: the life insurance policy is offered or entered into in New Zealand; and
c: either—
i: the loan is made because of the capacity or status of person A as a policyholder; or
ii: the interest charged on the loan depends on the capacity or status of person A as a policyholder. Life insurer as employer
2: For the purposes of the FBT rules, the life insurer is treated as an employer and person A or the person associated with them is treated as an employee. Meaning of life insurer
3: In this section, life insurer
a: means a person who is the insurer under the life insurance policy :
b: includes—
i: a person associated with the life insurer:
ii: a person with whom the life insurer has entered into an arrangement relating to the making of the loan. arrangement associated person employee employer employment-related loan FBT rules fringe benefit interest life insurance policy life insurer offered or entered into in New Zealand 1994 No 164 s CI 2(8), (9) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CX 11: Services for members of Parliament
When fringe benefit arises
1: A fringe benefit arises when travel, accommodation, attendance, and communications services are exempt income under section CW 25 Relationship with sections CX 5 and CX 24
2: This section overrides sections CX 5 CX 24 exempt income fringe benefit Section CX 11 replaced 17 July 2013 section 155(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
CX 12: Contributions to superannuation schemes
When fringe benefit arises
1: A fringe benefit arises when an employer contributes to a superannuation scheme for the benefit of an employee. Exclusion
2: This section does not apply if the contribution is a specified superannuation contribution. contribution employee employer fringe benefit specified superannuation contribution superannuation scheme 1994 No 164 s CI 1(g), (k)
CX 13: Contributions to sickness, accident, or death benefit funds
A fringe benefit arises when an employer makes a contribution for the benefit of an employee to a sickness, accident, or death benefit fund. contribution employee employer fringe benefit sickness, accident, or death benefit fund 1994 No 164 s CI 1(e)
CX 14: Contributions to funeral trusts
A fringe benefit arises when an employer makes a contribution to a fund in the circumstances described in section CW 38 contribution employer fringe benefit 1994 No 164 s CI 1(eb)
CX 15: Contributions to life or health insurance
When fringe benefit arises
1: A fringe benefit arises when an employer pays a specified insurance premium or makes a contribution to the insurance fund of a friendly society for the benefit of an employee. Exclusion
2: This section does not apply to a premium or contribution described in section CZ 15 Meaning of specified insurance premium
3: In this section, specified insurance premium spouse, civil union partner or de facto partner Life insurance
4: The first kind of policy referred to in subsection (3) is a policy of insurance on the life of the employee or their spouse, civil union partner or de facto partner
a: for policies other than whole of life policies, the minimum term is—
i: 10 years; or
ii: 5 years, for a policy whose maturity date is no earlier than the date on which a life assured reaches 60 years of age; and
b: the only benefits payable earlier than 10 years from the start of the policy or its maturity date, whichever is earlier, are—
i: benefits payable for the death of a life assured; or
ii: additional benefits payable for an accident to a life assured or disease or sickness of a life assured; and
c: the policy—
i: provides for a payment on the death of a life assured of a benefit that is not a return of premiums, is substantially capital, and is not materially less than the total benefit payable under the policy otherwise than for death; or
ii: is a policy on the life of a person who, because of ill health or physical disability, is unable to effect a policy of the kind described in subparagraph (i) at ordinary rates; or
iii: is a deferred life assurance policy on the life of a child. Life insurance: pension benefit
5: The second kind of policy referred to in subsection (3) is a policy described in subsection (4), or that would be described if it satisfied subsection (4)(c)(i), and under which the only benefits payable are for a life assured and by way of—
a: a pension starting on or after the date on which the life assured reaches 60 years of age and continuing for the life of the employee, their spouse, civil union partner or de facto partner
b: on the death of the life assured,—
i: the return of the part of the premiums paid for the assurance to secure the payment of a pension dependent on the life of the employee, their spouse, civil union partner or de facto partner
ii: the payment of the part of each bonus declared on the policy attributable to the part of the premiums described in subparagraph (i). Health insurance
6: The third kind of policy referred to in subsection (3) is a policy of insurance under which the benefits are payable only for—
a: an accident, whether fatal or not, to the employee, their spouse, civil union partner or de facto partner
b: disease or sickness of the employee, their spouse, civil union partner or de facto partner contribution employee employer friendly society fringe benefit life insurance specified insurance premium year 1994 No 164 ss CI 1(f), (ja), CI 3(8A), OB 1 policy of life insurance policy of pension insurance policy of personal accident or sickness insurance Subsection (3) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (4) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (4) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (5)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (5)(a) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (5)(b)(i) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (5)(b)(i) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (6)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (6)(a) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (6)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (6)(b) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
CX 16: Benefits provided to employees who are shareholders or investors
Benefit provided in connection with employment
1: If a company or a trustee of a group investment fund provides a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund, the benefit is treated as having been provided in connection with the employment. The shares or investment may be held in the employee's own right or beneficially. Whether fringe benefit or dividend
2: A company or a trustee of a group investment fund that has provided a non-cash benefit to an employee who holds shares in the company or who is an investor in the fund may choose to treat the benefit as a fringe benefit or a dividend. If the company or trustee does not make an election, the benefit is treated as a fringe benefit. If the company or trustee chooses to treat the benefit as a dividend, the FBT rules do not apply. Exclusion
3: Neither subsection (1) nor subsection (2) applies to a non-cash benefit provided by a company to a non-executive director of the company. Non-cash benefits
4: Subsection (2) applies to non-cash benefits that would,—
a: if section CD 23 section CD 3 shareholder; and
b: if section CX 4 Notice of election
5: The company or trustee must give notice to the Commissioner of the election referred to in subsection (2) within the time allowed for filing a fringe benefit tax return for the period in which the benefit was provided. Commissioner company dividend employee employment FBT rules fringe benefit investor non-executive director notice return share shareholder trustee unclassified benefit 1994 No 164 ss CI 2(2), (3), CI 2A Section CX 16(4)(a) amended 7 September 2010 section 198(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Exclusions and limitations
CX 17: Benefits provided instead of allowances
When not fringe benefit
1: A benefit that an employer provides to an employee in connection with their employment is not a fringe benefit to the extent to which it removes the need that would otherwise exist for the employer to pay the employee an allowance of 1 of the following kinds:
a: an allowance that, if it had been paid,—
i: would have been exempt income under section CW 13
ii: would have been paid for reasons other than to enable the employee to provide a benefit to another person; or
b: an allowance that reimburses the employee for transport costs that—
i: would have been incurred both in connection with their employment and for the benefit of the employer in travelling between home and work; and
ii: would have been attributable to any 1 or more of the factors set out in section CW 14(3) transport costs); or
c: an amount that, if it had been paid, would have been exempt income under section CW 13B Temporary change in workplace
2: A benefit that an employer provides to an employee is not a fringe benefit if it—
a: is in substitution for an allowance described in subsection (1)(b); and
b: is brought about because the employee has a temporary change in their place of work while in the same employment; and
c: reimburses the employee for transport costs that would have been incurred relating to travel by one or more of the employee's spouse, civil union partner, or de facto partner, and relatives for the purpose of visiting the employee in the temporary place of work; and
d: has a value that is no more than the amount that would be provided under the allowance described in subsection (1)(b). employee employer employment exempt income fringe benefit relative 1994 No 164 s CI 1(o)(iv), (v) The heading to subsection (1) inserted 1 April 2006 section 31(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 31(3) subpart ND Section CX 17(1)(b)(ii) amended 6 October 2009 section 749 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section CX 17(1)(c) added 6 October 2009 section 749 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2) inserted 1 April 2006 section 31(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 31(3) subpart ND The list of defined terms was amended 1 April 2006 section 31(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by adding the expression , relative See section 31(3) subpart ND
CX 17B: Transport in vehicle other than motor vehicle
A benefit that an employer provides to an employee in the form of transport of the employee in a vehicle is not a fringe benefit if the vehicle—
a: is not a motor vehicle; and
b: is not designed principally for the carriage of passengers. employer employee fringe benefit motor vehicle Section CX 17B inserted 30 March 2017 section 388(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
CX 18: Benefits to enable performance of duties
The taxable value of a benefit that an employer provides to an employee by way of subsidised transport, or in the form of expenditure that an employer incurs on accommodation or transport provided to an employee, is zero if the expenditure—
a: relates to travel by the employee in order for them to perform their employment duties; and
b: does not relate to the providing or taking of leave or a vacation; and
c: is not increased as a result of the benefit. employee employer subsidised transport 1994 No 164 s CI 4(4)
CX 18B: Business tools
When use of business tool not fringe benefit
1: The private use of a business tool that an employer provides to an employee, and the availability for private use of such a business tool, is not a fringe benefit if—
a: the business tool is provided mainly for business use; and
b: the cost of the business tool to the employer, including the amount of any deduction for the cost of the business tool that the employer may make under section 20(3) Use away from employer's premises
2: For the purposes of subsection (1), a business tool that is not taken to and used on the employer's premises may nevertheless be provided mainly for business use if the employee performs a significant part of the employee's employment duties away from the premises. business tool business use employee employer fringe benefit Section CX 18B inserted 1 April 2006 section 32(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 32(2) subpart ND
CX 19: Benefits to non-executive directors
A transfer of value to a non-executive director that is a dividend under section CD 12(2) dividend fringe benefit non-executive director transfer of value 1994 No 164 s CI 1(na)
CX 20: Benefits provided on premises
When not fringe benefit
1: A benefit, other than free, discounted, or subsidised travel, accommodation, or clothing, is not a fringe benefit if the benefit is—
a: provided to the employee by the employer of the employee and received or used by the employee on the premises of—
i: the employer:
ii: a company that is in the same group of companies as the employer:
b: provided to the employee by a company that is in the same group of companies as the employer of the employee and received or used by the employee on the premises of—
i: the employer:
ii: the company that provides the benefit. Premises of person
2: In this section, the premises of a person—
a: include premises that the person owns or leases:
b: include premises, other than those referred to in paragraph (a), on which an employee of the person is required to perform duties for the person:
c: do not include premises occupied by an employee of the person for residential purposes. company employee employer employer's premises fringe benefit group of companies lease 1994 No 164 s CI 1(q) Subsection (1) substituted 1 April 2006 section 33(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 33(4) subpart ND Subsection (2) substituted 1 April 2006 section 33(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 33(4) subpart ND The list of defined terms was amended 1 April 2006 section 33(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting company group of companies See section 33(4)
CX 20B: Benefits related to health or safety
A benefit that an employer provides to an employee is not a fringe benefit to the extent to which it—
a: is related to the employee's health or safety; and
b: is aimed at hazard management in the workplace as contemplated in the Health and Safety in Employment Act 1992
c: would be excluded by section CX 20 employee employer employment fringe benefit Section CX 20B inserted 1 April 2006 section 34(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 34(2) subpart ND
CX 21: Benefits provided by charitable organisations
When not fringe benefit
1: A charitable organisation that provides a benefit to an employee does not provide a fringe benefit except to the extent to which—
a: the employee receives the benefit mainly in connection with their employment; and
b: the employment consists of the carrying on by the organisation of a business whose activity is outside its benevolent, charitable, cultural, or philanthropic purposes. When employer provides charge facilities
2: Subsection (1) does not apply, and the benefit provided is a fringe benefit, if a charitable organisation provides a benefit to an employee by way of short-term charge facilities and the value of the benefit from the short-term charge facilities for the employee in a tax year exceeds 5% of the employee's salary or wages for the tax year. Meaning of short-term charge facilities
3: For the purposes of the FBT rules, a short-term charge facility
a: enables an employee of a charitable organisation to obtain goods or services that have no connection with the organisation or its operations by buying or hiring the goods or services or charging the cost of the goods or services to an account; and
b: places the liability for some or all of the payment for the goods or services on the organisation; and
c: is not a fringe benefit under section CX 9 business charitable organisation employee employment fringe benefit 1994 No 164 s CI 1(m) The heading to subsection (1) inserted 1 April 2006 section 35(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 35(2) subpart ND Subsections (2) (3) inserted 1 April 2006 section 35(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 35(2) subpart ND
CX 22: Non-liable payments
A benefit received by an employee is not a fringe benefit to the extent to which it is received in a quarter or in an income year in which they derive 1 or more source deduction payments, all of which are not liable for income tax. employee fringe benefit income tax income year quarter source deduction payment 1994 No 164 s CI 1(n)
CX 23: Assistance with tax returns
An employer's assistance with the preparation of an employee's income statement or return of income is not a fringe benefit when the expenditure incurred in providing the assistance is expenditure for which the employee would have been allowed a deduction, if it had been incurred by the employee, under section DB 3 deduction employee employer fringe benefit income statement return of income 1994 No 164 s CI 1(la)
CX 24: Accommodation
The value of accommodation that an employer provides to an employee in connection with the employment or services is not a fringe benefit. accommodation employee employer employment fringe benefit 1994 No 164 s CI 1(p) Section CX 24 substituted 6 October 2009 section 750(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 25: Entertainment
When not fringe benefit
1: A benefit in a form of entertainment described in section DD 2 When is fringe benefit
2: A benefit in a form of entertainment described in section DD 2
a: the employee does not receive or use it in the course of employment; and
b: the employee does not receive or use it as a necessary consequence of their employment duties; and
c: either—
i: the employee may choose when to receive or use the benefit; or
ii: the entertainment is of a kind described in section DD 7 employee employer employment fringe benefit 1994 No 164 s CI 1(r)
CX 26: Distinctive work clothing
When not fringe benefit
1: Distinctive work clothing that an employer provides to an employee is not a fringe benefit, whether provided by sale or otherwise. Meaning of distinctive work clothing
2: In this section, distinctive work clothing
a: is worn by an employee as, or as part of, a uniform that can be identified with the employer—
i: through the permanent and prominent display of a name, logo, or other identification that the employer regularly uses in carrying on their activity or undertaking; or
ii: because the colour scheme, pattern, or style is readily associated with the employer; and
b: is worn in the course, or as an incident, of employment; and
c: is not clothing that employees would normally wear for private purposes. distinctive work clothing employee employer employment fringe benefit 1994 No 164 ss CI 1(s), OB 1 distinctive work clothing
CX 26B: Contributions to income protection insurance
An employer who satisfies a liability to pay, or contribute to the payment of, a premium for income protection insurance for the benefit of an employee does not provide a fringe benefit to the employee if a payment of the insurance to the employee would be assessable income of the employee. contribution employee employer fringe benefit Section CX 26B inserted 1 April 2006 section 36(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 36(2) subpart ND
CX 27: Services provided to superannuation fund
A fringe benefit does not arise if services are provided to a superannuation fund to the extent to which the superannuation fund would have been allowed a deduction for the expenditure incurred in providing the services if the expenditure had been incurred by the superannuation fund. deduction fringe benefit superannuation fund 1994 No 164 s CI 1(l)
CX 27B: Goods provided at discount by third parties
When this section applies
1: This section applies if an employer and a person who is not associated with the employer have an arrangement through which goods are provided by the person at a discount. When not fringe benefit
2: A discount provided by the person to an employee in a group of employees is not a fringe benefit if—
a: the person offers a discount to a group of persons that—
i: negotiates the discount on an arm's-length basis; and
ii: does not include the group of employees; and
iii: is comparable in number to the group of employees; and
b: the discount offered to the group of employees is the same or less than the discount offered to the group described in paragraph (a). arrangement associated person employee employer fringe benefit Section CX 26B inserted 1 April 2006 section 37(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 37(2) subpart ND Definitions
CX 28: Meaning of emergency call
Emergency call
a: the employee makes the visit from their home in the course of their employment; and
b: the purpose of the visit is to provide—
i: essential services relating to the operation of the plant or machinery of the employer, or of their client or customer; or
ii: essential services relating to the maintenance of services provided by a local authority or a public authority; or
iii: essential services relating to the carrying on of a business for the supply of energy or fuel to the public; or
iv: emergency services relating to the health or safety of any person; and
c: the employer, their client or customer, or a member of the public requests the services; and
d: except when paragraph (b)(iv) applies, the services are required to be performed between the hours of 6.00 pm and 6.00 am on days other than a Saturday, Sunday, or statutory public holiday, and at any time on other days. business emergency call employee employer employment local authority public authority 1994 No 164 s OB 1 emergency call
CX 29: Meaning of employee share loan
Meaning
1: Employee share loan
a: the loan is made for the sole purpose of enabling the employee to acquire, under a scheme of acquisition,—
i: shares, rights, or options in the company that is their employer :
ii: shares, rights, or options in a company that is associated with their employer; and
b: the employee uses the loan only for the purpose of the acquisition; and
c: the employee beneficially owns the shares, rights, or options throughout the term of the loan; and
d: the employee must immediately repay the loan in full if they stop being the beneficial owner of any of the shares, rights, or options; and
e: the company issuing the shares, rights, or options must maintain a dividend-paying policy throughout the term of the loan. Exclusions
2: This section does not apply—
a: to shares, rights, or options in a qualifying company :
b: to a loan made under a share purchase scheme :
c: to an employer and an employee who are associated persons. associated person company dividend employee employee share loan employer qualifying company share 1994 No 164 s OB 1 employee share loan benefit Subsections (1)(a)(i) (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CX 30: Meaning of private use
Private use
a: the employee's use of the vehicle for travel between home and work; and
b: any other travel that confers a private benefit on the employee. employee motor vehicle private use 1994 No 164 s OB 1 private use or enjoyment
CX 31: Meaning of unclassified benefit
Unclassified benefit
a: not a benefit referred to in any of sections CX 6 to CX 15
b: not a benefit excluded under this subpart. employee employer employment fringe benefit unclassified benefit 1994 No 164 s CI 1(h)
CX 32: Meaning of work-related vehicle
Meaning
1: Work-related vehicle
a: if the employer owns the vehicle, the form of identification that the employer regularly uses in carrying on their undertaking or activity; or
b: if the employer rents the vehicle, the form of identification—
i: that the employer regularly uses in carrying on their undertaking or activity; or
ii: that the person from whom it is rented regularly uses in carrying on their undertaking or activity. Exclusion: motorcar
2: Subsection (1) does not apply to a motorcar. Exclusion: private use
3: A motor vehicle is not a work-related vehicle on any day on which the vehicle is available for the employee's private use, except for private use that is—
a: travel to and from their home that is necessary in, and a condition of, their employment; or
b: other travel in the course of their employment during which the travel arises incidentally to the business use. business use employee employer employment motor vehicle motorcar work-related vehicle 1994 No 164 s OB 1 work related vehicle Insurance
CX 33: Life insurers and fully reinsured persons
Persons to whom this section applies
1: The amounts described in subsection (2) are excluded income of—
a: a life insurer :
b: a person who is carrying on a business of providing life insurance but who is treated as not carrying on a business of providing life insurance because they have full reinsurance. Excluded income
2: The amounts are—
a: a premium derived by the life insurer or the person under a life insurance policy; or
b: a claim receivable by the life insurer or the person under a life reinsurance policy. amount business claim excluded income full reinsurance life insurance life insurance policy life insurer life reinsurance policy premium 1994 No 164 ss CM 3, CM 12(c), (d) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CX 34: Superannuation fund deriving amount from life insurance policy
When this section applies
1: This section applies when a superannuation fund invests funds in a life insurance policy offered or entered into in New Zealand. Excluded income
2: An amount that the superannuation fund derives from the policy is excluded income. amount excluded income life insurance policy offered or entered into in New Zealand superannuation fund 1994 No 164 s CL 2
CX 35: Resident insurance underwriters
When this section applies
1: This section applies when a natural person or an unincorporated body of natural persons—
a: is resident in New Zealand; and
b: carries on a business of providing general insurance or guarantees against loss, damage, or risk; and
c: as part of the business, is liable under an insurance contract, whether or not named in it, to pay, or to contribute towards the payment of, some or all of an amount claimable by the person insured under the contract. Excluded income
2: Income that the natural person or persons derive from carrying on the business outside New Zealand is excluded income to the extent to which it is income not referred to in section OE 4(1)(e) or (f) or (g) or (h) or (l) or (m) or (n) amount business excluded income general insurance income insurance contract New Zealand payment resident in New Zealand 1994 No 164 s CN 5 Petroleum mining
CX 36: Disposal of ownership interests in controlled petroleum mining entities
Excluded income
1: The consideration that a person derives from disposing of shares or trust interests in a controlled petroleum mining entity is excluded income of the person. Application of Tax Administration Act 1994
2: Section 65 consideration controlled petroleum mining entity dispose exempt income share 1994 No 164 s CJ 6
CX 37: Farm-out arrangements for petroleum mining
Farm-in expenditure under a farm-out arrangement is excluded income of a petroleum miner who is the farm-out party in the farm-out arrangement. excluded income farm-in expenditure farm-out arrangement petroleum miner 1994 No 164 s CJ 4(1) Mineral mining
CX 38: Disposal of mining shares
When subsection (2) applies
1: Subsection (2) applies when—
a: a mining company derives an amount from disposing of a mining share; and
b: the disposal is to a person other than a mining company or a mining holding company; and
c: the company has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2)
d: the excess amount would, if this section did not exist, be income of the company under any of sections CB 1 to CB 4 Excluded income
2: The excess amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period. When subsection (4) applies
3: Subsection (4) applies when—
a: a mining company ( seller
b: the disposal is to a mining company or to a mining holding company ( buyer
c: the seller has an excess amount because the amount derived from disposing of the share is more than the cost of the share calculated under section DU 11(2)
d: the excess amount would, if this section did not exist, be income of the seller under any of sections CB 1 to CB 4 Excluded income
4: The excess amount is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer. amount excluded income income mining company mining holding company mining purposes mining share prescribed period 1994 No 164 s DN 2(2)
CX 39: Disposal of mining shares acquired with reinvestment profit
When subsection (2) applies
1: Subsection (2) applies when—
a: a company derives an amount from disposing of a mining share; and
b: an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2)
c: some or all of the amount derived from the disposal would, if this section did not exist, be income of the company under section CU 14 Excluded income
2: The amount that would be income is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period. When subsection (4) applies
3: Subsection (4) applies when—
a: a company ( seller
b: the disposal is to a mining company or to a mining holding company ( buyer
c: an amount of the reinvestment profit of the seller is used in calculating the deduction for the cost of the mining share under section DU 11(2)
d: some or all of the amount derived from the disposal would, if this section did not exist, be income of the seller under section CU 14 Excluded income
4: The amount that would be income is excluded income of the seller to the extent to which it consists of mining shares issued to it in the buyer. When subsection (6) applies
5: Subsection (6) applies when—
a: a company derives an amount from disposing of a mining share; and
b: the disposal is of the kind described in section CU 20
c: an amount of the reinvestment profit of the company is used in calculating the deduction for the cost of the mining share under section DU 11(2)
d: some or all of the amount derived from the disposal would, if this section did not exist, be income of the company under section CU 14 Excluded income
6: The amount that would be income is excluded income of the company to the extent to which it consists of mining shares. amount company deduction excluded income income mining company mining holding company mining purposes mining share prescribed period reinvestment profit 1994 No 164 s DN 2(9)
CX 40: Repayment of loans made from reinvestment profit
When this section applies
1: This section applies when an amount would, if this section did not exist, be income of a company under section CU 16 Excluded income
2: The amount is excluded income of the company to the extent to which it is, or is to be, used for mining purposes within the prescribed period. amount company excluded income income mining purposes prescribed period 1994 No 164 s DN 2(6) Government grants
CX 41: Government grants to businesses
When this section applies
1: This section applies when—
a: a local authority or a public authority makes a payment to a person for a business that the person carries on; and
b: the payment—
i: is in the nature of a grant or subsidy; or
ii: is a grant-related suspensory loan; and
c: the payment is not in the nature of an advance or loan; and
d: the payment is made to the person in relation to—
i: expenditure that they incur and for which they would be allowed a deduction in the absence of section DF 1
ii: expenditure that they incur in acquiring, constructing, installing, or extending an asset for which they have an amount of depreciation loss. Excluded income
2: The payment is excluded income of the person. Exclusions
3: This section does not apply to—
a: a large budget screen production grant:
b: a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent that the grant relates to expenditure—
i: incurred by the recipient before the grant; and
ii: for which the recipient would be allowed a deduction in the absence of section DF 1 amount business deduction depreciation loss excluded income grant-related suspensory loan large budget screen production grant local authority public authority 1994 No 164 ss DC 1, DC 3(1) Section CX 41(1)(d)(i) amended 6 October 2009 section 751(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (3) substituted 3 April 2006 section 38(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section CX 41(3)(b)(ii) amended 6 October 2009 section 751(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 41B: Amounts remitted as condition of new start grant
When this section applies
1: This section applies if in an income year of a person—
a: the person carries on a business of—
i: animal husbandry:
ii: poultry-keeping:
iii: beekeeping:
iv: breeding horses other than bloodstock:
v: horticulture:
vi: cropping; and
b: the person is paid a new start grant for the business for an event that is a qualifying event; and
c: the person in carrying on the business—
i: incurs a liability for expenditure or loss before the declaration of the state of emergency that relates to the qualifying event; and
ii: before the date that is 3 months after the end of the state of emergency, takes the liability into account in calculating the person's taxable income for an income year; and
d: the liability referred to in paragraph (c)(i) is forgiven or otherwise remitted—
i: as a prerequisite for the payment of the new start grant; and
ii: before the date that is 18 months after the end of the state of emergency; and
e: the amount of the remitted liability is income of the person under section CG 2 Excluded income
2: The remitted liability is excluded income of the person to the extent that is the greater of zero and the amount calculated under the formula— remitted amount -- current loss -- available loss -- other loss Definition of items in formula
3: In the formula—
a: remitted amount
b: current loss
c: available loss
d: other loss
i: is incurred by a person associated with the person who receives the new start grant; and
ii: satisfies subsection (4). Loss incurred by associated person from business or land
4: The loss referred to in subsection (3)(d)—
a: is incurred by a person who—
i: carries on or has carried on the business for which the new start grant is paid or owns or has owned an estate in fee simple or leasehold estate in land used in the business; and
ii: in the opinion of the Commissioner, is under a substantial degree of control by the person; and
iii: in the opinion of the Commissioner, has a substantial identity of interests with the person; and
b: is incurred from—
i: the business referred to in paragraph (a)(i):
ii: land that is used in the business; and
c: is, for the income year in which the liability is remitted,—
i: a net loss of the associated person:
ii: an available net loss for the associated person; and
d: is included in the calculation in subsection (3) to an extent that the Commissioner determines, having regard to the interests of the associated person that are separate from those of the person. Notice to associated person
5: The Commissioner must give to the associated person written notice of a determination under subsection (4)(d). business capital limitation deduction diminished value general limitation general permission income income year qualifying event Section CX 41B inserted 1 October 2005 section 176 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Contributions to superannuation scheme or retirement savings scheme Heading substituted 19 December 2007 section 26 Taxation (Business Taxation and Remedial Matters) Act 2007
CX 42: Employer's superannuation contributions
An employer's superannuation contribution is excluded income of—
a: the employee for whose benefit the contribution is provided; and
b: the trustees of the superannuation scheme to whom the contribution is made. employee employer's superannuation contribution excluded income superannuation scheme trustee 1994 No 164 ss CL 1, OB 1 monetary remuneration
CX 42B: Contributions to retirement savings scheme
Excluded income
1: A retirement scheme contribution is excluded income of—
a: the person for whose benefit the retirement scheme contribution is provided, to the extent to which the retirement scheme contribution is—
i: money:
ii: an amount of imputation credit or Maori authority credit that is used to meet the liability of the retirement scheme contributor for retirement scheme contribution withholding tax on the retirement scheme contribution:
b: the retirement savings scheme. Exclusion
2: Subsection (1)(a) does not apply if the person for whose benefit the retirement scheme contribution is provided—
a: supplies to the retirement scheme contributor, or to the retirement savings scheme, a retirement scheme withholding rate that is less than the retirement scheme prescribed rate for the person:
b: includes the retirement scheme contribution in a return of income for the income year in which the retirement scheme contribution is provided:
c: is a non-resident and the retirement scheme contribution is non-resident withholding income. excluded income income year non-resident non-resident withholding income retirement savings scheme retirement scheme contribution retirement scheme contributor retirement scheme prescribed rate retirement scheme withholding rate return of income Section CX 42B inserted 19 December 2007 section 27 Taxation (Business Taxation and Remedial Matters) Act 2007 Farming, forestry, or fishing
CX 43: Income equalisation schemes
A refund under section EH 8 EH 43 EH 70 excluded income 1994 No 164 ss EI 1(4), EI 11(4), EI 17(2) Environmental restoration This heading was inserted 1 October 2005 section 12(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CX 43B: Refund from environmental restoration account
A refund to a person under section EK 9 excluded income Section CX 43B inserted 1 October 2005 section 12(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section CX 43B amended 1 October 2005 section 14(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by omitting , or after earlier payment or request for refund Inflation-indexed instruments
CX 44: Credits for inflation-indexed instruments
When this section applies
1: This section applies when—
a: an amount payable to a person who is a lender for money lent is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
b: an amount on account of an increase in the amount payable is credited to the lender's account by the borrower; and
c: the credit represents a recovery of a decrease, previously debited in account, in the amount payable over a previous period. Excluded income
2: The credit is excluded income of the lender. amount excluded income money lent New Zealand pay 1994 No 164 s EB 5(1) Share-lending arrangements This heading was inserted 1 July 2006 section 39 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
CX 44B: Share-lending collateral under share-lending arrangements
An amount of share-lending collateral derived by a person under a share-lending arrangement is excluded income of the person. amount excluded income share-lending arrangement share-lending collateral Section CX 44B inserted 1 July 2006 section 39 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Portfolio investment entities Heading inserted 1 October 2007 section 15 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
CX 44C: Proceeds from disposal of certain shares by portfolio investment
entities or New Zealand Superannuation Fund When this section applies
1: This section applies to income derived by a portfolio investment entity or by a life insurer, in relation to that part of the life insurer that is a portfolio investment-linked life fund, or the New Zealand Superannuation Fund
a: the share is issued by a company resident in New Zealand and not treated under a double tax agreement as not being resident in New Zealand or by a company—
i: resident in Australia and not treated as being resident in a country other than Australia in an agreement between Australia and another country that would be a double tax agreement if the agreement were negotiated between New Zealand and the other country; and
ii: included in an index that is an approved index under the ASX Market Rules, made under Chapter 7 of the Corporations Act 2001 (Aust)
iii: required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust)
b: the share is not a non-participating redeemable share; and
c: the entity disposing of the share is not assured, under an arrangement entered with another person when the share is acquired, of having a gain on the disposal. Excluded income
2: The income is excluded income of the portfolio investment entity or the New Zealand Superannuation Fund amount arrangement company dividend double tax agreement excluded income income non-participating redeemable share portfolio investment entity portfolio investment-linked life fund resident resident in Australia resident in New Zealand share Section CX 44C inserted 1 October 2007 section 15 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section CX 44C heading amended 1 October 2007 section 7(1) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CX 44C(1) amended 19 December 2007 section 28(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44C(1) amended 1 October 2007 section 7(2) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CX 44C(1)(a)(i) substituted 19 December 2007 section 28(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44C(1)(b) amended 19 December 2007 section 28(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44C(1)(c) added 19 December 2007 section 28(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44C(2) amended 1 October 2007 section 7(3) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CX 44C list of defined terms portfolio investment-linked life fund inserted 19 December 2007 section 28(4) Taxation (Business Taxation and Remedial Matters) Act 2007
CX 44D: Portfolio investor allocated income and distributions of income by
portfolio investment entities Portfolio investor allocated income
1: Portfolio investor allocated income derived under section CP 1
a: the prescribed investor rate for the investor and the portfolio calculation period is more than zero; and
b: the prescribed investor rate for the investor and the portfolio calculation period is not more than the portfolio investor rate for the investor and the portfolio calculation period when the entity calculates in relation to the portfolio investor allocated income—
i: the portfolio entity tax liability of the entity; or
ii: the amount of a payment under section HL 23B
c: for a portfolio tax rate entity making payments of tax under section HL 21 Distribution of income by portfolio tax rate entity
2: An amount of income derived by an investor as a distribution or dividend of Distribution by portfolio investment entity that is not portfolio tax rate entity
3: An amount of income derived in an income year by an investor as a distribution or dividend of
a: excluded income of the investor, if the investor is a resident who—
i: is a natural person or a trustee; and
ii: does not include the distribution as income in a return of income for the income year:
b: excluded income of the investor, if paragraph (a) does not apply, to the extent to which the amount of the distribution exceeds the total of the following:
i: the amount of the distribution that is fully imputed, as that term is defined in section NG 2(3)
ii: the amount of the distribution that is fully dividend withholding payment credited, as that term is defined in section NG 2(4) amount distribution excluded income income income year investor New Zealand resident portfolio investment entity portfolio investor allocated income portfolio investor exit period portfolio investor rate portfolio listed company portfolio tax rate entity prescribed investor rate return of income zero-rated portfolio investor Section CX 44D inserted 1 October 2007 section 15 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section CX 44D heading amended 1 October 2007 section 8(1) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CX 44D(1) heading substituted 19 December 2007 section 29(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44D(1) substituted 19 December 2007 section 29(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44D(2) amended 19 December 2007 section 29(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44D(3) amended 19 December 2007 section 29(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44D(3)(a)(i) substituted 19 December 2007 section 29(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section CX 44D(3)(a)(i) substituted 1 October 2007 section 8(2) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section CX 44D(3)(b) substituted 1 October 2007 section 8(3) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007
CX 44E: Rebates of certain fees by portfolio tax rate entities
A rebate of fees allocated to an investor as a member of a portfolio investor class by a portfolio tax rate entity is excluded income of the investor if the rebate is included in the calculation of the entity's portfolio entity tax liability under section HL 20 excluded income investor portfolio calculation period portfolio entity tax liability portfolio investor class portfolio tax rate entity CX 44E inserted 1 October 2007 section 9 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Emissions units under Climate Change Response Act 2002 Heading inserted 6 October 2009 section 752 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
CX 44F: Issue of post-1989 forest land units
When this section applies
1: This section applies when a person is issued a post-1989 forest land unit. Excluded income
2: An amount of income derived by the person from the issue is excluded income, if the person is treated as deriving an amount of income from the issue. amount excluded income income post-1989 forest land unit Section CX 44F inserted 26 September 2008 section 60 Climate Change Response (Emissions Trading) Amendment Act 2008
CX 44G: Disposal of pre-1990 forest land units
Who this section applies to
1: This section applies to a person who disposes of a pre-1990 forest land unit other than by surrender. Excluded income: disposal
2: An amount of income that the person derives from the disposal is excluded income if, at the time of the disposal, the person would not derive income, other than exempt income or excluded income, from a disposal without timber of the pre-1990 forest land to which the unit relates. amount excluded income income pre-1990 forest land pre-1990 forest land unit surrender Section CX 44G inserted 6 October 2009 section 753 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Income excluded under Parts F to I
CX 45: Exclusion under Parts to be rewritten
An amount of income is excluded income if it is excluded under a provision in any of Parts F to I amount excluded income income 1994 No 164 s BD 1(2)(b)
CY: Income under Parts F to I
Contents
CY 1: Amounts that are income under Parts to be rewritten
Start here An amount is income of a person if it is their income under a provision in any of Parts F to I. amount income 1994 No 164 s BD 1(1)
CZ: Terminating provisions
Contents
CZ 1: Share purchase agreement income before 19 July 1968
In sections CE 1 to CE 4 share purchase agreement share purchase agreement 1994 No 164 s CH 2(1)
CZ 2: Mining company's 1970-71 tax year
When this section applies
1: This section applies when—
a: section 152 or 153 of the Land and Income Tax Act 1954 section 153F of the Act
b: the company acquires an asset by incurring the exploration expenditure or development expenditure referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971 Application of subpart CU
2: The provisions of subpart CU
a: section CU 3 :
b: section CU 3 :
c: section CU 10 Resident and non-resident mining operators
3: This section applies, with any necessary modifications, to an asset of the kind referred to in paragraph (i) of item a section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972 income income from mining mining company non-resident mining operator resident mining operator tax year 1994 No 164 ss DN 1(15)(b), DN 4(6), DN 5(2)(b) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CZ 3: Exchange variations on 8 August 1975
When this section applies
1: This section applies when—
a: a person carrying on a business in New Zealand—
i: receives a loan in 2 or more instalments for the purposes of the business; or
ii: makes a loan in 2 or more instalments in the course of carrying on the business; and
b: an exchange variation arises in relation to the whole or partial repayment of the loan; and
c: the person derives an amount or incurs a loss through the exchange variation. Income or deduction
2: The amount derived is income of the person and the loss incurred is a deduction that they are allowed. Instalments and repayments
3: For the purposes of this section, unless the terms of the loan expressly provide otherwise,—
a: each instalment is treated as a separate loan; and
b: repayments are applied so that the separate loans are repaid in the order in which they were received. Exclusion
4: This section does not apply to a financial arrangement to which the financial arrangements rules apply. Some definitions
5: In this section,— exchange variation
a: the amount of the repayment expressed in New Zealand currency at the time at which the repayment was made; and
b: the amount expressed in New Zealand currency that would have been required to make that repayment on or at the later of 8 August 1975 and the time at which the loan was first made loan
a: for money lent, to a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
i: was lent with the consent of the Minister under the Capital Issues (Overseas) Regulations 1965 Overseas Investment Regulations 1974 Exchange Control Regulations 1978
ii: was lent in a currency other than New Zealand currency; and
iii: was expressed to be repayable in a currency other than New Zealand currency :
b: for money lent, by a person, on or after 1 January 1974 and on or before 22 January 1985, money that—
i: was lent with the consent of the Reserve Bank under the Exchange Control Regulations 1978
ii: was expressed to be repayable in a currency other than New Zealand currency :
c: for money lent, to a person, on or after 23 January 1985, money that—
i: is lent in a currency other than New Zealand currency; and
ii: is expressed to be repayable in a currency other than New Zealand currency :
d: in relation to money lent, by a person, on or after 23 January 1985, money that is expressed to be repayable in a currency other than New Zealand currency. amount business deduction exchange variation financial arrangement financial arrangements rules loan income money lent New Zealand 1994 No 164 s CZ 1(1), (2), (4), (5) Subsection (5)(a)(iii) (b)(ii) (c)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CZ 4: Mineral mining: company making loan before 1 April 1979
Application of this section
1: This section applies if sections CU 17 to CU 19 Income Tax Amendment Act 1979 Application of sections CU 17 to CU 19
2: The sections apply, as far as applicable, to such a loan as if section 45 of the Income Tax Amendment Act 1979 company mineral 1994 No 164 s DN 3(11)
CZ 5: Exempt interest: overseas money lent to government or local or public authority before 29 July 1983
Exempt income
1: Amounts that a non-resident derives are exempt income if they are derived from—
a: stock or debentures issued before 29 July 1983 by the government of New Zealand or by a local authority or a public authority, the interest on which is payable out of New Zealand; or
b: loans entered into before 29 July 1983, the interest on which was to be exempt from income tax in New Zealand under an agreement or arrangement made with the government of New Zealand. Application posted or received before 29 July 1983
2: For the purposes of subsection (1)(b), a loan entered into on or after 29 July 1983 is treated as having been entered into before that date if an exemption of a kind referred to in that provision was authorised as a result of an application received by or posted to the government of New Zealand before 29 July 1983. amount arrangement debentures exempt income income tax interest local authority money lent New Zealand non-resident pay public authority 1994 No 164 ss CB 2(5), CZ 2
CZ 6: Commercial bills before 31 July 1986
Income: redemption
1: The amount that a person receives on the redemption of a commercial bill owned by the person is income of the person. Income: disposal
2: The value of a commercial bill on the day its owner disposes of it is income of the owner. This subsection does not apply if the disposal is a transfer under a relationship agreement
3: amount commercial bill income matrimonial agreement 1994 No 164 s CE 3 Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (3) repealed 1 October 2005 section 13 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
CZ 7: Primary producer co-operative companies: 1987-88 income year
Income: sale of asset
1: If a primary producer co-operative company disposes of an asset for which the company was allowed a deduction under section 200 of the Income Tax Act 1976
a: the total of all deductions relating to the asset that were allowed under section 200
b: the amount that the company derived from the disposal of the asset. Income: payments to shareholders
2: If a primary producer co-operative company has been allowed a deduction under section 200 Amounts attributable to deductions
3: The part of the payment that is treated as income is only such part as—
a: is more than the available subscribed capital per share calculated under the slice rule of the shares surrendered or held on liquidation by the shareholder; and
b: is attributable to an increase in the value of the company's assets that was caused by the company applying or appropriating a deduction allowed under section 200 Some definitions
4: In this section,— primary producer co-operative company
a: was a primary producer co-operative company, as defined in section 200(1) and (9)
b: could qualify for a deduction under section 200(4) section 200 section 200 of the Income Tax Act 1976 section 41(1) of the Income Tax Amendment Act (No 5) 1988 amount available subscribed capital income income year liquidation primary producer co-operative company section 200 share shareholder slice rule 1994 No 164 s CK 3
CZ 8: Farm-out arrangements for petroleum mining before 16 December 1991
Excluded income
1: Excess expenditure under a farm-out arrangement entered into before 16 December 1991 is excluded income of the transferor. Some definitions
2: In subsection (1), excess expenditure farm-out arrangement transferor section 214D of the Income Tax Act 1976 section 15 of the Income Tax Amendment Act (No 5) 1992 excess expenditure excluded income transferor 1994 No 164 s CJ 4(2)
CZ 9: Available capital distribution amount: 1965 and 1985 to 1992
Section CD 33(7)(e)
1: For the purposes of section CD 33(7)(e)
a: before 1 April 1988, a net profit or gain was derived by the company to which section 4(5) of the Income Tax Act 1976 section 4(5A) of the Income Tax Act 1976 section 31(1) of the Income Tax Amendment Act (No 5) 1988
b: an amount is derived by the company that is attributable to—
i: a deduction allowed in the 1985-86 or 1986-87 tax year for livestock under section 86E of the Income Tax Act 1976
ii: a revaluation of livestock in any of the 1986-87 to 1991-92 tax years under section 86A of the Income Tax Act 1976
iii: a deduction allowed in the 1988-89 tax year for the revaluation of trading stock of wine, brandy, and whisky under section 87A of the Income Tax Act 1976 section EZ 2 Section CD 33(14)(b)
2: For the purposes of section CD 33(14)(b)
a: the amount has been excluded by section 4(3) of the Land and Income Tax Act 1954
b: the issue has been excluded by section 3(3) of the Income Tax Act 1976 amount bonus issue company dividend trading stock 1994 No 164 ss CF 3(6), OB 1 capital gain amount
CZ 10: Transitional relief for calculation of attributed repatriation dividends: 2 July 1992
Loans made by CFC to intermediary before 2 July 1992
1: Subsection (2) applies for the purposes of calculating attributed repatriation from a CFC to the extent to which—
a: the CFC made a loan before 8.00 pm New Zealand standard time on 2 July 1992; and
b: the loan enabled another person (intermediary) to make a loan to a New Zealand resident associated with the CFC; and
c: the loan is not a loan that is an arrangement subject to section GC 8
d: the New Zealand resident associated person repays the intermediary and the intermediary repays the CFC; and
e: the CFC uses the proceeds to make a loan directly to the New Zealand resident associated person. Loan to associate: treated as existing for whole accounting period
2: The loan to the New Zealand resident associated person is treated as if it were in existence at the start of the accounting period of the CFC in which it is in fact made. Property acquired under contract binding before 2 July 1992
3: Subsection (4) applies for the purposes of calculating attributed repatriation from a CFC if the CFC—
a: acquires any property (including an amount accruing on a financial arrangement) under a binding contract entered into before 8.00 pm New Zealand standard time on 2 July 1992; and
b: the acquisition is not as a result of any voluntary action taken by the CFC after that time. Acquired property: treated as existing for whole accounting period
4: The property is treated as if it were held by the CFC at the start of the accounting period of the CFC in which it is in fact acquired. accounting period arrangement associated person attributed repatriation CFC financial arrangement New Zealand New Zealand resident 1994 No 164 s CG 8(9), (12)
CZ 11: Recovery of deductions for software acquired before 1 April 1993
What this section applies to
1: This section applies to any of the following items for the acquisition of which a person was allowed a deduction before 1 April 1993:
a: the copyright in software :
b: the right to use the copyright in software :
c: the right to use software. Income
2: An amount derived from the disposal of the item is income. Relationship with sections EE 37 to EE 44 and EZ 19
3: Sections EE 37 to EE 44 Section EZ 19 adjusted tax value amount income 1994 No 164 s EG 19(1)(a)(ii) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
CZ 12: General insurance with risk period straddling1 July 1993
When this section applies
1: This section applies when—
a: a company carries on a business of providing general insurance or guarantees against loss, damage, or risk, immediately before and on 1 July 1993; and
b: the company holds a reinsurance contract for the general insurance that covers a period of risk starting before 1 July 1993 and ending after 1 July 1993; and
c: the company pays the premiums under the contract outside New Zealand. Income
2: An amount derived by the company from a claim under the reinsurance contract is income of the company if the event giving rise to the claim occurs on or after 1 July 1993. Timing
3: The income is allocated to the income year in which the event giving rise to the claim occurs. amount business company general insurance income income year New Zealand pay reinsurance contract 1994 No 164 s CZ 6(d)(i)-(iii), (vi), (vii)
CZ 13: Treatment of units and interests in unit trusts and group investment funds on issue as at 1 April 1996
Units and interests in unit trusts and group investment funds
1: All units in a unit trust and interests in a group investment fund on issue on 1 April 1996 are treated, on and from that date, as not having been issued on terms that their redemption would be subject to the slice rule. Election made for units or interests
2: All units or interests to which subsection (1) applies and for which an election has been made relying on paragraph (c) of the definition of the term shares of the same class section OB 1 Exclusion
3: This section does not apply to a unit or interest if the manager or trustee of the unit trust or group investment fund so chooses, by giving notice to the Commissioner before 1 April 1996, in which case the relevant unit or interest is treated, on and from 1 April 1996, as having been issued on terms that its redemption would be subject to the slice rule. Commissioner group investment fund notice shares of the same class slice rule trustee unit trust 1994 No 164 s CZ 4(3)-(5)
CZ 14: Treatment of superannuation fund interests in group investment funds on 1 April 1999
When this section applies
1: This section applies when a superannuation fund has an interest in a group investment fund on 1 April 1999. Exclusions from dividends
2: Section CD 14(4) Trustee's election
3: If a trustee of a group investment fund chose on or before 31 March 1999 to treat a superannuation fund interest in a group investment fund as subject to section CD 14(4)
a: subsection (2) does not apply to the interest; and
b: section CD 14(2) dividend group investment fund interest superannuation fund trustee 1994 No 164 ss CZ 4A(1), (2), CZ 4B(1), (2) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
CZ 15: Accident insurance contracts before 1 July 2000
A premium or contribution referred to in section CX 15(2)
a: a premium or contribution paid for an accident insurance contract, as defined in section 13 of the Accident Insurance Act 1998
b: a premium or contribution paid for a contract to which section 188(1)(a) of the Act contribution 1994 No 164 s CI 1(ja)
CZ 16: Interest payable to exiting company: 2001
Interest payable under schedule 4 section 5 exempt income interest pay 1994 No 164 s CB 1(1)(d)
CZ 17: Dividend of exiting company: 2001
If an exiting company (as defined in section 5 schedule 4 dividend exempt income 1994 No 164 s CB 10(6)
CZ 18: Benefit provider approved within 6 months of 25 November 2003
When this section applies
1: This section applies when a person ( provider
a: is—
i: an incorporated body; or
ii: a trustee; and
b: provides accident insurance, health insurance, life insurance, or other health and welfare benefits to natural persons ( recipients
c: either—
i: was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; or
ii: administers a fund that was approved as a sickness, accident, or death benefit fund by the Commissioner on or before 24 November 2003; and
d: has been approved by the Commissioner as an organisation that the Commissioner considers operates on the principles of mutuality for recipients—
i: within the 6 months starting on 25 November 2003; or
ii: within a further period allowed by the Commissioner, if the provider satisfies the Commissioner that the provider was not aware of the requirement for the Commissioner's approval in sufficient time to obtain the approval under subparagraph (i). Exempt income
2: An amount derived by a provider is exempt income if—
a: the amount is not derived from a business carried on by the provider beyond the circle of the recipients; and
b: each of the recipients is—
i: a beneficiary of the trust for which the provider is the trustee; or
ii: a member of the provider; or
iii: a member of an organisation that directly or indirectly controls the provider; or
iv: a relative of a person described in any of subparagraphs (i) to (iii). amount business Commissioner exempt income life insurance relative sickness, accident, or death benefit fund trustee 1994 No 164 s CB 4(1)(ab)
CZ 19: Community trust receipts in 2004-05 or 2005-06 tax year
An amount of income derived by a trustee or company is exempt income if—
a: the amount would be exempt income under section CW 34 CW 35
b: either—
i: the corpus of the trust was provided by the community trust; or
ii: the company is wholly owned by the community trust. amount community trust company corpus dividend exempt income income tax year trustee 1994 No 164 s CB 4(1)(n)
CZ 20: Geothermal wells between 31 March 2003 and 17 May 2006
When this section applies
1: This section applies to a person's geothermal well, if—
a: the well is—
i: both started and completed between 31 March 2003 and 17 May 2006:
ii: acquired between 31 March 2003 and 17 May 2006; and
b: the person—
i: uses the well, or has the well available for use, after the end of the well's geothermal energy proving period, in deriving assessable income or carrying on a business for the purpose of deriving assessable income:
ii: disposes of the well. Income
2: The person has, for the first income year in which this section applies, income equal to,—
a: if subsection (1)(b)(i) applies, the total amount of deductions that the person is allowed for the well under section DZ 7 section DZ 15
b: if subsection (1)(b)(ii) applies, the lesser of—
i: the amount derived from disposing of the well; and
ii: the total amount of deductions that the person is allowed for the well under section DZ 7 section DZ 15 amount business deduction dispose geothermal energy proving period geothermal well income income year Section CZ 20 inserted 1 April 2005 section 16(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
D: Deductions
Contents
DA: General rules
Contents
DA 1: General Permission
Nexus with income
1: A person is allowed a deduction for an amount of expenditure or loss (including an amount of depreciation loss) to the extent to which the expenditure or loss is—
a: incurred by them in deriving—
i: their assessable income; or
ii: their excluded income; or
iii: a combination of their assessable income and excluded income; or
b: incurred by them in the course of carrying on a business for the purpose of deriving—
i: their assessable income; or
ii: their excluded income; or
iii: a combination of their assessable income and excluded income. General permission
2: Subsection (1) is called the general permission. amount assessable income business deduction depreciation loss excluded income general permission loss 1994 No 164 s BD 2(1)(b)(i), (ii)
DA 2: General limitations
Capital limitation
1: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a capital nature. This rule is called the capital limitation. Private limitation
2: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a private or domestic nature. This rule is called the private limitation. Exempt income limitation
3: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving exempt income. This rule is called the exempt income limitation. Employment limitation
4: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving income from employment. This rule is called the employment limitation. Withholding tax limitation
5: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving schedular income subject to final withholding. This rule is called the withholding tax limitation. Non-residents' foreign-sourced income limitation
6: A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-residents' foreign-sourced income. This rule is called the non-residents' foreign-sourced income limitation. Relationship of general limitations to general permission
7: Each of the general limitations in this section overrides the general permission. amount capital limitation deduction employment limitation exempt income exempt income limitation general limitation general permission income from employment loss non-residents' foreign-sourced income non-residents' foreign-sourced income limitation private limitation schedular income subject to final withholding withholding tax limitation 1994 No 164 s BD 2(2)
DA 3: Effect of specific rules on general rules
Supplements to general permission
1: A provision in any of subparts DB DZ Express reference needed to supplement
2: A provision in any of subparts DB DZ Relationship of general limitations to supplements to general permission
3: Each of the general limitations overrides a supplement to the general permission in any of subparts DB DZ Relationship between other specific provisions and general permission or general limitations
4: A provision in any of subparts DB to DZ may override any 1 or more of the general permission and the general limitations. Express reference needed to override
5: A provision in any of subparts DB DZ
a: that it overrides the general permission or the relevant limitation; or
b: that the general permission or the relevant limitation does not apply. Part E
6: No provision in Part E deduction general limitation general permission supplement 1994 No 164 s BD 2(1)(b)(iii), (2)(e)
DA 4: Treatment of amount of depreciation loss
The capital limitation does not apply to an amount of depreciation loss merely because the item of property is itself of a capital nature. amount capital limitation depreciation loss 1994 No 164 s BD 2(1)(a)
DB: Specific rules for expenditure types
Contents
Taxes and other amounts Heading substituted 29 August 2011 section 193 Taxation (Tax Administration and Remedial Matters) Act 2011
DB 1: Taxes, other than GST, and penalties
No deduction
1: A person is denied a deduction for the following:
a: income tax; and
b: a civil penalty under Part 9
c: a tax, a penalty, or interest on unpaid tax that is—
i: payable under the laws of a country or territory outside New Zealand; and
ii: substantially the same as a civil penalty as defined in section 3(1) Part 9 Part 7 Meaning of income tax
2: In this section, income tax
a: includes—
i: further income tax :
ii: a tax imposed in a country or territory outside New Zealand that is substantially the same as income tax :
iii: imputation penalty tax :
iv: a dividend withholding payment, further dividend withholding payment, and dividend withholding payment penalty tax :
v: qualifying company election tax :
b: does not include—
i: fringe benefit tax :
ii: specified superannuation contribution withholding tax. Link with subpart DA
3: This section overrides the general permission. deduction dividend withholding payment dividend withholding payment penalty tax fringe benefit tax further dividend withholding payment further income tax general permission GST imputation penalty tax income tax New Zealand qualifying company election tax specified superannuation contribution withholding tax tax 1994 No 164 s DB 1 Subsections (1)(a) (b) (2)(a)(i) (v) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Subsection (2)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DB 2: GST
No deduction
1: A registered person is denied a deduction for the following:
a: input tax on a supply of goods or services to them:
b: GST payable by them to the Commissioner. Deduction
2: A registered person is allowed a deduction for output tax on a supply of goods or services that section 5B 21 21I(1) to (3)
a: they are allowed a deduction for expenditure that they incur in acquiring or producing the goods or services; or
b: they are allowed a deduction for an amount of depreciation loss for the goods or services. Exclusion
3: Subsection (2) does not apply to an amount that relates to the application of a capital asset—
a: for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies; or
b: other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies; or
c: other than for the purpose of deriving income. Depreciable property
4: The provisions that apply when an amount of depreciation loss is quantified by reference to the cost of an item of depreciable property to a person are in section EE 45 Link with subpart DA
5: The link between this section and subpart DA
a: subsection (1) overrides the general permission :
b: subsection (2) supplements the general permission. The general limitations still apply. amount Commissioner deduction depreciable property depreciation loss general limitation general permission goods GST GST payable income input tax output tax registered person services supplement taxable supply 1994 No 164 s ED 4(2), (3), (7) Section DB 2(2) amended 21 December 2010 section 165 Taxation (GST and Remedial Matters) Act 2010 Subsection (5)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DB 3: Determining tax liabilities
Deduction
1: A person is allowed a deduction for expenditure that they incur in connection with the following matters:
a: calculating or determining their income tax liability for a tax year :
b: calculating or determining the GST payable by them in a taxable period :
c: preparing, instituting, or presenting an objection or challenge to, or an appeal following, a determination or assessment made under this Act or an earlier Act, the Tax Administration Act 1994 Goods and Services Tax Act 1985 :
d: making a contribution towards the expenditure incurred by another person if—
i: the other person is allowed a deduction for that expenditure; and
ii: the expenditure relates to a matter affecting the determination of the first person's liability for income tax or GST; and
iii: the first person has objected to, challenged, or appealed against an assessment or determination made in relation to the matter under this Act or an earlier Act, the Tax Administration Act 1994 Goods and Services Tax Act 1985 Exclusions
2: This section does not apply to expenditure that a person incurs in connection with the following matters:
a: a matter arising from a return of income or a return under the Goods and Services Tax Act 1985 :
b: an offence under any of the Inland Revenue Acts :
c: a shortfall penalty assessed under this Act or an earlier Act, the Tax Administration Act 1994 Goods and Services Tax Act 1985 :
d: an objection, challenge, or appeal that is inconsequential or frivolous :
e: a matter arising under the Goods and Services Tax Act 1985 Some definitions
3: In this section,— GST payable
a: means an amount of GST calculated under sections 19 to 19D 20
b: includes—
i: an amount refundable under those sections; and
ii: an amount referred to in section 17(2) 51B GST payable: paragraph (b)(ii) of this definition was substituted 1 October 2005 section 177 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 taxable activity section 6 taxable period section 2 Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply. amount assessment business capital limitation deduction employment limitation general limitation general permission GST GST payable income tax liability Inland Revenue Acts private limitation return of income supplement tax year taxable activity taxable period 1994 No 164 s DJ 5(1), (3), (4) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Subsection (2)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Section DB 3(4) substituted 6 October 2009 section 754(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 3 list of defined terms capital limitation inserted 6 October 2009 section 754(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DB 3B: Use of money interest
Deduction
1: A person is allowed a deduction for an amount of interest they are liable to pay under Part 7 Timing of deduction
2: The deduction is allocated under section EF 5 Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply. amount capital limitation deduction employment limitation general limitation general permission private limitation Section DB 3B inserted 29 August 2011 section 194(1) Taxation (Tax Administration and Remedial Matters) Act 2011
DB 4: Chatham Islands dues
Deduction
1: A person is allowed a deduction for expenditure incurred on dues levied under the Chatham Islands Council Act 1995 Timing of deduction
2: The deduction is allocated to the income year in which the dues are paid. Exclusion of expenditure: other deductions
3: Expenditure to which subsection (1) applies must not be taken into account in calculating the cost of the goods for the purpose of a deduction relating to the goods under any other provision of this Act. Link with subpart DA
4: The link between this section and subpart DA
a: subsection (1) supplements the general permission and overrides the capital limitation. The other general limitations still apply :
b: subsection (3) overrides the general permission. business capital limitation deduction general limitation general permission income year supplement 1994 No 164 s DJ 3 Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Financing costs
DB 5: Transaction costs: borrowing money for use as capital
Deduction
1: A person is allowed a deduction for expenditure incurred in borrowing money that is used as capital in deriving their income. Link with subpart DA
2: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission income 1994 No 164 s DJ 11
DB 6: Interest: not capital expenditure
Deduction
1: A person is allowed a deduction for interest incurred. Exclusion
2: Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1 Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission interest 1994 No 164 s DD 1(1)(b)(i), (ii)
DB 7: Interest: most companies need no nexus with income
Deduction
1: A company is allowed a deduction for interest incurred. Exclusion: qualifying company
2: Subsection (1) does not apply to a qualifying company. Exclusion: exempt income
3: If a company ( company A company B
a: dividends; or
b: income exempted under section CW 46
c: income exempted under section CW 48 Exclusion: non-resident company
4: If a company is a non-resident company, subsection (1) applies only to the extent to which the company incurs interest in the course of carrying on a business through a fixed establishment in New Zealand. Exclusion: interest related to tax
5: Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1 Link with subpart DA
6: This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply. business capital limitation company deduction dividend exempt income exempt income limitation fixed establishment general limitation general permission income interest New Zealand non-resident company qualifying company supplement wholly-owned group of companies withholding tax limitation 1994 No 164 ss BD 2A, DD 1(3), (4)
DB 8: Interest: money borrowed to acquire shares in group companies
Deduction: borrowing to acquire group company shares
1: A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company in the same group of companies. Exclusion: group not in existence at tax year end
2: Subsection (1) does not apply if the 2 companies are not in the same group of companies at the end of the tax year for which the deduction is claimed. Deduction: interest after qualifying amalgamation
3: A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ceased to exist on a qualifying amalgamation. Exclusion: group not in existence immediately before qualifying amalgamation
4: Subsection (3) does not apply if the 2 companies were not in the same group of companies immediately before the qualifying amalgamation. Application from tax year of qualifying amalgamation
5: Subsection (3) applies in the tax year in which the qualifying amalgamation occurs and in later tax years. Link with subpart DA
6: This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply. company deduction exempt income limitation general limitation general permission group of companies interest qualifying amalgamation share supplement tax year withholding tax limitation 1994 No 164 ss DD 1(1)(b)(iii), (2), DD 3
DB 8B: Interest or expenditure connected to stapled debt security
No deduction
1: A company that issues a stapled debt security is denied, while section FC 2B(2)
a: interest payable under the security:
b: expenditure or loss incurred in connection with the security:
c: expenditure or loss incurred in borrowing the money secured by or owing under the security. Relationship with sections DB 5 to DB 8
2: This section overrides sections DB 5 to DB 8 Link with subpart DA
3: This section overrides the general permission. deduction general permission interest pay stapled debt security Section DB 8B inserted 6 October 2009 section 755 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Financial arrangements adjustments
DB 9: Negative base price adjustment
Deduction
1: A person who has a negative base price adjustment under section EW 31(4) section CC 3 Link with subpart DA
2: This section supplements the general permission and overrides all the general limitations. assessable income deduction financial arrangement general limitation general permission income year supplement 1994 No 164 s EH 47(4)
DB 9B: Base price adjustment under old financial arrangements rules
1: A person is allowed a deduction for an amount that is a deduction under section EZ 34(6) EZ 35(3) or (4) Link with subpart DA
2: This section supplements the general permission and overrides all the general limitations. amount deduction general limitation general permission supplement Section DB 9B inserted 1 April 2005 section 40(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (2) inserted 1 April 2005 section 17(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 The list of defined terms was inserted 1 April 2005 section 17(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
DB 10: Repayment of debt sold at discount to associate of debtor
Deduction
1: When section EW 50(6)(b) Link with subpart DA
2: This section supplements the general permission and overrides all the general limitations. amount associated person deduction general limitation general permission supplement 1994 No 164 s EH 53(1), (7)
DB 11: Security payment
When subsection (2) applies
1: Subsection (2) applies when—
a: a person receives a security payment for a loss; and
b: no other provision of this Act allows the person a deduction for the loss. Deduction: loss
2: The person is allowed a deduction for the loss quantified in section EW 52(2) When subsection (4) applies
3: Subsection (4) applies when—
a: a person receives a security payment for a share loss as described in section DB 18
b: the requirements of section DB 18
c: no other provision of this Act allows the person a deduction for the loss. Deduction: share loss
4: The person is allowed a deduction for the share loss quantified in section EW 52(4) Link with subpart DA
5: This section supplements the general permission and overrides all the general limitations. deduction general limitation general permission loss security payment supplement 1994 No 164 s EH 55
DB 12: Sureties
When this section applies
1: This section applies when a surety incurs expenditure or loss under a security arrangement. No deduction (with exceptions)
2: Neither the surety nor a person with whom the surety was an associated person over the security arrangement's term is allowed a deduction for the expenditure or loss to the extent to which the expenditure or loss is due to—
a: the actions of the surety or a person with whom the surety was an associated person over the arrangement's term; or
b: the occurrence of an event, if the occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement's term; or
c: the non-occurrence of an event, if the non-occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement's term. Link with subpart DA
3: This section overrides the general permission. associated person deduction general permission loss security arrangement 1994 No 164 s EH 56 Share-lending arrangements This heading was inserted 1 July 2006 section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DB 12B: Share-lending collateral under share-lending arrangements
No deduction
1: A person is denied a deduction for the amount of expenditure incurred as share-lending collateral under a share-lending arrangement. Link with subpart DA and other subject matter
2: This section overrides—
a: the general permission:
b: sections DB 17 to DB 19 amount deduction general permission share-lending arrangement share-lending collateral Sections DB 12B DB 12C inserted 1 July 2006 section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DB 12C: Replacement payments and imputation credits under share-lending arrangements
A person is allowed a deduction for—
a: the amount of expenditure incurred as a replacement payment under a share-lending arrangement:
b: the amount of imputation credit attached under sections ME 6B NF 8B amount deduction imputation credit replacement payment share-lending arrangement Sections DB 12B DB 12C inserted 1 July 2006 section 41 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Premises or land costs
DB 13: Transaction costs: leases
Deduction
1: A person is allowed a deduction for expenditure that they incur for the preparation and registration, or the renewal, of a lease of property. Link with subpart DA
2: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission lease 1994 No 164 s DJ 11
DB 13B: Expenses of failed or withdrawn application for resource consent
Deduction
1: A person who applies for the grant of a resource consent under the Resource Management Act 1991
a: that the person incurs in relation to the application; and
b: that would have been part of the cost of depreciable property, or otherwise a deduction,
c: for which the person is not allowed a deduction under another provision. Timing of deduction
2: The deduction is allocated to the income year in which the grant is refused or the application is withdrawn. Link with subpart DA
3: This section overrides the capital limitation. The general permission and other general limitations still apply. accounting year capital limitation deduction general limitation general permission income year Section DB 13B inserted 1 October 2005 section 178 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (1)(b) amended 1 October 2005 section 14 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting depreciable property, or otherwise a deduction, a resource consent that is depreciable property
DB 14: Destruction of temporary building
Deduction
1: A person is allowed a deduction for a loss that they incur through the destruction of a temporary building. Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission loss supplement temporary building 1994 No 164 s DD 1(c)
DB 15: Amounts paid for non-compliance with covenant for repair
When this section applies
1: This section applies when—
a: a person who is a lessee of land uses it to derive income; and
b: the lease contains a covenant requiring the lessee to maintain the land or to make repairs to improvements on the land; and
c: the lessee does not comply with the covenant; and
d: the lessee is, consequently, liable to pay an amount to the lessor; and
e: either—
i: the lessee, during the term of the lease or after it ends, pays the amount to the lessor; or
ii: the lessor recovers the amount from the lessee during the term of the lease or after it ends. Deduction
2: The lessee is allowed a deduction for the amount paid to the extent to which it relates to maintenance or repairs and to the extent to which the lessee would have been allowed a deduction for the expenditure had the lessee incurred it during the term of the lease. Timing of deduction
3: The deduction is allocated to the income year in which the lessee pays the amount or the lessor recovers the amount. Relationship with section EJ 10
4: This section is overridden by section EJ 10 Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission income income year lease repairs supplement term of the lease 1994 No 164 s EO 5
DB 16: Amounts paid for non-compliance and change in use
When this section applies
1: This section applies when—
a: a person who is a lessor receives an amount for non-compliance with a covenant for repair that is assessable income under section CC 2
b: in the tax year in which the lessor receives the amount or in any of the following 4 tax years,—
i: the lessor does not use the land to which the amount relates to derive assessable income, but continues to own the land; and
ii: the lessor incurs expenditure in maintaining the land or in making repairs to improvements on the land, including painting and general maintenance; and
iii: the lessor would have been allowed a deduction if the land had been used for the purpose of deriving assessable income; and
iv: in the absence of section DB 37 Deduction
2: The lessor is allowed a deduction for the expenditure. Amount of deduction
3: The amount of the deduction is the lesser of—
a: the amount of the expenditure; and
b: the part of the amount that is assessable income derived by the lessor in the tax year in which the expenditure is incurred through the operation of—
i: section CC 2
ii: section EI 4
iii: section EI 5 Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount assessable income deduction general limitation general permission own supplement tax year 1994 No 164 s EN 1(6), (8) Subsection (1)(b)(iv) substituted 1 October 2005 section 15(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Revenue account property
DB 17: Cost of revenue account property
When this section applies
1: This section applies if a person incurs expenditure as the cost Deduction
2: The person is allowed a deduction for the expenditure. Exclusion for portfolio investment entities
3: Subsection (2)
a:
b: section CX 44C or New Zealand Superannuation Fund Link with subpart DA
4: The link between this section and subpart DA
a: subsection (2)
b: subsection (3)
c: the other general limitations still apply. capital limitation deduction general limitation general permission portfolio investment entity revenue account property 1994 No 164 s DJ 13 Section DB 17(1) substituted 1 October 2007 section 18(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 17(1) amended 1 October 2007 section 10(1) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section DB 17(2) substituted 1 October 2007 section 18(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 17(3) added 1 October 2007 section 18(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 17(3)(a) repealed 6 October 2009 section 756 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 17(3)(a) substituted 19 December 2007 section 30(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 17(3)(b) amended 1 October 2007 section 10(2) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section DB 17(4) added 1 October 2007 section 18(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 17 list of defined terms portfolio investment entity inserted 1 October 2007 section 18(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 17 list of defined terms portfolio investment-linked life fund repealed 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 17 list of defined terms portfolio investment-linked life fund inserted 19 December 2007 section 30(2) Taxation (Business Taxation and Remedial Matters) Act 2007
DB 18: Share losses
When this section applies
1: This section applies when—
a: a company ( company A company B
b: the share declines in value; and
c: because of the decline in value, company A incurs a loss ( share loss subpart ED
d: company B—
i: itself uses the amount subscribed for the share; or
ii: uses it to fund directly or indirectly another company ( company C
e: company B or company C has a net loss, in the calculation of which the amount used is taken into account; and
f: company A, or a company that is in the same group of companies as company A at any time in the income year in which company B or company C has the net loss, offsets an amount for the net loss under section IG 2
g: the offset is in a tax year before the tax year that corresponds to the income year in which company A incurs the share loss. No deduction (with exception)
2: Company A is denied a deduction for the share loss, except to the extent to which the share loss, as adjusted under subsection (3), is more than the amount offset under section IG 2 Other denied deductions added
3: When subsection (2) applies, the share loss is adjusted by adding every loss to which all the following apply:
a: company A incurs it as a result of the share's decline in value or the decline in value of another share if the use of the amount subscribed for the other share is taken into account in calculating the net loss; and
b: company A incurs it in a tax year before the tax year in which company A incurs the share loss; and
c: company A has been denied a deduction for it by the operation of subsection (2). Other offsets added
4: The amount offset under section IG 2 Link with subpart DA
5: This section overrides the general permission. amount company deduction general permission group of companies loss net loss share tax year 1994 No 164 s DJ 1(b)
DB 19: Amount from profit-making undertaking or scheme and not already in income
When this section applies
1: This section applies when a person derives income under section CB 2 Deduction
2: The person is allowed a deduction for the value of the property, as determined under subsection (3). Determining amount of deduction
3: For the purpose of determining the amount of the deduction, the person is treated as—
a: having disposed of the property to an unrelated third party immediately before the start of the undertaking or scheme; and
b: having reacquired the property immediately after the start of the undertaking or scheme at the market value of the property at the time. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income supplement 1994 No 164 s DJ 15
DB 20: Amount from major development or division and not already in income
When this section applies
1: This section applies when a person derives income under section CB 11 Deduction
2: The person is allowed a deduction for the value of the land, as determined under subsection (3). Determining amount of deduction
3: For the purpose of determining the amount of the deduction, the person is treated as—
a: having disposed of the land to an unrelated third party immediately before the start of the undertaking or scheme; and
b: having reacquired it immediately after the start of the undertaking or scheme at the market value of the land at the time. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income land supplement 1994 No 164 s DJ 14(3)
DB 21: Amount from land affected by change and not already in income
When this section applies
1: This section applies when a person derives income under section CB 12 Deduction
2: The person is allowed—
a: a deduction allowed under any other provision of this Act; and
b: a deduction to the extent described in subsection (3). Calculation of deduction
3: The maximum amount of the deduction is the greater of $1,000 and an amount calculated using the formula in subsection (4). However, the amount must not be more than the profit obtained from the disposal of the land. Formula
4: The formula is— percentage of profit x years Definition of items in formula
5: In the formula,—
a: percentage of profit
b: years Meaning of profit
6: In this section, profit Link with subpart DA
7: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income land profit supplement year 1994 No 164 s DJ 14(1), (2)
DB 22: Cost of non-specified mineral
When this section applies
1: This section applies when—
a: an amount of cost of a mineral is treated by a person under generally accepted accounting practice as a cost of the mineral for the person and reported accordingly for financial reporting purposes; and
b: the mineral is not a specified mineral; and
c: no other provision of this Act allows the person a deduction for the amount; and
d: an amount derived by the person from disposing of the mineral would be income of the person under section CB 25 Deduction
2: The person is allowed a deduction for the amount. Timing of deduction: trading stock
3: If the amount is a cost of trading stock, the deduction is allocated to the income year in which the mineral first becomes trading stock of the person. Timing of deduction: not trading stock
4: If the amount is not a cost of trading stock, the deduction is allocated by section EA 2 Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction dispose general limitation general permission generally accepted accounting practice income income year mineral specified mineral trading stock 1994 No 164 s DJ 13A Bad debts
DB 23: Bad debts
No deduction (with exception)
1: A person is denied a deduction in an income year for a bad debt, except to the extent to which—
a: the debt is written off as bad in the income year; and
b: in the case of the bad debts described in subsections (2) to (5), the requirements of the relevant subsection are satisfied. Deduction: financial arrangement debt: amount of income
2: A person who derives assessable income from a financial arrangement to which the financial arrangements rules apply is allowed a deduction for an amount owing under the financial arrangement, but only to the extent to which—
a: the amount is a bad debt and subsection (1)(a) is satisfied; and
b: the amount is attributable to the income; and
c: subsection (5) does not limit the deduction. Deduction: financial arrangement debt: dealers in arrangements
3: A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
a: the amount is a bad debt and subsection (1)(a) is satisfied; and
b: the person carries on a business for the purpose of deriving assessable income that includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement; and
c: the person is not associated with the person owing the amount written off; and
d: subsection (5) does not limit the deduction. Deduction: financial arrangement debt: dealers in property or services sold
4: A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
a: the amount is a bad debt and subsection (1)(a) is satisfied; and
b: the financial arrangement is an agreement for the sale and purchase of property or services; and
c: the person carries on a business of dealing in the property or services that are the subject of the agreement; and
d: the person carries on the business for the purpose of deriving assessable income; and
e: subsection (5) does not limit the deduction. Deduction: bad debt representing loss already offset
5: A person is allowed a deduction for a bad debt only to the extent to which it is more than the total of the amounts offset under section IG 2
a: the person writing off the amount of debt is a company ( company A
b: the debt is owed to it by another company ( company B
c: company B—
i: itself uses the amount giving rise to the debt; or
ii: uses it to fund directly or indirectly another company ( company C
d: company B or company C has a net loss, in the calculation of which the amount used is taken into account; and
e: company A, or a company that is in the same group of companies as company A at any time in the income year in which company B or company C has the net loss, offsets an amount for the net loss under section IG 2
f: the offset is in a tax year before the tax year that corresponds to the income year in which company A writes off the amount of debt (but not before the 1993-94 tax year). Link with subpart DA
6: The link between this section and subpart DA
a: subsection (1) overrides the general permission; and
b: for subsections (2) to (5),—
i: they supplement the general permission, to the extent to which they allow a deduction that is denied under the general permission; and
ii: they override the general permission, to the extent to which they deny a deduction that is allowed under the general permission; and
iii: the general limitations still apply, except that subsection (3) overrides the capital limitation for a financial arrangement held as part of a business that includes dealing in or holding financial arrangements. agreement for the sale and purchase of property or services amount assessable income associated person business company deduction financial arrangement financial arrangements rules general limitation general permission group of companies income year net loss supplement tax year 1994 No 164 ss DJ 1(a)(i), (iii), (iv), EH 54 Section DB 23(6)(b)(iii) replaced 24 February 2016 section 285 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
DB 24: Bad debts owed to estates
When this section applies
1: This section applies when—
a: a debt owing to a person at the date of their death is, in a tax year,—
i: assessable income of the person; or
ii: assessable income of the trustee of their estate; and
b: the trustee writes off some or all of the debt as bad because it is not recoverable. Deduction
2: The following persons, in the following order, are allowed a deduction for the amount of the debt written off:
a: first, the trustee, to the extent of assessable income derived as trustee income in the tax year; and
b: second, any beneficiary who has a vested interest in the capital of the estate, to the extent of assessable income derived in the tax year by or in trust for the beneficiary, and to the extent to which the amount is chargeable against the capital of the beneficiary; and
c: third, the trustee or a beneficiary denied a deduction for the balance in the tax year; each is allowed a deduction, as described in paragraph (a) or (b), in the next tax year, and so on. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount assessable income deduction general limitation general permission supplement tax year trustee trustee income 1994 No 164 s DJ 2 Research and development
DB 25: Scientific research
Deduction: scientific research
1: A person is allowed a deduction for expenditure they incur in connection with scientific research that they carry on for the purpose of deriving their assessable income. Exclusion
2: Subsection (1) does not apply to expenditure that the person incurs on an asset that—
a: is not created from the scientific research; and
b: is an asset for which they have an amount of depreciation loss for which—
i: they are allowed a deduction; or
ii: they would have been allowed a deduction but for the Commissioner's considering that incomplete and unsatisfactory accounts were kept by or for them. Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount assessable income capital limitation Commissioner deduction depreciation loss general limitation general permission supplement 1994 No 164 s DJ 9
DB 26: Research or development
Deduction
1: A person is allowed a deduction for expenditure they incur on research or development. This subsection applies only to a person described in any of subsections (2) to (5) and does not apply to the expenditure described in subsection (6). Person recognising expenditure as expense
2: Subsection (1) applies to a person who recognises the expenditure as an expense for financial reporting purposes,—
a: under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
b: under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard. Person not recognising expenditure as asset
3: Person recognising expenditure otherwise
4: Subsection (1) also applies to a person who—
a: recognises the expenditure as an expense for financial reporting purposes because it is an amount written off due to its being an immaterial amount for financial reporting purposes
b: would be required, if the expenditure were material, to recognise it for financial reporting purposes—
i: under paragraph 5.1 or 5.2 of the old reporting standard or because paragraph 5.4 of that standard applies; or
ii: under paragraph 68(a) of the new reporting standard applying, for the purposes of that paragraph, paragraphs 54 to 67 of that standard. Person with minor expenditure
5: Subsection (1) also applies to a person who—
a: incurs expenditure of $10,000 or less, in total, on research and development in an income year
b: has written off the expenditure due to its being an immaterial amount for financial reporting purposes; and
c: has recognised the expenditure as an expense for financial reporting purposes. Exclusion
6: Subsection (1) does not apply to expenditure that the person incurs on property to which all the following apply:
a: the property is used in carrying out research or development; and
b: it is not created from the research or development; and
c: it is 1 of the following kinds:
i: property for which the person is allowed a deduction for an amount of depreciation loss; or
ii: property the cost of which is allowed as a deduction by way of amortisation under a provision of this Act outside subpart EE
iii: land; or
iv: intangible property, other than depreciable intangible property; or
v: property that its owner chooses, under section EE 8 Choice for allocation of deduction
6B: A person who is allowed a deduction under this section for expenditure that is not interest may choose to allocate all or part of the deduction—
a: to an income year after the income year in which the person incurs the expenditure; and
b: in the way required by section EJ 21 Section need not be applied
7: A person may return income and expenditure in their return of income on the basis that this section does not apply to expenditure incurred on research or development in the income year Relationship with section EA 2
8: If expenditure to which this section applies is incurred in devising an invention that is patented, the expenditure is not treated as part of the cost of revenue account property for the purposes of section EA 2 Link with subpart DA
9: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount capital limitation deduction depreciable intangible property depreciation loss general limitation general permission income income year new reporting standard old reporting standard research return of income revenue account property 1994 No 164 s DJ 9A(1)-(5) Section DB 26(2) substituted 7 December 2009 section 152(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 26(2) amended 19 December 2007 section 31(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 26(3) heading repealed 19 December 2007 section 31(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 26(3) repealed 19 December 2007 section 31(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 26(4)(a) amended 19 December 2007 section 31(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 26(4)(b) substituted 7 December 2009 section 152(2) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 26(4)(b) substituted 19 December 2007 section 31(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (5) amended 1 April 2005 section 16(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting in an income year for a tax year Section DB 26(5)(b) substituted 19 December 2007 section 31(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (6B) inserted 1 October 2006 section 42(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (7) amended 1 April 2005 section 16(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting income year tax year The defined terms were amended 1 April 2005 section 16(3)(a) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words income year, Section DB 26 list of defined terms new reporting standard inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 26 list of defined terms old reporting standard inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 26 list of defined terms reporting standard repealed 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 The defined terms were amended 1 April 2005 section 16(3)(b) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by repealing the words , tax year
DB 27: Some definitions
Definitions
1: In this section, and in section DB 26 development new reporting standard old reporting standard Financial Reporting Act 1993 research Meaning of research or development: modification by Order in Council
2: The Governor-General may make an Order in Council specifying—
a: a kind of expenditure that is not expenditure on research or development for the purposes of section DB 26
b: an activity that is neither research nor development for the purposes of section DB 26
c: the date from which the expenditure or the activity is excluded from being research or development. development new reporting standard old reporting standard research tax year 1994 No 164 ss DJ 9A(6), (7), DJ 9B Section DB 27(1) heading substituted 19 December 2007 section 32(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 27(1) substituted 19 December 2007 section 32(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1) amended 1 October 2006 section 43(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting sections DB 26, EE 1 EJ 20 EJ 21 section DB 26 Section DB 27(1) new reporting standard inserted 7 December 2009 section 153 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 27(1) old reporting standard inserted 7 December 2009 section 153 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 27(1) reporting standard repealed 7 December 2009 section 153 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 27 list of defined terms Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities) omitted 19 December 2007 section 32(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DB 27 list of defined terms new reporting standard inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 27 list of defined terms old reporting standard inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 27 list of defined terms reporting standard repealed 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DB 28: Patent expenses
Deduction
1: A person is allowed a deduction for expenditure that they incur in connection with the grant, maintenance, or extension of a patent if they—
a: acquired the patent before 23 September 1997; and
b: use the patent in deriving income in the tax year in which they incur the expenditure. Link with subpart DA
2: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission income tax year 1994 No 164 s DJ 6(1)
DB 28B: Expenses of failed or withdrawn patent application
Deduction
1: A person who applies for the grant of a patent and is refused the grant or withdraws the application is allowed a deduction for expenditure—
a: that the person incurs in relation to the application; and
b: that would have been part of the cost of fixed life intangible property if the application had been granted; and
c: for which the person is not allowed a deduction under another provision. Timing of deduction
2: The deduction is allocated to the income year in which the grant is refused or the application is withdrawn. Link with subpart DA
3: This section overrides the capital limitation. The general permission and other general limitations still apply. capital limitation deduction fixed life intangible property general limitation general permission income year Section DB 28B inserted 1 October 2005 section 179 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DB 29: Patent rights: devising patented inventions
When this section applies
1: This section applies when a person incurs expenditure in devising an invention for which a patent has been granted. The section applies whether the person devised the invention alone or in conjunction with another person. Deduction: expenditure before 1 April 1993
2: When the person uses the patent in deriving income in a tax year, they are allowed a deduction for expenditure incurred before 1 April 1993, but not if a deduction has been allowed for the expenditure under any other provision of this Act or an earlier Act. Deduction: devising invention
3: If the person sells all the patent rights relating to the invention, they are allowed a deduction for the expenditure that they have incurred (whenever it is incurred) in connection with devising the invention to the extent to which a deduction has not already been allowed under subsection (2). Deduction: devising invention: proportion of expenditure
4: If the person sells some of the patent rights relating to the invention, they are allowed a deduction for part of the expenditure described in subsection (3). The part is calculated by dividing the amount derived from the sale by the market value of the whole of the patent rights on the date of the sale. Link with subpart DA
5: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount capital limitation deduction general limitation general permission income patent rights tax year 1994 No 164 ss DJ 6(2), EN 2(3)(a)
DB 30: Patent rights acquired before 1 April 1993
When this section applies
1: This section applies when a person sells patent rights that they acquired before 1 April 1993. Deduction
2: The person is allowed a deduction on the sale of the patent rights. Amount of deduction
3: The amount is calculated using the formula— Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount capital limitation general limitation general permission patent rights 1994 No 164 s EN 2(3)(b)
DB 31: Patent applications or patent rights When this section applies
1: This section applies when a person sells a patent application with a complete specification or Deduction
2: The person is allowed a deduction on the sale of the patent application with a complete specification or Amount of deduction
3: The amount is calculated using the formula— total cost – total amounts of depreciation loss Definition of items in formula
4: In the formula,—
a: total cost section DZ 14
b: total amounts of depreciation loss Link with subpart DA
5: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount capital limitation deduction depreciation loss general limitation general permission patent rights 1994 No 164 s EN 2(3)(c) The heading to section DB 31 was amended 21 June 2005 section 17(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting Patent applications or patent rights Patent rights Subsection (1) amended 21 June 2005 section 17(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words a patent application with a complete specification or patent rights Subsection (2) amended 21 June 2005 section 17(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words patent application with a complete specification or patent rights Subsection (4)(a) (b) amended 21 June 2005 section 17(4) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words patent application with a complete specification or patent rights Subsection (4)(a) (b) substituted 21 June 2005 section 19(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Unsuccessful software development Heading inserted 2 November 2012 section 243(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DB 31B: Expenditure in unsuccessful development of software
When this section applies
1: This section applies when a person incurs expenditure in the development of software for use in the person's business if—
a: the development of the software is abandoned before the software is fit to be used in the person's business; and
b: the person would have been entitled to a deduction for an amount of depreciation loss for the software if the software had been made fit to be used in the person's business. Deduction
2: The person is allowed a deduction for the expenditure incurred in the development of the software to the extent to which no deduction has been allowed for the expenditure under another provision of this Act or under another Act. Timing of deduction
3: The deduction is allocated to the income year in which the development of the software is abandoned. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission income year Section DB 31B inserted 2 November 2012 section 243(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Marketing
DB 32: Gifts of money by company
Who this section applies to
1: This section applies to—
a: a company that is not a close company :
b: a close company that has its shares quoted on the official list of a recognised exchange. Deduction
2: The company is allowed a deduction for a gift of money that it makes to a society, institution, association, organisation, trust, or fund of any of the kinds described in section KC 5(1) Amount of deduction
3: The deduction for the total of all gifts made in an income year is limited to 5% of the amount that would be the company's net income in the corresponding tax year in the absence of this section. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount close company company deduction general limitation general permission net income recognised exchange share supplement tax year 1994 No 164 s DJ 4 Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Section DB 32(3) heading substituted 6 October 2009 section 757(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 32(3) substituted 7 December 2009 section 154 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section DB 32(3) substituted 6 October 2009 section 757(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DB 32(3) amended 19 December 2007 section 33 Taxation (Business Taxation and Remedial Matters) Act 2007 Theft and bribery
DB 33: Property misappropriated by employees or service providers
When this section applies
1: This section applies when—
a: a person carries on a business; and
b: an employee of the business, or a person who provides services to the business, misappropriates property; and
c: no other provision of this Act allows the person who carries on the business a deduction for the loss resulting from the misappropriation. Exclusions
2: This section does not apply when—
a: the person who misappropriates the property is a relative of the person who carries on the business; or
b: the business is carried on by a company, and—
i: the company and the person who misappropriates the property are associated persons; or
ii: the company and a relative of the person who misappropriates the property are associated persons; or
c: the person who carries on the business is a trustee of a trust, and the person who misappropriates the property either created the trust, settled property on the trust, or is a beneficiary of the trust. Deduction
3: The person is allowed a deduction for the loss that they incur in the course of the business as a result of the misappropriation of the property. Timing of deduction
4: The deduction is allocated to the income year in which the loss is ascertained, or in 1 or more earlier years if, in the circumstances, the Commissioner considers it would be fair. Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. associated person business capital limitation Commissioner company deduction employee general limitation general permission income year relative supplement trustee 1994 No 164 s DJ 8
DB 34: Making good loss from misappropriation by partners
When this section applies
1: This section applies when a person carrying on a business in partnership pays an amount to make good a loss that arises from a partner, other than the person or the person's spouse, civil union partner or de facto partner
a: belongs to another person who is neither a partner in the partnership nor the spouse, civil union partner or de facto partner
b: is received in the course of the business either by the partnership or 1 or more of its partners. Deduction
2: The person is allowed a deduction for the amount if the person is under a legal liability to make good the loss. Timing of deduction
3: The deduction is allocated to the income year in which the amount is paid. Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation deduction general limitation general permission income year supplement 1994 No 164 s DJ 7 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (1)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(a) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
DB 35: Restitution of stolen property
Deduction
1: A person who derives income under section CB 28 section CB 28 Timing of deduction
2: The deduction is allocated to the income year in which the person makes restitution. Meaning of restitution
3: In this section, restitution includes restitution made to a person claiming through the person beneficially entitled to the property. Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation and the private limitation. The other general limitations still apply. amount capital limitation deduction general limitation general permission income income year private limitation property restitution supplement 1994 No 164 s DJ 18
DB 36: Bribes paid to public officials
When this section applies
1: Subsection (2) applies when—
a: a person ( person A
b: person A gives the bribe intending to influence a
i: obtain or retain business for person A; or
ii: obtain an improper advantage for person A in the conduct of business; and
c: the official either has or does not have the authority to act or to fail to act. No deduction
2: Person A is denied a deduction for the amount of the bribe. Exclusions
3: This section does not apply if—
a: the bribe is given outside New Zealand and, at the time it is given by person A, the bribe is not an offence under the laws of the foreign country in which is situated the principal office of the person, organisation or other body by whom the foreign public official is employed or for whom they provide services:
b: the bribe is paid wholly or mainly to ensure or expedite the performance by a foreign public official of a routine government action when the value of the benefit is small. No deduction (with exception)
4: Some definitions
5: In this section,— benefit, foreign country, and foreign public official section 105C bribe section 99 public official
a: a member of Parliament or a Minister of the Crown; and
b: a judicial officer, a law enforcement officer, or an official, as those terms are defined in section 99
c: a foreign public official routine government action is defined in section 105C Link with subpart DA
6: This section overrides the general permission. amount benefit bribe business deduction foreign country foreign public official general permission New Zealand public official routine government action 1994 No 164 s DJ 22 The heading to subsection (1) substituted 1 April 2005 section 20(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1)(b) amended 18 December 2006 section 20(1)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by omitting New Zealand Subsection (3) substituted 18 December 2006 section 20(1)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (4) repealed 18 December 2006 section 20(1)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Pollution control
DB 37: Avoiding, remedying, or mitigating effects of discharge of contaminant
When this section applies
1: This section applies if a person—
a: carries on a business in New Zealand; and
b: the person incurs, in the business or in ending the operations of the business, expenditure that is—
i: of a type listed in schedule 6B
ii: not incurred in relation to revenue account property other than land that is subject to section CB 6B
c: no other provision allows a deduction for the expenditure. Amount and timing of deduction
2: The person is allowed for an income year a deduction for the expenditure of,—
a: if paragraphs (b) and (c) do not apply, an amount that is calculated using the formula— rate × value:
b: if the operations of the business for which the expenditure was incurred come to an end in the income year, the diminished value or adjusted value of the expenditure for the income year:
c: if an improvement to land described in schedule 6B Definition of items in formula
3: The items in the formula in subsection (2)(a) are defined in subsections (4) and (6). Rate
4: Rate
a: 100% if the expenditure is of a type listed in schedule 6B
b: the appropriate rate under subsection (5) if—
i: the expenditure is of a type listed in schedule 6B
ii: paragraph (c) does not apply:
c: the rate for the type of expenditure, the income year, the valuation method adopted under subsection (6), and the person determined by the Commissioner under section 91AAN Schedule 11 rates
5: The rate for expenditure if the requirements of subsection (4)(b) are met is—
a: the rate set out in schedule 11
b: the rate set out in schedule 11 Value
6: Value
a: the amount of the expenditure incurred if the person chooses to use the straight-line equivalent method:
b: the diminished value of the expenditure for the income year if the person chooses to use the diminishing value equivalent method. Formula for rate for expenditure with assumed life
7: The formula for the rate referred to in subsection (5)(a) for a kind of expenditure to which subsection (4)(b) applies is— 100% ÷ assumed life. Definition of item in formula
8: In the formula in subsection (7), assumed life
a: for expenditure associated with a business activity that does not require a resource consent, 35:
b: for expenditure associated with a business activity that requires a resource consent, the lesser of 35 and the number of years in the period of the resource consent that include or follow the time at which the expenditure is incurred. Adjusted value
9: In this section, adjusted value amount of expenditure − deductions allowed + income derived. Definition of items in formula
10: In the formula in subsection (9),—
a: amount of expenditure
b: deductions allowed
c: income derived section CB 24B(8) Diminishing value equivalent method
11: In this section, diminishing value equivalent method Straight-line equivalent method
12: In this section, straight-line equivalent method Link with subpart DA
13: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. adjusted value amount business capital limitation deduction diminished value diminishing value equivalent method general limitation general permission income income year New Zealand revenue account property straight-line equivalent method Section DB 37 replaced 28 March 2024 section 176 section 176(2) Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 Repayments
DB 38: Payments for remitted amounts
When this section applies
1: This section applies when—
a: a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
b: the person's liability for the amount is later remitted or cancelled, wholly or partly; and
c: the remission or cancellation is not a dividend; and
d: the person is not required to calculate a base price adjustment by section EW 29
e: the amount to which the remission or cancellation applies is assessable income of the person under section CG 2
f: the person makes a payment for the amount to which the remission or cancellation applies. Amount, and timing, of deduction
2: The person is allowed a deduction for the amount of the payment in the income year in which it is made. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount assessable income deduction dividend general limitation general permission income year supplement 1994 No 164 s IE 1(4)(g)
DB 39: Restrictive covenant breached
When this section applies
1: This section applies when an employee ( person A person B
a: person A derives assessable income under section CE 9
b: person A breaches a term of the undertaking they gave to person B; and
c: person A is, consequently, required to make the payment to person B. Deduction
2: Person A is allowed a deduction for the payment. Amount of deduction
3: The amount of the deduction is the lesser of the following:
a: the assessable income that person A derives under section CE 9
b: the payment that person A makes to person B, excluding interest, punitive damages, exemplary damages, and person B's legal costs and other expenses. Timing of deduction
4: The deduction is allocated to the income year in which person A makes the payment to person B. Link with subpart DA
5: This section supplements the general permission and overrides the employment limitation. The other general limitations still apply. amount assessable income deduction employee employment limitation general limitation general permission income year interest supplement 1994 No 164 ss DJ 21, EO 7 Matching rules: revenue account property, prepayments, and deferred payments
DB 40: Adjustment for opening values of trading stock, livestock, and excepted financial arrangements
When this section applies
1: This section applies when a person has some or all of the following at the start of an income year:
a: trading stock valued under subpart EB :
b: livestock valued under subpart EC (Valuation of livestock) :
c: excepted financial arrangements that are revenue account property valued under subpart ED (Valuation of excepted financial arrangements):
d: a share supplier's share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c). Deduction: opening value of trading stock
2: The person is allowed a deduction in the income year for the value that the trading stock had at the end of the previous income year, as calculated under section EB 3 Deduction: opening value of livestock
3: The person is allowed a deduction in the income year for the value that the livestock had at the end of the previous income year, as calculated under section EC 2 Deduction: opening value of excepted financial arrangements
4: The person is allowed a deduction in the income year for the value that the excepted financial arrangements or share-lending right had section ED 1 Link with subpart DA
5: This section supplements the general permission. The general limitations still apply. deduction excepted financial arrangement general limitation general permission income year original share revenue account property share-lending right share supplier supplement trading stock 1994 No 164 s EE 2(4) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Subsection (1)(c) amended 1 July 2006 section 44(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression arrangements): arrangements). Subsection (1)(d) inserted 1 July 2006 section 44(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (4) amended 1 July 2006 section 44(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting arrangements or share-lending right had arrangements had The list of defined terms was amended 1 July 2006 section 44(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting the words original share The list of defined terms was amended 1 July 2006 section 44(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting the words share-lending right The list of defined terms was amended 1 July 2006 section 44(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting the words share supplier
DB 41: Adjustment for prepayments
When this section applies
1: This section applies when a person has, under section EA 3 Deduction
2: The person is allowed a deduction for the unexpired amount for the following income year. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act. amount deduction general limitation general permission income year supplement 1994 No 164 s EF 1(1)(b)
DB 42: Adjustment for deferred payment of employment income
When this section applies
1: This section applies when a person has, under section EA 4 Deduction
2: The person is allowed a deduction for the unpaid amount for the following income year. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act. amount deduction employment income general limitation general permission income year supplement 1994 No 164 s EF 1(1)(b) Change to accounting practice
DB 43: Adjustment for change to accounting practice
When this section applies
1: This section applies when a person has, under section EG 2(2) Amount, and timing, of deduction
2: The person is allowed a deduction of the amount as quantified and allocated under section EG 2 Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission supplement 1994 No 164 s EC 1 Portfolio investment entities Heading inserted 1 October 2007 section 21 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
DB 43B: Certain investors have deduction for portfolio investor allocated loss
When this section applies
1: This section applies to an investor in a portfolio investor class of a portfolio tax rate entity for a portfolio calculation period of the entity when—
a: the investor—
i: is a zero-rated portfolio investor for the portfolio calculation period:
ii: has all or part of a portfolio investor exit period included in the portfolio calculation period and the entity makes payments of tax under section HL 21
b: the portfolio calculation period includes a portfolio allocation period for which the person is allocated an amount of portfolio investor allocated loss under subpart HL Deduction
2: The investor has a deduction for an income year for the amount of portfolio investor allocated loss if—
a: the portfolio tax rate entity makes payments of tax under section HL 21
b: the portfolio tax rate entity makes payments of tax under section HL 23 deduction income year investor portfolio allocation period portfolio calculation period portfolio investor allocated loss portfolio investor class portfolio tax rate entity tax tax year zero-rated portfolio entity Section DB 43B substituted 1 October 2007 section 11 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section DB 43B inserted 1 October 2007 section 21 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section DB 43B(2)(a) substituted 19 December 2007 section 34 Taxation (Business Taxation and Remedial Matters) Act 2007
DB 43C: Certain fees charged by portfolio tax rate entities to investors not allowed as deductions
When this section applies
1: This section applies to an investor in a portfolio investor class of a portfolio tax rate entity when—
a: the investor incurs fees in relation to the investor's portfolio investor interest; and
b: the amount of the fees is included in the calculation of the entity's portfolio entity tax liability under section HL 20 No deduction
2: The investor is denied a deduction for the amount of the fees. Link with subpart DA
3: This section overrides the general permission. deduction general permission investor portfolio calculation period portfolio entity tax liability portfolio investment entity portfolio investor class Section DB 43C inserted 1 October 2007 section 12 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Exempt income This heading was inserted 1 October 2005 section 180 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DB 44: Expenditure incurred in deriving exempt dividend
Deduction
1: A company that derives a dividend that is exempt income of the company under section CW 9
a: the amount of the expenditure incurred by the company in deriving the dividend, if the company is not a conduit tax relief company:
b: the amount calculated using the following formula, if the company is a conduit tax relief company: expenditure x (1 -- non-resident shareholding) Definition of items in formula
2: In the formula,—
a: expenditure
b: non-resident shareholding section NH 7(2) NH 7(4) Link with subpart DA
3: This section supplements the general permission and overrides the exempt income limitation. The other general limitations still apply. company conduit tax relief company deduction dividend exempt income exempt income limitation general limitation general permission non-resident shareholder Section DB 44 inserted 1 October 2005 section 180 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Section DB 44(3) replaced 30 June 2014 section 198(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Use of motor vehicle under certain arrangements This heading was inserted 1 April 2006 section 45(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DB 45: Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 6B
Deduction
1: A party to an agreement or arrangement referred to in section CX 6B Link with subpart DA
2: This section overrides the private limitation and exempt income limitation. The general permission must still be satisfied and the other general limitations still apply. arrangement deduction depreciation loss exempt income limitation FBT rules general limitation general permission lease loss motor vehicle Section DB 45 inserted 1 April 2006 section 45(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section DB 45 substituted 1 April 2006 section 22(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Emissions trading scheme Heading added 26 September 2008 section 61 Climate Change Response (Emissions Trading) Amendment Act 2008
DB 46: Acquisition of ETS units
When this section applies
1: This section applies when a person acquires an ETS unit. No expenditure or loss on issue of forest land units
2: The person is treated as incurring no expenditure or loss on the acquisition, if the acquisition is on issue of a forest land unit. Deduction: acquisition from another person
3: The person is allowed a deduction for expenditure or loss incurred on acquiring the ETS unit from another person, if it is not the issue of a forest land unit. Deduction: acquisition of Kyoto unit on conversion of New Zealand unit
4: Despite subsection (3), if a person converts a New Zealand unit to a Kyoto unit under the Climate Change Response Act 2002
a: not more than the cost, if any, to the person of the New Zealand unit; and
b: not less than the cost, if any, to the person of the New Zealand unit. Link with subpart DA
5: The link between this section and subpart DA
a: subsections (2) and (4)(a) override the general permission:
b: subsection (3) overrides the capital limitation. The other general limitations still apply:
c: subsection (4)(b) supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation convert ETS unit forest land unit general limitation general permission Kyoto unit loss New Zealand unit Section DB 46 added 26 September 2008 section 61 Climate Change Response (Emissions Trading) Amendment Act 2008
DB 46B: Liabilities for emissions
When this section applies
1: This section applies when a person incurs a liability under the Climate Change Response Act 2002 No deduction
2: The person is denied a deduction for the liability. Link with subpart DA
3: Subsection (2) overrides the general permission. amount deduction general permission post-1989 forest land pre-1990 forest land Section DB 46B inserted 6 October 2009 section 758 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DB 47: Surrender of pre-1990 forest land units for post-1989 forest land deforestation
When this section applies
1: This section applies when a person surrenders a pre-1990 forest land unit under the Climate Change Response Act 2002 Treated as disposal and reacquisition
2: The person is treated as having disposed of the pre-1990 forest land unit to an unrelated person and as having then reacquired it, in each case, immediately before the surrender and for an amount equal to the unit’s market value at the time. amount post-1989 forest land pre-1990 forest land unit surrender Section DB 47 added 26 September 2008 section 61 Climate Change Response (Emissions Trading) Amendment Act 2008
DC: Employee or contractor expenditure
Contents
DC 1: Lump sum payments on retirement
Deduction
1: A person who carries on a business is allowed a deduction for a lump sum paid as a bonus, gratuity, or retiring allowance to an employee on retirement. Inclusions
2: For the purposes of subsection (1), a lump sum paid on retirement includes a lump sum paid to—
a: an employee when they end their employment or service through redundancy, loss of office, or similar circumstances :
b: a former employee when they are unable to be reemployed in seasonal work in circumstances that would be considered the loss of employment or service through redundancy if they resulted in ending the seasonal work. Exclusion
3: This section does not apply to the extent to which the person has accepted a liability, as described in section DC 9(1)(c) Timing of deduction
4: The deduction is allocated to the income year in which the lump sum is paid. Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation deduction employee employment income general limitation general permission income year supplement 1994 No 164 s DF 5 Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DC 2: Pension payments to former employees
When subsection (2) applies
1: Subsection (2) applies when—
a: a person, other than a close company, carries on a business; and
b: a former employee has retired from their employment in the business or their employment has ended through redundancy or similar circumstances; and
c: they are paid a pension in consideration of their past services in the business; and
d: they or their spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner enters a new marriage, civil union partner or de facto relationship Deduction: not close company
2: The person is allowed a deduction for a reasonable amount paid as the pension to the former employee or their surviving spouse, civil union partner or de facto partner When subsection (4) applies
3: Subsection (4) applies when—
a: a close company carries on a business; and
b: a former employee of the company is or has been a shareholder in it or has a relative who is or has been a shareholder in it; and
c: the former employee's employment in the company was genuine; and
d: they have retired from the employment or their employment has ended through redundancy or similar circumstances; and
e: they are paid a pension in consideration of their past services in the business; and
f: they or their spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner enters a new marriage, civil union or de facto relationship Deduction: close company
4: The close company is allowed a deduction for the amount paid as the pension to the former employee or their surviving spouse, civil union partner or de facto partner Amount of deduction under subsection (4)
5: The amount of the deduction allowed under subsection (4) is the amount that the company would have paid if the former employee or their relative were not, or had not been, a shareholder in the company. Timing of deductions
6: A deduction under this section is allocated to the income year in which the amount is paid. Relationship with section FF 17(1)
7: Section FF 17(1) Link with subpart DA
8: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation close company deduction employee general limitation general permission income year relative shareholder supplement 1994 No 164 s DF 4 Subsection (1)(d) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (1)(d) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting enters a new marriage or civil union remarries Subsection (1)(d) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (1)(d) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting enters a new marriage, civil union partner or de facto relationship enters a new marriage or civil union Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (2) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(f) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(f) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting enters a new marriage or civil union remarries Subsection (3)(f) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(f) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting enters a new marriage, civil union or de facto relationship enters a new marriage or civil union Subsection (4) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (4) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
DC 3: Pension payments to former partners
When this section applies
1: This section applies when—
a: a person is a partner in a partnership; or
b: a person who was a partner in a partnership is in business on their own account. Exclusion
2: This section does not apply to a partnership or a business that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land. Deduction
3: The person is allowed a deduction for their share of an amount, to the extent to which the amount is reasonable, paid as a pension to a former partner, or to the spouse, civil union partner or de facto partner
a: the partnership in which the former partner was a partner ( old partnership
b: the former partner retired from the old partnership or their employment ended through retirement; and
c: the former partner or their spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner enters a new marriage, civil union or de facto relationship
d: the pension is paid for the former partner's services in the old partnership. Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation deduction estate general limitation general permission interest land share supplement 1994 No 164 ss DF 8A, DF 8B Subsection (3) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (3)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting enters a new marriage or civil union remarries Subsection (3)(c) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Subsection (3)(c) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting enters a new marriage, civil union or de facto relationship enters a new marriage or civil union
DC 4: Payments to working partners
Deduction
1: A person who is a partner in a partnership is allowed a deduction for their share of a payment made under a contract of service to a partner who personally and actively performs duties that—
a: are required to be performed in carrying on the business of the partnership; and
b: are performed by the partner during the currency of the contract of service. Exclusion
2: This section does not apply to a partnership that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land. Amount of deduction
3: The amount of the deduction is limited to the amount of the payment authorised by the contract of service and any bonus, whether or not the payment of a bonus is authorised by the contract. Relationship with section GD 3
4: This section is overridden by section GD 3 Meaning of contract of service
5: In this section, contract of service
a: specifies the terms and conditions of the services to be performed by the partner; and
b: specifies the amount payable to the partner for the performance of the services; and
c: is entered into by all the partners in the partnership; and
d: is in writing. Link with subpart DA
6: This section supplements the general permission. The general limitations still apply. amount business contract of service deduction estate general limitation general permission interest land share supplement 1994 No 164 s DF 8
DC 5: Contributions to employees' benefit funds
Deduction
1: An employer is allowed a deduction for an amount that they pay to, or set aside as, a fund to provide individual personal benefits to their employees if—
a: the fund is not a superannuation scheme; and
b: the employees' rights to receive benefits from the fund are fully secured. Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction employee employer general limitation general permission superannuation scheme supplement 1994 No 164 s DF 2
DC 6: Contributions to employees' superannuation schemes
Deduction
1: An employer is allowed a deduction for a contribution to an employees' superannuation scheme. Exclusion
1B: The employer is denied a deduction for a contribution, to the extent of the amount of the tax credit under section KJ 6 Timing of deduction
2: The deduction is allocated to the income year in which the employer makes the contribution. Relationship with section EJ 19
3: Subsection (2) is overridden by section EJ 19 Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction employee employer general limitation general permission income year superannuation scheme 1994 No 164 s DF 3(1) Section DC 6(1B) heading inserted 1 April 2008 section 5 Taxation (KiwiSaver) Act 2007 Section DC 6(1B) inserted 1 April 2008 section 5 Taxation (KiwiSaver) Act 2007
DC 7: Attribution of personal services
When this section applies
1: This section applies when, under sections GC 14B to GC 14E Deduction
2: The person required to attribute the amount is allowed a deduction for the amount attributed. Timing of deduction
3: The deduction is allocated to the income year in which the amount is attributed to the other person. Link with subpart DA
4: This section supplements the general permission and overrides all the general limitations. amount deduction general limitation general permission income year supplement 1994 No 164 ss DJ 19, EO 6
DC 8: Restrictive covenants or exit inducements
Deduction
1: A person is allowed a deduction for expenditure that they incur that is income of another person under section CE 9 Exclusion
2: This section does not apply if—
a: the other person performs services for the person; and
b: expenditure that the person would have incurred for the services, if the other person had not derived an amount that is income under section CE 9 Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount capital limitation general limitation general permission income 1994 No 164 s DJ 20
DC 9: Sale of business: transferred employment income obligations
When this section applies
1: This section applies when—
a: a person ( seller buyer
b: an employee of the seller working in the business, or the part of the business, becomes an employee of the buyer under the sale arrangements; and
c: the seller and the buyer agree in writing, under the sale arrangements, that the buyer assumes the obligation to pay an amount of employment income to the employee. Deduction: parties not associated
2: If the seller and the buyer are not associated persons at the time of the sale,—
a: the seller is allowed a deduction, in the income year of the sale, for the provision made by the seller for a part
b: the seller is treated under section EA 4(4) of the provision Deduction: parties associated
3: If the seller and the buyer are associated persons at the time of the sale,—
a: the buyer is allowed a deduction for the provision made by the seller for the amount of employment income if the seller would have been allowed a deduction for the amount if the business, or the part of the business, had not been sold; and
b: section EA 4(5) Deduction: Buyer's payment exceeding provision
3B: The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays and that exceeds the provision made by the seller for that amount. Link with subpart DA
4: The link between this section and subpart DA
a: subsection (2)(a) supplements the general permission. The general limitations still apply :
b: subsections (3) and (3B) override amount arrangement associated person business capital limitation deduction employee employment income general limitation general permission income year supplement time of the sale 1994 No 164 s DF 10 Section DC 9(2)(a) amended 19 December 2007 section 35(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DC 9(2)(b) amended 19 December 2007 section 35(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DC 9(3) substituted 19 December 2007 section 35(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DC 9(3B) heading inserted 19 December 2007 section 35(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DC 9(3B) inserted 19 December 2007 section 35(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Section DC 9(4)(b) amended 19 December 2007 section 35(4) Taxation (Business Taxation and Remedial Matters) Act 2007
DC 10: Transfers of employment income obligations to associates
When this section applies
1: This section applies when—
a: an employee of a person ( person A person B
b: person A and person B are associated persons at the time; and
c: person B assumes person A's obligation to pay an amount of employment income to the employee; and
d: the employee's becoming an employee of person B does not result from the sale by person A of a business, or a part of a business, to person B. Deduction
2: Person B is allowed a deduction for the amount of employment income if person A would have been allowed a deduction for the amount if the transfer had not occurred. Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount associated person business capital limitation deduction employee employment income general limitation general permission 1994 No 164 s DF 11
DC 11: Loans to employees under share purchase schemes
Deduction
1: An employing company that provides financial assistance to an employee by way of an interest-free loan under a share purchase scheme is allowed a deduction for providing the assistance, under the following conditions:
a: the scheme must have the Commissioner's approval, which must be given if the scheme meets all the criteria set out in sections DC 12 DC 13
b: the deduction is allowed only for the 5 years after the date of the loan. Amount, and timing, of deduction
2: The amount of the deduction in each income year is equal to the interest that would have been payable by the employing company for the income year if the amount of the loan had been borrowed by the company at an interest rate of 10% annually with interest calculated with monthly rests, and as if repayments by the employee under the scheme were repayments of the notional loan by the company. Group of companies
3: If the employing company is part of a group of companies, and the share purchase scheme involves shares issued by another company in the group, the shares are treated as if they were issued by the employing company. Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation Commissioner company deduction employee employing company general limitation general permission group of companies income year interest share share purchase scheme supplement year 1994 No 164 s DF 7(1)
DC 12: Criteria for approval of share purchase schemes: before period of restriction ends
What this section does
1: This section sets out the criteria, relating to the provisions of a share purchase scheme on the period of restriction, that the Commissioner applies in determining whether or not to approve the scheme. Purchase of shares
2: The scheme must provide for—
a: the shares to be available for no more than their market value at the date of purchase or subscription; and
b: the amount that an employee spends on buying shares under the scheme or any similar scheme to be $2,340 or less in a 3 year period. Eligibility
3: The scheme must provide for—
a: employees to be eligible to participate equally in the scheme, that is,—
i: every full-time permanent employee on an equal basis with every other full-time permanent employee; and
ii: if the scheme applies to part-time employees and seasonal employees, every part-time employee on an equal basis with every other part-time employee and every seasonal employee on an equal basis with every other seasonal employee; and
b: any minimum period of employment or service before employees are eligible to participate,—
i: for full-time employees, to be no more than 3 years' full-time work; and
ii: for other employees, an accumulated period that is the equivalent of 3 years' full-time work. Loans to employees
4: The scheme must provide for—
a: a loan to an employee to buy shares to be free of interest and other charges; and
b: any minimum amount of loan to be $624 or less; and
c: employees to be able to repay the loan by regular equal instalments at intervals of 1 month or less over a period of between 3 years and 5 years from the date of the loan; and
d: employees to be able to choose to repay some or all of the loan before the due date for repayment. Shares held on trust
5: The scheme must provide for—
a: the trustee of the scheme to hold the shares in trust for the employee; and
b: the trustee to pay any dividends directly to the employee; and
c: the dividends to be treated as having been derived by the employee; and
d: the trustee to be prohibited from applying a dividend to the repayment of any sum owing to the company or to the trustee; and
e: the employee to be prohibited from charging or disposing of their rights or interests in the shares. Hardship
6: The scheme must provide for a trustee who is satisfied that the employee's continued participation in the scheme has resulted or would result in serious hardship,—
a: with the employee's agreement, to vary the terms of the repayment of a loan under the scheme; or
b: with the employee's agreement, to allow the employee to withdraw from the scheme as if they had ended their employment in the circumstances described in section DC 13(4) Withdrawal from scheme
7: The scheme must provide for—
a: an employee to be able to withdraw from the scheme on giving 3 months' notice to the trustee; and
b: the employee to be treated for the purposes of the scheme as if they ended their employment with the company on the date the notice takes effect, with the effect that section DC 13(4) amount Commissioner company dividend employee interest notice period of restriction share share purchase scheme trustee year 1994 No 164 s DF 7(2)(a)-(h), (j), (k) Section DC 12(5)(d) substituted 6 October 2009 section 759(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DC 13: Criteria for approval of share purchase schemes: when period of restriction ends
What this section does
1: This section sets out the criteria, relating to the provisions of a share purchase scheme on the period when the period of restriction ends, that the Commissioner applies in determining whether or not to approve the scheme. General rule
2: The scheme must provide for—
a: the trustee—
i: to transfer the shares to the employee if the employee is still employed by the company; or
ii: at the option of the employee, to buy the shares at their market value on the date of purchase; or
b: the trustee to apply subsection (3) or (4), if either applies, in priority to paragraph (a). Death, accident, sickness, redundancy, or retirement at normal retiring age
3: If the period of restriction ends because the employee ends their employment through death, accident, sickness, redundancy, or retirement at normal retiring age, the scheme must provide for—
a: the trustee to transfer the shares to the legal representative of the employee's estate or to the former employee; or
b: at the option of the legal representative or former employee, the trustee to buy the shares at their market value on the date of purchase, subject to the repayment of any outstanding loan under the scheme for the shares. Employment ends for other reason
4: If the period of restriction ends because the employee ends their employment for any reason other than one described in subsection (3), the scheme must provide for the trustee to buy the shares at their market value on the date on which the employee ends their employment, subject to the repayment of any outstanding loan under the scheme for the shares. Purchase price when trustee buys shares
5: If the trustee buys the shares when the period of restriction ends, the scheme must provide for the purchase price to be no more than the price paid for the shares by the employee. Commissioner company employee normal retiring age period of restriction share share purchase scheme trustee 1994 No 164 s DF 7(2)(i)
DC 14: Some definitions
Definitions
1: In this section, and in sections DC 11 to DC 13 employee
a: means a person that—
i: is employed by a company:
ii: is not a corporation sole, a body corporate, or an unincorporated body:
b: does not include—
i: a director of the company; or
ii: a person who, with any associated person, holds 10% or more of the issued capital of the company
iii: employing company normal retiring age
a: for an employee other than one to whom paragraph (b) applies, no less than 60 years of age :
b: for a female employee who is entitled under a contract of employment entered into before 1 April 1978 with the employing company to retire before 60 years of age, no less than 55 years of age :
c: for any employee, an age that is earlier than the age referred to in paragraph (a) or (b) and that the Commissioner considers reasonable given the nature of the employment or the general terms of employment in the business or occupation of the employee normal retiring age: paragraphs (a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and share trustee Meaning of period of restriction
2: In this section, and in sections DC 12 DC 13
a: period of restriction
b: for the purposes of this definition, if an employing company is part of a group of companies, and an employee is transferred to another company in the group, the employee is treated as continuing in their employment. Shorter of 2 periods
3: Period of restriction
a: a period of 3 years starting on the date the employee buys or subscribes for the shares, or the period of repayment of a loan made to them under the scheme for this purpose, whichever is longer; and
b: a period starting on the date the employee buys or subscribes for the shares and ending on the date the employee ends their employment with the employing company. This subsection is overridden by subsection (4). Different period
4: If the employee buys or subscribes for the shares at market value, and the rules of the scheme provide a period of restriction, that period applies, but it must be no shorter than the period of repayment of a loan made under the scheme for the purpose, and must be no longer than the period described in subsection (3) that would apply if this subsection did not exist. associated person company director employee employing company group of companies group of persons local authority normal retiring age period of restriction public authority share share purchase scheme trustee year 1994 No 164 s DF 7(3) Section DC 14(1) employee replaced 2 November 2012 section 244(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DC 14(1) employee amended 2 November 2012 section 244(2)(a) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section DC 14(1) employee repealed 2 November 2012 section 244(2)(b) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
DD: Entertainment expenditure
Contents
DD 1: Entertainment expenditure generally
When this subpart applies
1: This subpart applies when, in deriving income, a person incurs expenditure on entertainment that provides both a private and a business benefit. No deduction (with exception)
2: The person is denied a deduction for expenditure that they incur on the forms of entertainment specified in section DD 2 Meaning of limitation rule
3: Limitation rule Link with subpart DA
4: This section overrides the general permission. amount business deduction general permission income limitation rule 1994 No 164 s DG 1
DD 2: Limitation rule
What rule applies to
1: The expenditure to which the limitation rule applies is expenditure on the forms of entertainment described in subsections (2) to (6). Corporate boxes
2: The limitation rule—
a: applies to deductions for expenditure on corporate boxes, corporate marquees or tents, or other exclusive areas, whether temporary or permanent, at—
i: cultural, sporting, or other recreational events :
ii: activities taking place off the person's business premises; and
b: applies to the cost of tickets or other rights of entry to the areas; and
c: applies to the cost of food and drink incidental to this form of entertainment. Holiday accommodation
3: The limitation rule—
a: applies to deductions for expenditure on accommodation in a holiday home, time-share apartment, or similar leisure venue; and
b: does not apply to accommodation that is merely incidental to business activities or employment duties; and
c: applies to the cost of food and drink incidental to this form of entertainment. Pleasure craft
4: The limitation rule—
a: applies to deductions for expenditure on yachts or other pleasure craft; and
b: applies to the cost of food and drink incidental to this form of entertainment. Entertainment off premises
5: The limitation rule applies to deductions for expenditure on food and drink that a person provides off their business premises. Entertainment on premises
6: The limitation rule applies to deductions for expenditure on food and drink that a person provides, other than light refreshments such as a morning tea and whether or not guests are present,—
a: on their business premises at a celebration meal, party, reception, or other similar social function :
b: in an area of the premises that at the time is reserved for senior employees to use and is not open to all the person's employees working in the premises. Meaning of expenditure
7: Expenditure
a: in subsections (2) to (4),—
i: an amount of depreciation loss; and
ii: expenditure or loss on running costs and maintenance and similar matters; and
iii: a deduction for a lease premium under section DZ 9
b: in subsections (2) to (6), any incidental expenditure on matters such as hireage of crockery, glassware, or utensils, waiting staff, and music or other entertainment provided in association with the specified kind of entertainment. amount business business premises deduction depreciation loss expenditure limitation rule 1994 No 164 s DG 1(1), (3) schedule 6A, part A, cls 1-4 part B, cl 4(a) Subsection (2)(a)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Subsection (6)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DD 3: When limitation rule does not apply
The limitation rule is either restricted in its application or does not apply to deductions for the expenditure described in sections DD 4 to DD 8 deduction limitation rule 1994 No 164 s DG 1(2)
DD 4: Employment-related activities
Business travel expenditure
1: The limitation rule does not apply to a deduction for expenditure on food or drink consumed by a person while travelling in the course of business or for their employment duties. However, the limitation rule applies if—
a: the travel is mainly for the purpose of enjoying entertainment; or
b: the food or drink is consumed at a meal or function involving an existing or potential business contact as a guest; or
c: the food or drink is consumed at a celebration meal, party, reception, or other similar social function. Conference expenditure
2: The limitation rule does not apply to a deduction for expenditure on light refreshments at a conference or educational course or similar event, nor to food or drink consumed at such an event lasting for at least 4 consecutive hours (excluding meal times). However, the limitation rule applies if the event is mainly for the purpose of entertainment. Relocation expenses, employees' meals, and sustenance allowances
3: The limitation rule does not apply to a deduction for expenditure on—
a: an amount that is exempt income of an employee under sections CW 13B CW 13C
b: a light meal consumed as part of the employee's employment duties in an area of the person's business premises that at the time is reserved for senior employees and their guests to use and is not open to all the person's employees working in the premises. amount business business contacts business premises deduction employee exempt income limitation rule 1994 No 164 schedule 6A, part B, cls 1-5 Section DD 4(3) heading substituted 6 October 2009 section 760(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DD 4(3)(a) substituted 6 October 2009 section 760(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Section DD 4 list of defined terms amount inserted 6 October 2009 section 760(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DD 5: Promoting businesses, goods, or services
Sponsored promotions
1: The limitation rule does not apply to a deduction for expenditure on entertainment if—
a: the entertainment is sponsored mainly to advertise or promote a person's business, goods, or services to the public; and
b: none of the following has a greater opportunity to enjoy the entertainment than the public generally:
i: existing business contacts of the person or the person whose business, goods, or services are being advertised or promoted :
ii: employees of the person or the person whose business, goods, or services are being advertised or promoted :
iii: anyone associated with the person or the person whose business, goods, or services are being advertised or promoted. Incidental costs of promotion
2: The limitation rule does not apply to a deduction for expenditure on entertainment that is merely an incidental part of—
a: a trade display mainly held to advertise or promote a business, goods, or services :
b: a function open to the public and mainly held to advertise or promote a business, goods, or services. Samples
3: The limitation rule does not apply to a deduction for expenditure on samples that a person provides for promotion or advertising purposes to anyone who is not an employee of or associated with the person. Entertainment for review
4: The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to a person who is reviewing the entertainment for a book, magazine, paper, or other medium of communication. associated person business business contacts deduction employee limitation rule 1994 No 164 schedule 6A, part B, cls 6, 8, 10, 12 Subsections (1)(b)(i) (ii) (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DD 6: Entertainment as business or for charitable purpose
Entertainment as business
1: The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides for market value or in an arm's length transaction in the ordinary course of their business, if that business is to provide 1 or more of the forms of entertainment referred to in section DD 2 Entertainment for charitable purposes
2: The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to members of the public for charitable purposes. business charitable purpose deduction limitation rule 1994 No 164 schedule 6A, part B, cls 9, 11
DD 7: Entertainment outside New Zealand
The limitation rule does not apply to a deduction for expenditure on entertainment that is enjoyed or consumed outside New Zealand. deduction limitation rule New Zealand 1994 No 164 schedule 6A, part B, cl 7
DD 8: Entertainment that is income or fringe benefit
The limitation rule does not apply to a deduction for expenditure on entertainment that is—
a: income of the person who consumes it; or
b: a fringe benefit to which fringe benefit tax applies. deduction fringe benefit fringe benefit tax income limitation rule 1994 No 164 schedule 6A, part B, cls 13, 14
DD 9: Relationship with FBT rules
Sections DD 2 to DD 8 section CX 25 sections DD 2 to DD 8
a: may choose when to receive or use the benefit :
b: does not receive or use the benefit in the course of their employment duties. employee FBT rules 1994 No 164 s CI 1(r) Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DD 10: Interpretation: reimbursement and apportionment
In sections DD 2 to DD 8
a: a person is treated as having incurred expenditure on entertainment described in section DD 2 sections CW 13 CW 13B CW 13C :
b: if a person incurs expenditure that relates only partly to the entertainment, the expenditure must be apportioned appropriately. employee exempt income 1994 No 164 s DG 1(3), (4) Section DD 10(a) amended 6 October 2009 section 761 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DD 11: Some definitions
In this subpart,— business business contacts
a: includes, for a person,—
i: their clients, customers, shareholders, other financiers, and suppliers :
ii: the clients, customers, shareholders, other financiers, and suppliers of an associated person :
b: if the person is in partnership, does not include other partners in the partnership business contacts: paragraph (a)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and business premises
a: means the normal business premises or a temporary workplace of the person (or an associate) :
b: does not include premises or a workplace established mainly for the purpose of enjoying entertainment. business premises: paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and associated person business business contacts business premises shareholder 1994 No 164 schedule 6A business business contacts business premises
DE: Motor vehicle expenditure
Contents
Introductory provisions
DE 1: What this subpart does
Apportions motor vehicle expenditure
1: This subpart sets out the rules for determining the proportion of business use of a motor vehicle to its total use when a person uses a motor vehicle partly for business purposes and partly for other purposes. Exclusions
2: This subpart does not apply—
a: to a company :
b: to a person whose only income is income from employment :
c: to a motor vehicle that is used only—
i: for the purpose of deriving income; or
ii: for a purpose that constitutes a fringe benefit. business purposes business use company fringe benefit income income from employment motor vehicle 1994 No 164 s DH 1 Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DE 2: Deductions for business use
Deduction
1: A person is allowed a deduction for—
a: expenditure that they incur for the business use of a motor vehicle :
b: an amount of depreciation loss for the business use of a motor vehicle. Amount, and timing, of deduction: expenditure
2: The amount of the deduction allowed in an income year for the expenditure for the business use of the vehicle is calculated using the formula— expenditure x business proportion Definition of item in formula
3: In the formula, business proportion sections DE 3 to DE 12 Amount, and timing, of deduction: depreciation loss
4: The amount of the deduction allowed in an income year for the amount of depreciation loss for the business use of the vehicle is calculated—
a: using the formula in subsection (5), except in a case to which paragraph (b) or (c)
b: using the formula in subsection (7), if that subsection applies to the depreciation loss; or
c: using the formula in subsection (8C), if that subsection applies to the depreciation loss. Calculation of deduction: depreciation loss generally
5: The formula referred to in subsection (4)(a) is— standard calculation x business proportion Definition of items in formula
6: In the formula,—
a: standard calculation section EE 16
b: business proportion sections DE 3 to DE 12 When subsection (7) applies
6B: Subsection (7) applies when—
a: the depreciation loss results from a calculation made for the motor vehicle under section EE 41(2)
b: the motor vehicle was, at any time during the period the person owned it, dealt with in subsection (5). Calculation of deduction: depreciation loss on disposal
7: The formula referred to in subsection (4)(b) is— Definition of items in formula
8: In the formula,—
a: disposal depreciation loss section EE 41(2)
b: all deductions
c: base value sections EE 48 to EE 50
d: adjusted tax value When subsection (8C) applies
8B: Subsection (8C) applies when—
a: the depreciation loss results from a calculation made for the motor vehicle under section EE 41(2)
b: the motor vehicle starts to have a business use in the same income year as the year in which the depreciation loss arose. Calculation of deduction: depreciation loss on disposal in certain circumstances
8C: The formula referred to in subsection (4)(c) is— disposal depreciation loss × business proportion. Definition of items in formula
8D: In the formula,—
a: disposal depreciation loss section EE 41(2)
b: business proportion sections DE 3 to DE 12 Link with subpart DA
9: This section supplements the general permission and overrides the private limitation. The other general limitations still apply. adjusted tax value amount business use deduction depreciation loss general limitation general permission income year motor vehicle own private limitation supplement 1994 No 164 ss DH 1(3), EG 2(1)(d), EG 19(4) Subsection (1)(a) amended 3 April 2006 section 46 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting : ; or Subsection (4)(a) amended 18 December 2006 section 23(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting paragraph (b) or (c) paragraph (b) Subsection (4)(b) substituted 18 December 2006 section 23(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (4)(c) inserted 18 December 2006 section 23(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (6B) inserted 18 December 2006 section 23(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsections (8B) to (8D) inserted 18 December 2006 section 23(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
DE 3: Methods for calculating proportion of business use
The 3 methods that may be used to calculate the proportion of business use of a motor vehicle are—
a: actual records ( section DE 5 :
b: a logbook ( sections DE 6 to DE 11 :
c: mileage rates ( section DE 12 business use motor vehicle 1994 No 164 s DH 2 Paragraphs (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DE 4: Default method for calculating proportion of business use
When this section applies
1: This section applies when—
a: a person has not maintained actual records to show the proportion of business use of a motor vehicle; or
b: a period is not a term to which a proportion of business use of a motor vehicle established by a logbook applies; or
c: a person cannot use the mileage rate method. Amount of deduction
2: The deduction under section DE 2
a: the proportion of actual business use of the vehicle; and
b: 25% of the total use of the vehicle. amount business use deduction motor vehicle 1994 No 164 s DH 4 Actual records
DE 5: Actual records
To determine the proportion of business use of a motor vehicle, a person may use actual records showing the reasons for and the distance of journeys by a motor vehicle for business purposes. However, when the period covered falls within a logbook term, actual records may be used only if the person and the Commissioner agree. business purposes business use Commissioner logbook term motor vehicle 1994 No 164 s DH 2 Logbook
DE 6: Using logbook for test period
A person may keep a logbook for a test period for the purpose of establishing the proportion of the business use of a motor vehicle for an income year (or part of an income year) that falls within a logbook term. If a person uses a logbook as a method of establishing the proportion of business use, they must also record the total distance travelled in each income year (or part of an income year) that falls within a logbook term. business use income year logbook term motor vehicle 1994 No 164 s DH 3(1)
DE 7: Logbook requirements
Test period
1: When a logbook is used to establish the proportion of business use of a motor vehicle, a person must select a start date, and keep the logbook for at least 90 consecutive days at a time that represents (or is likely to represent) the average proportion of travel by the vehicle for business purposes during the logbook term. Record of reasons for, and distance of, journeys
2: The logbook must record—
a: the start and end of the 90 day test period; and
b: the vehicle's odometer readings at the start and end of the test period; and
c: the distance of each business journey; and
d: the date of each business journey; and
e: the reason for each business journey; and
f: any other detail that the Commissioner may require. business business purposes business use Commissioner logbook term motor vehicle 1994 No 164 s DH 3(2)
DE 8: Logbook term
Meaning of logbook term
1: A logbook term Start of term
2: A logbook term starts on the date that is the latest of the following days:
a: the first day of the income year in which a person starts to keep a logbook :
b: the day that a person acquires the motor vehicle (unless the vehicle is a replacement vehicle, which is dealt with in section DE 11 :
c: the day immediately after the last day of the previous logbook term :
d: a day that a person specifies. End of term
3: The logbook term ends on the date that is the earliest of the following days:
a: the day that a person disposes of the motor vehicle without replacing it :
b: the day that is 3 years after the first day of the income year in which the logbook term started :
c: a day that the Commissioner specifies under section DE 9 :
d: a day that a person specifies. business use Commissioner income year logbook term motor vehicle year 1994 No 164 s DH 3(3) Subsections (2)(a) (c) (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DE 9: Inadequate logbook
Non-representative logbook proportion
1: If the Commissioner considers that the proportion of business use recorded in a logbook does not, or does no longer, represent the average use of a motor vehicle for business purposes during an income year that falls within a logbook term, the Commissioner may,—
a: within the logbook term, direct a person to keep a further logbook and specify another 90 day period in the logbook term for keeping the logbook; or
b: treat a person as not having kept a logbook that applies to the logbook term. Further logbook
2: If the Commissioner directs a person to keep a further logbook, and the proportion of business use calculated under that logbook is less by at least 20% than the proportion under the first logbook, the Commissioner may find that the first logbook—
a: represented the average use of the motor vehicle for business purposes for only part of the logbook term; or
b: did not represent that use at all. Partly representative logbook
3: If subsection (2)(a) applies, the Commissioner may determine a date on which the application of the first logbook ended, and the further logbook applies to a new logbook term that starts on the day after that date. Non-representative logbook
4: If subsection (2)(b) applies, the Commissioner may direct that the further logbook applies for the logbook term to which the first logbook applied. business purposes business use Commissioner income year logbook term motor vehicle 1994 No 164 s DH 3(6), (7)
DE 10: Variance during logbook term
If, in any month during a logbook term, the proportion of business use in that month is less by at least 20% than the proportion established by the logbook, and the proportion of business use recorded in the logbook no longer represents the average use of the motor vehicle for business purposes, the logbook term must end on the last day of that month. business purposes business use logbook term motor vehicle 1994 No 164 s DH 3(4)
DE 11: Replacement vehicles
For the purpose of establishing the proportion of business use of a motor vehicle, a replacement vehicle is treated in the same way as the vehicle it replaces if—
a: the logbook is likely to be representative of the average travel for business purposes for the remainder of the logbook term; and
b: from the date of replacement, a person keeps a record of the total distance travelled by the replacement vehicle for each income year (or part of an income year) of the remaining logbook term. business purposes business use income year logbook term motor vehicle 1994 No 164 s DH 3(5) Mileage rates
DE 12: Mileage rate method
Using mileage rates
1: If a person's business travel is 5,000 kilometres or less in an income year, they may use the mileage rate method to calculate the expenditure or loss on a motor vehicle that represents the proportion of business use of the vehicle. Amount of deduction
2: Under the mileage rate method, the person must keep details of the business use of the motor vehicle and calculate the mileage travelled for business purposes for the income year. The amount of the deduction under this method is found by multiplying the mileage rate by the distance that reflects the proportion of business use of the vehicle for the income year. Setting mileage rates
3: For the purposes of this section, the Commissioner must from time to time set and publish a mileage rate. amount business business purposes business use Commissioner deduction income year motor vehicle
DF: Government
grants and compensation Heading amended 1 July 2008 section 36 Taxation (Business Taxation and Remedial Matters) Act 2007 Contents
DF 1: Government grants to businesses
When subsection (2) applies
1: Subsection (2) applies when—
a: a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
b: the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
c: the payment is made to the person for expenditure that they incur, other than in a way described in subsection (3); and
d: the person would be allowed a deduction for the expenditure if this section did not exist; and
e: the payment is excluded income under section CX 41 No deduction (with exception)
2: The person is denied, to the extent of the amount of the payment, the deduction that they would have been allowed if this section did not exist. When subsection (4) applies
3: Subsection (4) applies when—
a: a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
b: the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
c: the payment is made to the person for expenditure that they incur in acquiring, constructing, installing, or extending an item of depreciable property; and
d: the person owns the item; and
e: the person is allowed a deduction for an amount of depreciation loss for the item. Amount of depreciation loss
4: For the purpose of quantifying the amount of depreciation loss, the amount of the expenditure is reduced by the amount of the payment. Amendment of assessment
5: Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section. Exclusion
6: This section does not apply to a large budget screen production grant. Link with subpart DA
7: This section overrides the general permission. amount assessment business Commissioner deduction depreciable property depreciation loss general permission grant-related suspensory loan large budget screen production grant local authority public authority time bar 1994 No 164 s DC 1 Subsection (1)(d) amended 3 April 2006 section 48(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting exist; and exist. Subsection (1)(e) inserted 3 April 2006 section 48(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DF 2: Repayment of grant-related suspensory loans
Deduction
1: A person is allowed a deduction for the amount of a repayment that they are required to make of some or all of a grant-related suspensory loan to the extent to which the amount relates to a payment to which section DF 1(2) Timing of deduction
2: The deduction is allocated to the income year in which repayment is first required. Amount of depreciation loss
3: If a person is required to repay some or all of a grant-related suspensory loan, then, to the extent to which section DF 1(3)
a: the person is allowed a deduction for an amount of depreciation loss for the item; and
b: the amount of depreciation loss is the total of the amounts of depreciation loss for the item for which the person would have been allowed a deduction if section DF 1(3) Quantifying amount of depreciation loss
4: For the purpose of quantifying the amount of depreciation loss for the item in the income year and in later income years, the following matters must be taken into account:
a: the amount of the deduction under subsection (3); and
b: the total of the amounts of depreciation loss for the item for which the person has been allowed a deduction; and
c: the person's expenditure on acquiring, constructing, installing, or extending the item. Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation for the amount described in subsection (1). The other general limitations still apply. amount capital limitation deduction depreciation loss general limitation general permission grant-related suspensory loan income year supplement 1994 No 164 s DC 3(1)-(3)
DF 3: Identifying expenditure for purposes of sections DF 1 and DF 2
For the purposes of sections DF 1 DF 2 grant-related suspensory loan 1994 No 164 s DC 3(4)
DF 4: Payment by claimant receiving personal service rehabilitation payment
When this section applies
1: This section applies when a person (the claimant Injury Prevention, Rehabilitation, and Compensation Act 2001 Deduction
2: The claimant is allowed a deduction for the income year of the amount given by subsection (3). Formula
3: The amount of the deduction allowed under subsection (2) is calculated using the following formula: The following table is small in size and contains a formula. amount paid 1 – tax rate. Definition of items in formula
4: In the formula,—
a: amount paid section OB 1
b: tax rate Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation and private limitation for the amount described in subsection (2). The other general limitations still apply. assessable income capital limitation general limitation general permission income year payment personal service rehabilitation payment private limitation Section DF 4 added 1 July 2008 section 37 Taxation (Business Taxation and Remedial Matters) Act 2007
DN: Attributed losses from foreign equity
Contents
Attributed controlled foreign company loss
DN 1: Attributed controlled foreign company loss
Deduction
1: A person is allowed a deduction for an attributed CFC loss, subject to the jurisdictional ring-fencing rule in section DN 4 Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. attributed CFC loss capital limitation deduction general limitation general permission supplement 1994 No 164 s CG 1(a)
DN 2: When attributed CFC loss arises
A person has an attributed CFC loss
a: the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7
b: the accounting period ends during the income year; and
c: the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13
d: at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
e: the person's income interest is 10% or more for the accounting period, under sections EX 14 to EX 17
f: the CFC has a branch equivalent loss for the accounting period, under section EX 21
g: the CFC is not an unqualified grey list CFC for the accounting period, under section EX 22 accounting period attributed CFC loss branch equivalent loss CFC foreign company grey list income interest income year New Zealand resident transitional resident 1994 No 164 ss CG 6(1), CG 7(1), CG 13(1) Paragraph (d) substituted 1 October 2005 section 50(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 50(3) The list of defined terms was amended 1 October 2005 section 50(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting the words transitional resident See section 50(3)
DN 3: Calculation of attributed CFC loss
The amount of an attributed CFC loss is calculated under sections EX 18 to EX 20 amount attributed CFC loss
DN 4: Ring-fencing cap on deduction
Amount of deduction
1: The deduction that a person is allowed for an attributed CFC loss from a CFC in an income year is no more than the total of—
a: any attributed CFC income of the person for the income year from another CFC that is resident in the same country as the first CFC for the relevant accounting period; and
b: any FIF income of the person for the income year calculated under the branch equivalent method from a FIF that is resident in the same country. Income only once
2: When subsection (1) is applied to an attributed CFC loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when—
a: subsection (1) is applied to another attributed CFC loss; or
b: section DN 9 Relationship with sections IE 3 and IG 4
3: Any excess not able to be deducted because of subsection (1) is an attributed CFC net loss able to be used under section IE 3 accounting period amount attributed CFC income attributed CFC loss attributed CFC net loss branch equivalent method CFC deduction FIF FIF income FIF loss income year 1994 No 164 s DP 1 Foreign investment fund loss
DN 5: Foreign investment fund loss
Deduction
1: A person is allowed a deduction for a FIF loss. Ring fencing rule for loss under branch equivalent method
1B: The deduction for a FIF loss calculated under the branch equivalent method is subject to the jurisdictional ring-fencing rule in section DN 9 Ring fencing rule for loss under branch equivalent method Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. branch equivalent method calculation method capital limitation deduction FIF loss general limitation general permission supplement 1994 No 164 ss DP 2(1), DP 3(1) Subsection (1) substituted 1 April 2007 section 24(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 24(2) Subsection (1B) inserted 1 April 2007 section 24(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 24(2)
DN 6: When FIF loss arises
General rule
1: A person has a FIF loss
a: at any time in the year, the person has—
i: rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 4, part A
ii: rights under a life insurance policy issued by a non-resident; and
b: at that time, the rights are an attributing interest in a FIF under sections EX 30 FIFs); and
c: at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
i: the CFC regime exemption in section EX 32 :
ii: the grey list exemption in section EX 33 (Exemptions: direct income interests in FIF in grey list country) :
iib: the exemptions limited by income years in section EX 33B
iic: the exemption for shares in a listed Australian company in section EX 33C
iid: the exemption for units in certain Australian unit trusts in section EX 33D
iie: the Australian superannuation fund exemption in section EX 33E
iii: the foreign exchange control exemption in section EX 34 :
iv: the exemption for a non-resident or transitional resident, in section EX 35
v: the immigrant's accrued superannuation entitlement exemption in section EX 36 :
vi: the annuity or pension exemption in section EX 37 exemption); and
d: if the person is a natural person and not acting as a trustee, the person holds, at any time in the year
i: if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56
ii: if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section CQ 5(1)(d)(ii)
db: if the person is acting as a trustee of a trust that meets the requirements of subsection (4), the person holds , at any time in the year,
i: if subparagraph (ii) does not apply to the interest, the cost of the interest calculated under section EX 56
ii: if the person acquired the interest before 1 January 2000 and chooses, for the year or an earlier year, that this subparagraph and section CQ 5(1)(d)(ii)
e: at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
f: under the relevant calculation method chosen by the person, a loss amount is calculated for the income year or relevant accounting period under sections EX 38 to EX 45B Treatment of deemed transaction under section EX 51, EX 53, or EX 54B
1B: If a person is treated under section EX 51(5) EX 53 EX 54B Look-through calculation methods
2: Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
a: FIF loss arises in the income year only if the relevant accounting period of the FIF ends during the year; and
b: the tests in subsection (1)(a), (b), (c), and (e) are applied on the basis that references in subsection (1)(a), (b), (c), and (e) to any time in the income year are read as references to any time in the relevant accounting period. Special rule: CFC with FIF interest
3: A person with an income interest of 10% or more in a CFC can also have a FIF loss in an income year under the special rule in section EX 46 section EX 22 When application of subsection (1) affected by subsection (1)(db)
4: Subsection (1)(db) applies to the trustee of a trust for an income year if—
a: the settlor of the trust—
i: is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust under section OD 7
ii: is required by a court order to pay damages or compensation to the beneficiary:
b: the settlor of the trust—
i: is the estate of a deceased person; and
ii: is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
c: the settlor of the trust is the Accident Compensation Corporation:
d: the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person's death. accounting period accounting profits method amount attributing interest branch equivalent method calculation method CFC FIF FIF loss foreign company foreign superannuation scheme grey list income interest income year life insurance policy New Zealand resident non-resident transitional resident trustee 1994 No 164 ss CG 7(5), CG 15(1), (2), CG 16(2) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(a)(ii) amended 1 February 2004 section 25(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting non-resident; and non-resident: Subsection (1)(b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(b) amended 1 February 2004 section 25(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting FIFs); and FIFs): Subsection (1)(c)(i) (v) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (1)(c)(ii) amended 1 April 2007 section 25(3)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting (Exemptions: direct income interests in FIF in grey list country) (Grey list exemption) Subsection (1)(c)(iib) to (iie) inserted 1 April 2007 section 25(3)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1)(c)(iv) substituted 1 October 2005 section 51(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (1)(c)(vi) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(c)(vi) amended 1 February 2004 section 25(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting exemption); and exemption): Subsection (1)(d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(d) substituted 1 October 2005 section 51(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 51(4) Subsection (1)(d) amended 1 February 2004 section 25(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting $50,000; and $50,000: Subsection (1)(d) substituted 1 April 2007 section 25(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 25(10) Section DN 6(1)(d) amended 19 December 2007 section 38(1)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1)(db) inserted 1 April 2007 section 25(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 25(10) Section DN 6(1)(db) amended 19 December 2007 section 38(1)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1)(e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(e) amended 1 February 2004 section 25(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting time; and time: Subsection (1)(e) substituted 1 October 2005 section 51(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 51(4) Subsection (1)(f) amended 1 April 2007 section 25(8) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting EX 45B EX 45 See section 25(10) Section DN 6(1B) heading inserted 19 December 2007 section 38(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DN 6(1B) inserted 19 December 2007 section 38(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (4) inserted 1 April 2007 section 25(9) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 25(10) The list of defined terms was amended 1 October 2005 section 51(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 51(4)
DN 7: Calculation of FIF loss
The amount of a FIF loss is calculated, using the relevant calculation method, under sections EX 38 amount calculation method FIF loss Section DN 7 amended 1 October 2005 section 181 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression EX 38 EX 42
DN 8: Ring-fencing cap on deduction: not branch equivalent method
Section DN 8 repealed 1 April 2007 section 26(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 26(2)
DN 9: Ring-fencing cap on deduction: branch equivalent method
Amount of deduction
1: If a person has a FIF loss that is calculated under the branch equivalent method, the deduction the person is allowed for the loss in an income year is no more than the total of—
a: any attributed CFC income of the person for the income year from a CFC that is resident in the same country as the FIF for the relevant accounting period of the CFC; and
b: any FIF income of the person for the income year that is calculated under the branch equivalent method from another FIF resident in the same country. Income only once
2: When subsection (1) is applied to a FIF loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when applying—
a: subsection (1) to another FIF loss; or
b: section DN 4 Relationship with section IE 4
3: Any excess not able to be deducted because of subsection (1) is a FIF net loss able to be used under section IE 4 accounting period amount attributed CFC income attributed CFC loss branch equivalent method CFC deduction FIF FIF loss FIF net loss income year 1994 No 164 s DP 3
DO: Farming and aquacultural business expenditure
Contents
Farming
DO 1: Enhancements to land, except trees
Deduction
1: A person is allowed a deduction for expenditure that they incur on the following in carrying on a farming or agricultural business on land in New Zealand:
a: the destruction of weeds or plants detrimental to the land :
b: the destruction of animal pests detrimental to the land :
c: the repair of flood or erosion damage to the land :
d: the destruction of scrub, stumps, or undergrowth on the land :
e: the clearing or removing from the land of scrub, stumps, or undergrowth :
f: the construction on the land of fences for farming or agricultural purposes, including buying wire or wire netting for the purpose of making new or existing fences rabbit-proof:
g: the regrassing and fertilising of all types of pasture, if the expenditure is not incurred in the course of a significant capital activity. Link with subpart DA
2: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. business capital limitation deduction general limitation general permission New Zealand 1994 No 164 s DO 3(a)-(d), (g) Subsection (1)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Subsection (1)(f) amended 3 April 2006 section 52(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression rabbit-proof: rabbit-proof. Subsection (1)(g) inserted 3 April 2006 section 52(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DO 2: Erosion and shelter plantings
When this section applies
1: This section applies when a person carries on a farming or agricultural business on land in New Zealand, whether or not the business is the principal business carried on on the land. Deduction
2: The person is allowed a deduction for expenditure that they incur in planting or maintaining trees, whether or not on the land, for the purpose of—
a: preventing or combating erosion of the land; or
b: providing shelter to the land. Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. business capital limitation deduction general limitation general permission New Zealand 1994 No 164 s DO 3(e), (f)
DO 3: Trees on farms
When this section applies
1: This section applies when—
a: a person carries on, on land in New Zealand, a farming or agricultural business that is the principal business carried on on the land; and
b: they plant or maintain trees on the land; and
c: the trees are not—
i: trees for which the person is allowed a deduction under section DO 2
ii: trees planted mainly to produce fruit; or
iii: trees planted under a forestry encouragement agreement under the Forestry Encouragement Act 1962 Deduction
2: The person is allowed the following deductions:
a: in an income year in which the person incurs expenditure on planting trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur; and
b: in an income year in which the person incurs expenditure on maintaining trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur. Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. business capital limitation deduction general limitation general permission income year New Zealand 1994 No 164 s DO 7(1), (2)(e)
DO 4: Improvements to farm land
When this section applies
1: This section applies when—
a: a person carries on a farming or agricultural business on land in New Zealand; and
b: an improvement described in schedule 7 land; and
c: the expenditure on the improvement is not expenditure to which sections DO 4B to DO 4D Deduction: expenditure: owner of land
2: A person who owns the land is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person or by another person; and
c: it is not incurred on anything described in any of sections DO 1 to DO 3
d: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person disposes of the land. (The income year referred to in this paragraph is the income year of the person who owns the land.); and
e: it is incurred in developing the land; and
f: it is of benefit to the business in the income year in which the person is allowed the deduction. Deduction: expenditure: non-owner of land
3: A person who does not own the land is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person; and
c: it is not incurred on anything described in any of sections DO 1 to DO 3
d: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
e: it is incurred in developing the land; and
f: it is of benefit to the business in the income year in which the person is allowed the deduction. Amount, and timing, of deduction
4: The amount of the deduction is calculated using the formula— schedule 7 percentage x diminished value Definition of items in formula
5: In the formula,—
a: schedule 7 percentage schedule 7, part A
b: diminished value Amount, and timing, for obsolete vines or trees
6: When non-listed horticultural plants schedule 7
a: subsection (4) does not apply; and
b: the amount of the deduction is the diminished value of the non-listed horticultural plants
c: the deduction is allocated to the income year in which the non-listed horticultural plants Link with subpart DA
7: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. Order in Council to amend schedule 7
8: The Governor-General may from time to time by Order in Council make regulations amending schedule 7 amount business capital limitation deduction diminished value general limitation general permission income income year New Zealand own 1994 No 164 s DO 4(1)-(3)(b), (4) Subsection (1)(b) amended 1 October 2005 section 182(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting land; and land. Subsection (1)(c) inserted 1 October 2005 section 182(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (6) amended 1 October 2005 section 182(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting non-listed horticultural plants vines or trees Subsection (8) inserted 1 October 2005 section 53(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DO 4B: Expenditure on land: planting of listed horticultural plants
Application of section
1: This section applies if—
a: a person carries on a farming or agricultural business (including a horticultural business) on land in New Zealand; and
b: the land has been developed by the planting of listed horticultural plants on the land. Deduction and timing
2: For an income year in which the planting benefits the business and for which subsection (3) does not apply, the person is allowed a deduction relating to expenditure incurred by the person, or by another person, in developing the land. Income year in which no deduction
3: The person is not allowed a deduction under subsection (2) for an income year in which—
a: if the person owns the land, the person disposes of the land:
b: if the person does not own the land, the person ceases carrying on the business on the land. Amount of deduction other than under subsections (6) and (7)
4: For expenditure to which subsections (6) and (7) do not apply for the income year, the amount of the deduction under subsection (2) is calculated using the formula: 1.2 x rate x diminished value. Definition of items in formula
5: In the formula—
a: rate section 91AAB
b: diminished value Deduction: expenditure on replaced plant if no deduction under section DO 4C
6: If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person has no deduction under section DO 4C
a: the person is allowed a deduction:
b: the amount of the deduction is the diminished value of the expenditure on the listed horticultural plant at the time that the listed horticultural plant ceases to exist or to be used in deriving assessable income:
c: the deduction is allocated to the income year in which the listed horticultural plant ceases to exist or to be used in deriving income. Treatment of expenditure on replaced plant if deduction under section DO 4C
7: If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person has a deduction under section DO 4C
a: the person is not allowed a deduction under this section; and
b: the person may add the diminished value, immediately before the replacement, of the expenditure on the listed horticultural plant to the diminished values, at the end of the income year, of the expenditure on listed horticultural plants that are in the planting at the end of the income year; and
c: the person may elect the method of making the addition by applying the method in a return of income for the income year. Link with subpart DA
8: This section overrides the general permission and the capital limitation. The other general limitations still apply. assessable income business capital limitation deduction diminished value general limitation general permission income year listed horticultural plant planting return of income Section DO 4B inserted 1 October 2005 section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DO 4C: Expenditure on land: horticultural replacement planting
Application of section
1: This section applies to a person who carries on a horticultural business on land in New Zealand and who, in an income year (called the current income year
a: plants, or causes to be planted, on the land a listed horticultural plant as a replacement plant:
b: regrafts, or causes to be regrafted, a listed horticultural plant on the land as a replacement plant. Deduction
2: The person is allowed a deduction of an amount given by 1 of subsections (3) and (5) if, in the current income year—
a: the person incurs expenditure in replacing a listed horticultural plant; and
b: the replacement plant benefits the business; and
c: the person does not dispose of the land on which the listed horticultural plant is cultivated; and
d: the person elects that this section apply to the expenditure by making a return of income for the current income year on that basis. Amount of deduction if no deduction in 1 or both of 2 preceding income years
3: If the person has had no deduction under this section for 1 or both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is calculated using the formula— Definition of items in formula
4: In the formula—
a: replacement expenditure
b: fraction Amount of deduction if deduction in both of 2 preceding income years
5: If the person has had a deduction under this section for a planting for both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is the lesser of—
a: the amount that is calculated using the formula in subsection (6):
b: the amount that is calculated using the formula in subsection (8). Formula for first amount
6: The first amount is calculated using the formula Definition of items in formula
7: In the formula—
a: replacement expenditure
b: fraction Formula for second amount
8: The second amount is calculated using the formula— Definition of items in formula
9: In the formula—
a: replacement expenditure
b: earlier fraction
c: later fraction
d: replaced area fraction Timing of deduction
10: The deduction is allocated to the current income year. Link with subpart DA
11: This section overrides the general permission and the capital limitation. The other general limitations still apply. assessable income business capital limitation deduction diminished value general limitation general permission income year listed horticultural plant planting replaced area fraction replacement plant return of income Section DO 4C inserted 1 October 2005 section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DO 4D: Accounting for expenditure on listed horticultural plants under sections DO 4B and DO 4C
Separate accounting for additional listed horticultural plants if deduction under section DO 4C
1: A person to whom section DO 4B sections DO 4B DO 4C
a: the person has had a deduction under section DO 4C
b: the person acquires the listed horticultural plants in the income year; and
c: the listed horticultural plants benefit the business of the person in the income year; and
d: the listed horticultural plants are not replacement plants. Combined accounting for listed horticultural plants if no deduction under section DO 4C
2: A person may, despite subsection (1), account under sections DO 4B DO 4C deduction income year listed horticultural plant planting replacement plant Section DO 4D inserted 1 October 2005 section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DO 4E: Some definitions
In this section and sections DO 4B to DO 4D planting
a: that are involved in the business of the person during the income year; and
b: for which the person must account under sections DO 4B DO 4C plot replaced area fraction where—
replacement area: is the area, at the end of the income year, of the part of the plot on which listed horticultural plants in the planting are planted or regrafted during the income year as replacement plants
plot area: is the total area, at the end of the income year, of the plot. business deduction income year listed horticultural plant planting plot replaced area fraction replacement plant Section DO 4E inserted 1 October 2005 section 183 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
DO 5: Farming
or horticulture When this section applies
1: This section applies when a person—
a: is the owner of an estate in fee simple or of a leasehold estate in land in New Zealand; and
b: grants a lease or a sublease of the land to a person who carries on a farming or agricultural business on the land; and
c: in the term of the lease or sublease,—
i: incurs expenditure relating to the land for which they are allowed a deduction under any of section DO 1 DO 2 DO 4 DO 4B DO 4C
ii: is allowed a deduction under section DO 4(2) DO 4B(2) DO 4C Relationship with section DO 1 or DO 2 or DO 4 or DO 4B or DO 4C
2: Section DO 1 DO 2 DO 4 DO 4B DO 4C business deduction estate lease leasehold estate New Zealand own term of the lease 1994 No 164 s DO 6 The heading was amended 1 October 2005 section 184(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words or horticulture Farming Subsection (1)(c)(i) amended 1 October 2005 section 184(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words or DO 4B or DO 4C DO 4 Subsection (1)(c)(i) amended 1 October 2005 section 184(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words or DO 4B(2) or DO 4C DO 4(2) Subsection (2) amended 1 October 2005 section 184(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words or DO 4B or DO 4C DO 4 Subsection (2) amended 1 October 2005 section 184(5) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words or DO 4B or DO 4C DO 4
DO 5B: Improvement destroyed or made useless
When this section applies
1: This section applies if, in an income year of a person,—
a: the person owns land, or operates a business on land, to which an improvement described in schedule 7
b: the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
c: the person would be entitled for the income year to a deduction under section DO 4 DO 5
d: the damage occurs in an income year that corresponds to the 2005-06 or a subsequent tax year; and
e: the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person. Deduction: diminished value of expenditure
2: The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement. Link with subpart DA
3: This section overrides the general permission and the capital limitation. The other general limitations still apply. business capital limitation deduction diminished value general limitation general permission income income year Section DO 5B inserted 1 October 2005 section 185 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 The heading to section DO 5B amended 3 April 2006 section 54(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting by qualifying event Subsection (1) substituted 3 April 2006 section 54(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 3 April 2006 section 54(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting qualifying event Aquaculture
DO 6: Improvements to aquacultural business
When this section applies
1: This section applies when—
a: a person carries on an aquacultural business in New Zealand; and
b: the aquacultural business is—
i: fish farming under a licence issued under the Freshwater Fish Farming Regulations 1983
ii: mussel farming; or
iii: rock oyster farming; or
iv: scallop farming; or
v: sea-cage salmon farming; and
c: an improvement described in any of parts B to F of schedule 7 Deduction: expenditure: owner of improvement
2: A person who owns the improvement is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person or by another person; and
c: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business. (The income year referred to in this paragraph is the income year of the person who owns the improvement.); and
d: it is incurred in developing the business; and
e: it is of benefit to the business in the income year in which the person is allowed the deduction. Deduction: expenditure: non-owner of improvement
3: A person who does not own the improvement is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person; and
c: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business; and
d: it is incurred in developing the business; and
e: it is of benefit to the business in the income year in which the person is allowed the deduction. Amount, and timing, of deduction
4: The amount of the deduction is calculated using the formula— schedule 7 percentage x diminished value Definition of items in formula
5: In the formula,—
a: schedule 7 schedule 7
b: diminished value Link with subpart DA
6: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount business capital limitation deduction diminished value general limitation general permission income year New Zealand 1994 No 164 ss DO 5(1)-(3)(b), OB 1 aquaculture
DO 7: Improvement destroyed or made useless
When this section applies
1: This section applies if, in an income year of a person,—
a: the person carries on an aquacultural business in New Zealand—
i: that satisfies section DO 6(1)(b)
ii: for the purposes of which an improvement described in schedule 7
b: the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
c: the person would be entitled for the income year to a deduction under section DO 6
d: the damage occurs in an income year that corresponds to the 2005-06 or a subsequent tax year; and
e: the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person. Deduction: diminished value of expenditure
2: The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement. Link with subpart DA
3: This section overrides the general permission and the capital limitation. The other general limitations still apply. business capital limitation deduction diminished value general limitation general permission income income year Section DO 7 inserted 3 April 2006 section 55 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DP: Forestry expenditure
Contents
DP 1: Expenditure of forestry business
Deduction
1: A person carrying on a forestry business on land in New Zealand is allowed a deduction for expenditure that they incur on—
a: administrative overheads, rates, rent, insurance premiums, or other expenses of the same kinds :
b: interest on money borrowed for the purposes of the business and employed as capital in the business :
c: planting or maintaining trees on the land :
d: applying fertiliser after the planting of the trees :
e: disease control, pest control, or weed control :
f: repair or maintenance of plant, machinery, or equipment used by the person mainly in—
i: planting or maintaining trees on the land; or
ii: preparing or otherwise developing the land for the person's forestry operations :
g: repair or maintenance of land improvements, other than trees, effected on the land and used by the person mainly in the business :
h: the construction to or on the land of access tracks that are—
i: constructed for a specific operational purpose; and
ii: used for no longer than 12 months after construction :
i: the cost of standing timber that is lost or destroyed. Timing of deduction
2: Although timber is revenue account property, a deduction for expenditure described in subsection (1) is not allocated under section EA 2(2) section BD 4(2) Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. business capital limitation deduction forestry business general limitation general permission interest New Zealand revenue account property standing timber timber 1994 No 164 s DL 1(2)-(4), (7), (12), (13)(e) Subsection (1)(a) (e) (f)(ii) (g) (h)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Section DP 1(1)(e) amended 29 March 2025 section 255(1) section 255(2) Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 Section DP 1 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 2: Plant or machinery
When this section applies: first case
1: This section applies when—
a: a person incurs expenditure on acquiring, on or after 1 April 1975, plant or machinery; and
b: the person first uses the plant or machinery on or after 1 April 1975; and
c: the person uses the plant or machinery mainly in developing land in New Zealand for use in a forestry business to be carried on by them on the land. When this section applies: second case
2: This section also applies when—
a: a person carrying on a forestry business on land in New Zealand incurs expenditure on acquiring, on or after 1 April 1975, plant or machinery; and
b: the person first uses the plant or machinery on or after 1 April 1975; and
c: the person uses the plant or machinery mainly in planting or maintaining trees on the land. Deduction
3: The person is allowed a deduction for an amount of depreciation loss for the plant or machinery. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. acquire amount business capital limitation deduction depreciation loss forestry business general limitation general permission New Zealand 1994 No 164 s DL 1(5), (8) Section DP 2 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 3: Improvements to forestry land
When this section applies
1: This section applies when—
a: a person carries on a forestry business on land in New Zealand; and
b: an improvement described in schedule 7 Deduction: expenditure: owner of land
2: A person who owns the land is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person or by another person; and
c: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person disposes of the land. (The income year referred to in this paragraph is the income year of the person who owns the land.); and
d: it is incurred in developing the land; and
e: it is of benefit to the business in the income year in which the person is allowed the deduction. Deduction: expenditure: non-owner of land
3: A person who does not own the land is allowed a deduction for expenditure to which all the following apply:
a: it is incurred on making the improvement; and
b: it is incurred by the person; and
c: it is incurred in the 1995-96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
d: it is incurred in developing the land; and
e: it is of benefit to the business in the income year in which the person is allowed the deduction. Amount, and timing, of deduction
4: The amount of the deduction is calculated using the formula— schedule 7 percentage x diminished value Definition of items in formula
5: In the formula,—
a: schedule 7 percentage schedule 7
b: diminished value Link with subpart DA
6: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount business capital limitation deduction diminished value forestry business general limitation general permission income year New Zealand own 1994 No 164 s DL 2(1)-(3)(b) Section DP 3 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 3B: Improvement destroyed or made useless
When this section applies
1: This section applies if, in an income year of a person,—
a: the person operates a forestry business on land, to which there has been made an improvement; and
b: the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income—
i: in an income year that corresponds to the 2005-06 or a subsequent tax year; and
ii: other than as a result of the action or failure to act of the person, an agent of the person, or an associated person; and
c: the person would be entitled for the income year to a deduction under section DP 3 Deduction: diminished value of expenditure
2: The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement. Link with subpart DA
3: This section overrides the general permission and the capital limitation. The other general limitations still apply. business capital limitation deduction diminished value forestry business general limitation general permission income income year Section DP 3B inserted 1 October 2005 section 186 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 The heading to section DP 3B amended 3 April 2006 section 56(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting by qualifying event Subsection (1)(b) substituted 3 April 2006 section 56(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section DP 3B list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 The list of defined terms was amended 3 April 2006 section 56(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting qualifying event
DP 4: Forestry encouragement agreement: deductions
When this section applies
1: This section applies when a person makes a forestry encouragement agreement under the Forestry Encouragement Act 1962 Deduction: forestry expenditure under agreement
2: The person is allowed a deduction for expenditure that they incur if all the following apply to the expenditure:
a: it is expenditure incurred in planting or maintaining trees under the agreement; and
b: it is not expenditure for which an advance has been or is to be made under the agreement; and
c: it is not expenditure represented in a payment made to the person under the Forestry Encouragement Grants Regulations 1983
i: planting or maintaining trees; or
ii: meeting administrative overheads, rates, rent, insurance premiums, or other expenses of the same kinds; or
iii: paying interest on money borrowed for the purpose of developing the trees and employed as capital in developing the trees. Deduction: advance
3: The person is allowed a deduction for expenditure that they incur in—
a: making a payment of interest for an advance made under the agreement :
b: making a payment reducing the principal of an advance made under the agreement. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission interest 1994 No 164 s DL 6(1) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
DP 5: Forestry encouragement agreement: no deduction
No deduction
1: A person who has made a forestry encouragement agreement under the Forestry Encouragement Act 1962
a: an advance is made to the person under the agreement; and
b: the advance is exempt income of the person under section CW 2
c: the person is later relieved from some or all of their liability to repay the principal. Link with subpart DA
2: This section overrides the general permission. amount deduction exempt income general permission 1994 No 164 s DL 6(2)(b)
DP 6: Land contouring: no deduction
No deduction
1: A person who derives income under section CB 22 CB 23 Link with subpart DA
2: This section overrides the general permission. deduction general permission income 1994 No 164 s DL 1(9)
DP 7: Forestry business on land bought from Crown, Maori owners, or holding company: no deduction
No deduction: forestry company
1: A forestry company is denied a deduction for interest to which both the following apply:
a: it is paid by the company under a qualifying debenture issued by the company; and
b: it is exempt income of the person deriving it, under section CW 3 No deduction: Maori investment company
2: A Maori investment company is denied a deduction for interest to which both the following apply:
a: it is paid by the company under a qualifying debenture issued by the company; and
b: it is exempt income of the person deriving it, under section CW 3 Relationship with sections FC 2 , FC 2B, and FZ 2
3: Sections FC 2 FZ 2 and section FC 2B Link with subpart DA
4: This section overrides the general permission. business deduction exempt income forestry business forestry company general permission holding company interest Maori investment company Maori owners qualifying debenture 1994 No 164 s DL 5(1)(b), (c) Section DP 7(3) heading amended 6 October 2009 section 762(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DP 7(3) amended 6 October 2009 section 762(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DP 7 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 8: Cost of acquiring timber: forestry business on land bought from Crown, Maori owners, or holding company
When this section applies
1: This section applies when a forestry company buys land with standing timber on it from a seller who is the Crown, the Maori owners, or a holding company of the forestry company. Sellers of Maori land
2: For the purposes of subsection (1),—
a: land sold to the forestry company by the Maori Trustee or by a trustee for a Maori owner is treated as if it had been sold by the beneficial owners :
b: land sold to the forestry company by a Maori incorporation is treated as if it had been sold by the members of the incorporation. Cost of acquiring timber
3: The cost to the forestry company of acquiring the timber is the lesser of—
a: the cost of the timber
b: the amount described in section CB 23(3) business forestry business forestry company holding company Maori incorporation Maori owners standing timber trustee 1994 No 164 s DL 5(1)(d)(ii), (iii) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(a) amended 1 October 2005 section 187 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting cost of the timber cost of timber Section DP 8 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DP 8B: Treaty of Waitangi claim settlements: rights to take timber
When this section applies
1: This section applies when a person's right to take timber (the old right new rights section CW 1B Cost of acquiring new rights
2: The person who is granted the new rights is treated, for each new right, as having acquired the new right for a cost equal to the expenditure they incurred in relation to the old right, but only to the extent that the expenditure relates to the land covered by the new right and has not been deducted previously. exempt income land person right to take timber Section DP 8B inserted 29 August 2011 section 195 Taxation (Tax Administration and Remedial Matters) Act 2011
DP 9: Cost of acquiring timber or right to take timber: other cases
Acquiring land with standing timber
1: For a person acquiring land with standing timber on it in a disposal to which section CB 23 section CB 23 Recharacterisation or avoidance
2: For a person acquiring timber or a right to take timber in a disposal or distribution to which section FB 4
a: the price paid or realised under section FB 4
b: the consideration under section FF 7
c: the price realised under section GD 1
d: the price realised under section GD 2 amount dispose income right to take timber standing timber timber 1994 No 164 ss CJ 1(2)(e)(ii), OB 1 cost
DP 10: Cost of timber
When this section applies
1: This section applies when a person—
a: derives an amount on the disposal of timber and the amount is income of the person under section CB 22 CB 23
b: has incurred expenditure in relation to the timber that is a cost of timber. Deduction
2: The person is allowed a deduction for the amount that is a cost of timber. Timing of deduction
3: The deduction is allocated—
a: for timber harvested from the land before the time of disposal, to the income year in which the timber first becomes trading stock of the person; or
b: otherwise, by section EA 2 Meaning of timber
4: In this section, timber
a: the creation or grant of a right to take timber:
b: the grant of a licence or an easement in relation to timber:
c: the creation of a forestry right as defined in section 2
4B: Subsection (2) does not apply if the amount of income of the person under section CB 22 section CW 1B section CW 1B(3) Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation cost of timber deduction dispose exempt income general permission income year timber trading stock Section DP 10 substituted 7 December 2009 section 155(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Subsection (1)(b) substituted 1 October 2005 section 20(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section DP 10(4B) inserted 29 August 2011 section 196(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section DP 10 list of defined terms exempt income inserted 29 August 2011 section 196(2) Taxation (Tax Administration and Remedial Matters) Act 2011
DQ: Income equalisation schemes
and environmental restoration accounts scheme This heading was amended 1 October 2005 section 21 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words and environmental restoration accounts scheme Contents
DQ 1: Main income equalisation scheme
Deduction
1: A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 7(2) Timing of deduction
2: The deduction is allocated to the tax year described in section EH 7(3) Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction deposit general limitation general permission main income equalisation scheme person supplement tax year 1994 No 164 s EI 3
DQ 2: Adverse event income equalisation scheme
Deduction
1: A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 42(2) Timing of deduction
2: The deduction is allocated to the tax year described in section EH 42(3) Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. adverse event income equalisation scheme amount capital limitation deduction deposit general limitation general permission person supplement tax year 1994 No 164 s EI 13
DQ 3: Thinning operations income equalisation scheme
Deduction
1: A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 69(2) Timing of deduction
2: The deduction is allocated to the tax year described in section EH 69(3) Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction deposit general limitation general permission person supplement tax year thinning operations income equalisation scheme 1994 No 164 ss EI 3, EI 17(2)
DQ 4: Environmental restoration accounts scheme
Deduction for payment
1: A person is allowed a deduction of the amount given by section EK 7 section EK 2 section EK 9 Timing of deduction
2: A deduction under subsection (1) is allocated to the income year given by section EK 7 Deduction for transfer
3: A person is allowed a deduction for an income year of the amount given by section EK 8
a: a transfer under section EK 15 section EK 15(4)
b: a transfer under section EK 16(3)(b)
c: a transfer under section EK 19 Timing of deduction
4: A deduction under subsection (3) is allocated to the income year given by section EK 8 Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission income year pay supplement Section DQ 4 inserted 1 October 2005 section 22(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
DR: Life insurance business expenditure
Contents
DR 1: Mortality profit formula: negative result
When this section applies
1: This section applies when—
a: a life insurer follows the steps in section EY 25(2)
b: the negative result is not treated as zero because 1 of the exceptions in section EY 32(2) to (4) Deduction
2: The life insurer is allowed a deduction of the amount quantified in section EY 33(2) Timing of deduction
3: The deduction is allocated to the income year described in section EY 33(3) Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income year life insurer mortality profit formula supplement 1994 No 164 s DK 3A
DR 2: Disposal of property
When this section applies
1: This section applies when a life insurer disposes of any property of their life insurance business. Exclusions
2: This section does not apply when the property is—
a: a share to which section DB 18
b: a financial arrangement; or
c: property for whose cost the life insurer has already been allowed a deduction, other than for an amount of depreciation loss. Deduction
3: The life insurer is allowed a deduction of the amount quantified in section EY 46(2) Timing of deduction
4: The deduction is allocated to the income year described in section EY 46(3) Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount business capital limitation deduction depreciation loss financial arrangement general limitation general permission income year life insurance life insurer property share supplement 1994 No 164 s DK 3B(1), (2) Subsection (4) amended 1 April 2005 section 57(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression section EY 46(3) section EY 46(6)
DR 3: Specific deductions denied to life insurers and fully reinsured persons
No deduction
1: A life insurer is denied a deduction for—
a: a claim payable by the life insurer under a life insurance policy; or
b: expenditure or loss incurred by the life insurer in deriving policyholder income; or
c: a bonus or other discretionary amount added to the actuarial reserves; or
d: a premium payable by the life insurer under a life reinsurance policy. Inclusion
2: This section applies to a person who is carrying on a business of providing life insurance but who is treated as not carrying on a business of providing life insurance because they have full reinsurance. Link with subpart DA
3: This section overrides the general permission. actuarial reserves amount business claim deduction full reinsurance general permission life insurance life insurance policy life insurer life reinsurance policy loss pay policyholder income premium 1994 No 164 ss DK 3, DK 3D
DS: Film industry expenditure
Contents
DS 1: Acquiring film rights
Deduction
1: A person is allowed a deduction for expenditure that they incur in acquiring a film right, if the film is completed (whether it is completed before, at the time, or after the film right is acquired). Exclusion
2: This section does not apply to expenditure that a person incurs in acquiring a film right if—
a: the person operates a television station, a television network, or a cable television system, and the film right is acquired mainly to enable the film to be broadcast in New Zealand; or
b: the film is intended to be shown as an advertisement; or
c: the expenditure is film production expenditure; or
d: section DS 2B Timing of deduction
3: The deduction is allocated under section EJ 4 EJ 5 No other deduction
4: No other deduction for expenditure incurred in acquiring a film right is allowed under any other provision of this Act except under section DS 2B Link with subpart DA
5: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation completed deduction film film production expenditure film right general limitation general permission New Zealand 1994 No 164 s EO 3(1)-(5), (7), (9) Section DS 1(2)(c) amended 19 December 2007 section 39(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 1(2)(d) added 19 December 2007 section 39(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 1(4) amended 19 December 2007 section 39(2) Taxation (Business Taxation and Remedial Matters) Act 2007
DS 2: Film production expenditure
Deduction
1: A person is allowed a deduction for film production expenditure if—
a: the film is completed; and
b: the person has a film right in it—
i: before it is completed :
ii: at the time it is completed :
iii: after it is completed. Inclusions
2: For the purposes of subsection (1),—
a: if a person ( person A person B
b: if a person ( person A person B Exclusion
3: This section does not apply to film production expenditure if—
a: the film is produced mainly for broadcast in New Zealand by a person who operates a television station, a television network, or a cable television system:
b: the film is intended to be shown as an advertisement:
c: section DS 2B Timing of deduction
4: The deduction is allocated under—
a: section EJ 7 EJ 8
b: section EJ 4 EJ 5 No other deduction
5: No other deduction for film production expenditure is allowed under any other provision of this Act except under section DS 2B Link with subpart DA
6: The link between this section and subpart DA
a: it overrides the capital limitation; and
b: the other general limitations still apply; and
c: either—
i: the general permission must be satisfied; or
ii: a provision that supplements the general permission must be satisfied. capital limitation completed deduction film film production expenditure film right general limitation general permission large budget screen production grant New Zealand supplement 1994 No 164 s EO 4(1)-(5) Subsection (1)(b)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or Section DS 2(3) heading substituted 19 December 2007 section 40(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(3) substituted 19 December 2007 section 40(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(4) heading substituted 19 December 2007 section 40(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(4) substituted 19 December 2007 section 40(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section DS 2(5) amended 19 December 2007 section 40(2) Taxation (Business Taxation and Remedial Matters) Act 2007
DS 2B: Expenditure in acquiring film, or film right, intended for disposal
Deduction
1: A person is allowed a deduction for film production expenditure or expenditure incurred in acquiring a film right if, when the person incurs the expenditure, the person intends to dispose of the film or film right. Timing of deduction
2: The deduction is allocated under section EA 2 Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction film film production expenditure film right general limitation general permission Section DS 2B inserted 19 December 2007 section 41(1) Taxation (Business Taxation and Remedial Matters) Act 2007
DS 3: Clawback of deductions for film reimbursement schemes
Reduction of deductions
1: A person who disposes of property under a film reimbursement scheme must use the formula in subsection (3) to reduce—
a: the total deductions that they have been allowed for the disposal under the scheme under section DS 1 DS 2
b: the total deductions that they would be allowed for the disposal under the scheme under section DS 1 DS 2 Order of reduction
2: Deductions must be reduced in the same order as they have been allowed or would be allowed. Formula
3: The total deductions must be reduced to an amount equal to the greater of zero and the amount calculated using the formula— total deductions – total consideration Definition of items in formula
4: In the formula,—
a: total deductions is the total amount of deductions that—
i: the person has been allowed under section DS 1 DS 2
ii: the person would be allowed under section DS 1 DS 2
b: total consideration is the total amount of consideration for the disposal of the property that the person derives and that is not film income. Application of Tax Administration Act 1994
5: Section 44A Amendment of assessment
6: Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section. Exclusion
7: This section does not apply to a deduction for expenditure excluded under section DZ 11 amount assessment Commissioner deduction time bar 1994 No 164 ss EO 4A(2)-(5), EO 4B
DS 4: Meaning of film reimbursement scheme
Meaning
1: Film reimbursement scheme means an arrangement to which subsections (2) to (4) apply. Deduction allowed
2: The first requirement for a film reimbursement scheme is that it is a scheme under which a person may incur expenditure for which they are allowed a deduction under—
a: section DS 1 DS 2 section DS 3 :
b: subpart DA
i: a film right :
ii: a right to an amount that is dependent on or calculated by reference to income from the rental, sale, use, or other exploitation of a film. Disposal of property
3: The second requirement for a film reimbursement scheme is that 1 of the following applies:
a: it enables the person or an associated person to dispose of property; or
b: it gives a right to the person or an associated person to dispose of property; or
c: it gives a right, the right creates an obligation for the person or an associated person, and the person or the associated person may meet the obligation by disposing of property. Consideration not film income
4: The third requirement for a film reimbursement scheme is that it is a scheme under which some or all of the consideration for the property would not be film income. Associated persons
5: For the purposes of subsection (3), a shareholder in a loss attributing qualifying company and the company are associated persons, in addition to the associated persons described in section OD 7 amount arrangement associated person deduction film right income loss attributing qualifying company shareholder 1994 No 164 s EO 4A(2), (6), (7) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DT: Petroleum mining expenditure
Contents
Petroleum exploration expenditure
DT 1A: Ring-fenced allocations
When this section applies
1: This section applies to an amount of a person's deductions, expenditure and loss for an income year to the extent to which it is—
a: petroleum exploration expenditure:
b: petroleum development expenditure:
c: residual expenditure. Basis for allocation of deductions
2: If, but for this subsection, an amount that relates to petroleum mining operations undertaken outside New Zealand would be allocated to an income year (the current year Excess allocations: carrying forward and re-instating next year
3: Any excess not able to be allocated to the current year because of the basis for allocation described in subsection (2) is carried forward and treated as—
a: relating to petroleum mining operations undertaken outside New Zealand for the next income year; and
b: allocated to that next income year. Restriction on reinstating excess allocations
4: Despite subsection (3), the excess is not allocated to the next income year, and no deduction is allowed or allocated to any income year for the excess section IF 1 deduction income year net loss New Zealand petroleum development expenditure petroleum exploration expenditure petroleum mining operation residual expenditure Section DT 1A inserted 6 October 2009 section 763(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 1A(4) amended 7 December 2009 section 156 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
DT 1: Petroleum exploration expenditure
Deduction
1: A person is allowed a deduction for petroleum exploration expenditure incurred by them. Relationship with section DT 2
2: This section is overridden by section DT 2 Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission petroleum exploration expenditure supplement 1994 No 164 ss DM 1(1), (2)(a), DM 1A(1)
DT 2: Arrangement for petroleum exploration expenditure and sale of property
What this section applies to
1: This section applies to a person and an arrangement if—
a: the person may incur expenditure under the arrangement and would be allowed a deduction for the expenditure under section DT 1
b: the person or a person associated with them may dispose of property—
i: under the arrangement; or
ii: under a right given by the arrangement to the person or the associated person; or
iii: in meeting an obligation of the person or the associated person arising from a right given by the arrangement; and
c: the property is not—
i: exploratory material; or
ii: a petroleum permit; or
iii: material or a permit that relates to petroleum mining operations undertaken outside New Zealand, and that material or permit are substantially the same as those described in subparagraphs (i) or (ii), with necessary modifications made to this subpart and the Crown Minerals Act 1991 Amount of deduction
2: The person is allowed a deduction in an income year for the expenditure described in subsection (1)(a) expenditure – (consideration – lesser amount) Exclusion
3: If consideration for the property is derived in an income year, the person's deductions in previous income years for the expenditure described in subsection (1)(a) are reduced so that the total of those deductions is equal to the greater of zero and the amount calculated using the formula— previous expenditure – consideration. Definition of items in formulas
4: In the formulas in subsections (2) and (3),—
a: expenditure section DT 1(1)
b: consideration
c: lesser amount
i: the amount of consideration; and
ii: the amount of expenditure for which a person would be allowed a deduction in previous income years under section DT 1(1)
d: previous expenditure section DT 1(1) Order of reduction
5: When an adjustment under subsection (3) is being made, deductions are treated as denied in the same order in time as they would have been allowed under section DT 1(1) Meaning of associated person
5B: In this section, associated person has the meaning given in section OD 7 OD 8(3) Application of Tax Administration Act 1994
6: Section 44A Amendment of assessment
7: Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section. Relationship with section DT 1
8: This section overrides section DT 1 Link with subpart DA
9: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount arrangement assessment associated person Commissioner consideration deduction dispose exploration permit exploratory material income year petroleum petroleum exploration expenditure prospecting permit supplement time bar 1994 No 164 ss DM 1A, DM 1B Section DT 2(1)(c)(ii) substituted 6 October 2009 section 764(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(1)(c)(iii) substituted 6 October 2009 section 764(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(5B) heading inserted 6 October 2009 section 764(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 2(5B) inserted 6 October 2009 section 764(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DT 3: Acquisition of licences and permits
The consideration that a person pays to acquire a prospecting licence, a prospecting permit for petroleum, or an exploration permit for petroleum from a petroleum miner is treated as petroleum exploration expenditure incurred in the income year in which the petroleum miner disposes of the licence or permit to the person. consideration dispose exploration permit income year petroleum exploration expenditure petroleum miner prospecting licence prospecting permit 1994 No 164 s DM 3(1)
DT 4: Acquisition of exploratory material
The consideration that a person pays to acquire exploratory material from a petroleum miner is treated as petroleum exploration expenditure incurred in the income year in which the petroleum miner disposes of the material to the person. consideration dispose exploratory material income year petroleum exploration expenditure petroleum miner 1994 No 164 s DM 3(2) Petroleum development expenditure
DT 5: Petroleum development expenditure
Deduction
1: A petroleum miner is allowed a deduction for petroleum development expenditure incurred by them. Timing of deduction
2: For an income year, an amount of the deduction is allocated to that year, as provided by—
a: section EJ 11
b: section EJ 11B Relationship with section DZ 3
3: This section is overridden by section DZ 3 Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission petroleum development expenditure petroleum miner supplement 1994 No 164 s DM 1(1), (2)(b) Section DT 5(1) heading substituted 6 October 2009 section 765(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(1) substituted 6 October 2009 section 765(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(2) heading substituted 6 October 2009 section 765(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 5(2) substituted 6 October 2009 section 765(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DT 6: Expenditure on petroleum mining assets
Expenditure that a person incurs in buying a petroleum mining asset is treated as petroleum development expenditure if, at the time the asset is bought,—
a: petroleum is produced in commercial quantities on a continuing basis under a petroleum permit that is the one being bought; or
b: petroleum is produced in commercial quantities on a continuing basis under a petroleum permit that applies to the permit area in which an asset of the kind described in section CT 7(1)(b)
c: an application for a mining permit for the permit area has been made by a person entitled to a mining permit under section 32(3) permit area petroleum petroleum development expenditure petroleum permit petroleum mining asset 1994 No 164 s DM 1(8)
DT 7: Exploratory well expenditure
When this section applies
1: This section applies when—
a: a petroleum miner incurs exploratory well expenditure; and
b: the miner then uses the exploratory well for the commercial production of petroleum; and
c: the exploratory well expenditure is then treated, under section CT 3 Treatment of expenditure
2: An amount equal to the amount that is treated as income is treated as petroleum development expenditure incurred by the petroleum miner in the income year in which commercial production from the well starts. amount commercial production exploratory well expenditure income income year petroleum petroleum development expenditure petroleum miner 1994 No 164 s DM 1(9)(b)
DT 8: Acquisition of certain petroleum mining assets
The consideration that a person pays to acquire a petroleum mining asset, other than a prospecting licence, a prospecting permit for petroleum, or an exploration permit for petroleum, from a petroleum miner is treated as petroleum development expenditure incurred in the income year in which the petroleum miner disposes of the petroleum mining asset to the person. consideration dispose exploration permit income year petroleum petroleum development expenditure petroleum miner petroleum mining asset prospecting licence prospecting permit 1994 No 164 s DM 3(1)
DT 9: Disposal of petroleum mining asset to associate
When this section applies
1: This section applies when—
a: a petroleum miner disposes of a petroleum mining asset to—
i: a person associated with the miner; or
ii: a person who holds the asset for the miner; or
iii: a person who holds the asset for a person associated with the miner; and
b: section EJ 14(2) section EJ 11 EJ 11B No deduction
2: The miner is denied a deduction for the amount that section EJ 15(2) Link with subpart DA
3: This section overrides the general permission. amount associated person deduction dispose general permission income year petroleum miner petroleum mining asset 1994 No 164 s DM 1(6) Section DT 9(1)(b) substituted 6 October 2009 section 766(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DT 9(2) substituted 29 August 2011 section 197(2) Taxation (Tax Administration and Remedial Matters) Act 2011
DT 10: Disposal of petroleum mining asset outside association
When this section applies
1: This section applies when—
a: a petroleum miner disposes of a petroleum mining asset to a person described in subsection (2) ( person A
b: person A disposes of the asset to a person described in subsection (3) ( person B Person A
2: For the purposes of subsection (1)(a), the persons are—
a: an associated person of the miner; or
b: a person who holds the asset for the miner; or
c: a person who holds the asset for an associated person of the miner. Person B
3: For the purposes of subsection (1)(b), the persons are—
a: a person not associated with the miner; or
b: a person who does not hold the asset for the miner; or
c: a person who does not hold the asset for a person associated with the miner. Deduction
4: Person A is allowed a deduction. Amount of deduction
5: The amount of the deduction is the amount for which the petroleum miner is denied a deduction under section DT 9 Timing of deduction
6: The deduction is allocated to the income year in which person A disposes of the asset. Link with subpart DA
7: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount associated person capital limitation deduction dispose general limitation general permission income year petroleum miner petroleum mining asset supplement 1994 No 164 s DM 1(7)(a)
DT 11: Association ending
When this section applies
1: This section applies when—
a: a petroleum miner disposes of a petroleum mining asset to a person ( person A
i: an associated person of the miner; or
ii: a person who holds the asset for an associated person of the miner; or
iii: a person who holds the asset for the miner; and
b: while person A holds the asset,—
i: the association between the miner and the associated person ends; or
ii: the association between the miner and the person who holds the asset for the miner ends. Exclusion
2: This section does not apply when the petroleum miner and the other party to the association end their association—
a: for the purpose of the miner being allowed a deduction under this section; or
b: for various purposes, 1 of which is, as a more than merely incidental purpose, the miner being allowed a deduction under this section. Deduction
3: The petroleum miner is allowed a deduction. Amount of deduction
4: The amount of the deduction is the amount for which the petroleum miner is denied a deduction under section DT 9 Timing of deduction
5: The deduction is allocated to the income year in which the association ends. Link with subpart DA
6: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount associated person capital limitation deduction dispose general limitation general permission income year petroleum miner petroleum mining asset supplement 1994 No 164 s DM 1(7)(b) Other expenditure
DT 12: Damage to assets
Deduction
1: A petroleum miner is allowed a deduction for the cost of repairing a damaged asset of the kind described in section CT 7(1)(b) Link with subpart DA
2: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission petroleum miner supplement 1994 No 164 s DM 5
DT 13: Disposal of ownership interests in controlled petroleum mining entities
No deduction
1: A person who disposes of shares or trust interests in a controlled petroleum mining entity is denied a deduction for their cost. Application of Tax Administration Act 1994
2: Section 65 Link with subpart DA
3: This section overrides the general permission. controlled petroleum mining entity deduction dispose share 1994 No 164 s DM 6
DT 14: Farm-out arrangements
When this section applies
1: This section applies when a farm-in party under a farm-out arrangement incurs farm-in expenditure that, if it were incurred by the farm-out party, would be petroleum development expenditure, exploratory well expenditure, or prospecting expenditure. Treatment of farm-in expenditure
2: The farm-in expenditure is treated as if it were petroleum development expenditure, exploratory well expenditure, or prospecting expenditure, as applicable. Deduction
3: The farm-in party is allowed a deduction for the farm-in expenditure that is incurred under the farm-out arrangement on or after 16 December 1991. Relationship with section DZ 5
4: Farm-in expenditure that is incurred before 16 December 1991 is dealt with in section DZ 5 Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction exploratory well expenditure farm-in expenditure farm-out arrangement general limitation general permission petroleum development expenditure prospecting expenditure supplement 1994 No 164 s DM 4(1)
DT 15: Persons associated with petroleum miner
When this section applies
1: This section applies to a person associated with a petroleum miner when—
a: the petroleum miner has some or all of a prospecting licence or a mining licence; and
b: the associated person—
i: undertakes petroleum mining operations in the licence area of the prospecting licence or mining licence; and
ii: does so under an arrangement for reward; and
iii: when doing so is not a petroleum miner in relation to the petroleum mining operations. Deduction
2: The associated person is allowed a deduction for expenditure or loss that they incur in the petroleum mining operations described in subsection (1). Amount of deduction
3: The amount of the deduction is limited to the extent of the amount of income that they derive from the petroleum mining operations. Link with subpart DA
4: This section overrides the general permission. amount arrangement associated person deduction general permission income mining licence petroleum miner petroleum mining operations prospecting licence 1994 No 164 s DK 2
DT 16: Removal or restoration operations
Deduction
1: A petroleum miner is allowed a deduction for expenditure that they incur on removal or restoration operations. Timing of deduction
2: The deduction is allocated to the income year in which the expenditure is incurred. Relationship with section EA 2
3: This section overrides section EA 2 Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission income year petroleum miner removal or restoration operations supplement 1994 No 164 ss DM 1(1), DM 2 General provisions
DT 17: Attribution of expenditure
Petroleum permit
1: A deduction for expenditure incurred to acquire a petroleum permit is attributable to the permit area of the petroleum permit. Other assets
2: A deduction for expenditure incurred to acquire an asset of the kind described in section CT 7(1)(b)
a: the asset; and
b: the permit area to which the asset relates. Relationship with this subpart and sections GC 12 and IH 3
3: This section applies for the purposes of this subpart, sections GC 12 IH 3 section 91 permit area petroleum permit 1994 No 164 s DM 1(4)
DT 18: Replacement permits
In this subpart, a reference to a petroleum permit includes a reference to a replacement permit. All expenditure incurred, deductions allowed, and petroleum mining assets that are attributable to the petroleum permit are attributable to the replacement permit. deduction petroleum mining asset petroleum permit replacement permit 1994 No 164 s OB 1 petroleum permit
DT 19: Partnership interests and disposal of part of asset
In this subpart, unless the context requires otherwise,—
a: a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership :
b: references to the disposal of an asset apply equally to the disposal of part of an asset. dispose income petroleum permit 1994 No 164 ss DM 9, DM 10 Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DT 20: Petroleum mining operations outside New Zealand
This subpart applies, with any necessary modifications, to a petroleum miner undertaking petroleum mining operations that are—
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by this subpart. controlled foreign company New Zealand petroleum miner petroleum mining operations 1994 No 164 s DM 7(1)
DU: Mineral mining expenditure
Contents
DU 1: Mining exploration expenditure and mining development expenditure
Deduction
1: A mining company is allowed a deduction for mining exploration expenditure and mining development expenditure that it incurs. Amount of deduction
2: The amount of the deduction is the amount determined under section DU 2 Mining expenditure
3: The amount of the expenditure for which the company is allowed a deduction must be taken into account in the mining expenditure section DU 7(5) Link with subpart DA
4: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction general limitation general permission mining company mining development expenditure mining exploration expenditure supplement 1994 No 164 s DN 1(5)
DU 2: Mining exploration expenditure or mining development expenditure on acquisition of asset
What this section does
1: This section applies when a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure. It describes the consideration that the mining company is treated as giving for the asset and the consideration that the person who disposes of the asset to the mining company is treated as receiving for it. Consideration in various cases
2: The consideration is,—
a: in a case other than one described in any of subsections (3) to (6), the consideration that the company incurs for the acquisition of the asset :
b: in the case described in subsection (3), the consideration specified in the subsection for the acquisition of the asset :
c: in the case described in subsection (4), the consideration specified in the subsection for the acquisition of the asset :
d: in the case described in subsection (5), the consideration specified in subsection (6) for the acquisition of the asset. Consideration other than in cash
3: If some or all of the consideration for the acquisition is other than in cash, and the acquisition is not from an associated person, the consideration that is not in cash has the value agreed between the mining company and the person from whom the asset is acquired. If the mining company and the person do not agree, or if the Commissioner considers that the value agreed is unreasonable, the consideration that is not in cash has the value that the Commissioner decides. Acquisition from associated person
4: If the acquisition is from an associated person, the consideration for the acquisition is the market value that the asset has on the date of the acquisition. Amount specified by parties to acquisition
5: Subsection (6) applies when—
a: the mining company acquires the asset for use in carrying on their mining operations or associated mining operations; and
b: the mining company and the person from whom the asset is acquired give notice to the Commissioner that they have agreed to apply subsection (6); and
c: the notice is given to the Commissioner within 1 of the following times:
i: the time within which the mining company is required to file a return of income for the income year in which it acquires the asset; or
ii: a longer time allowed by the Commissioner; and
d: the notice specifies an amount that—
i: is no more than the market value that the asset has at the date of the acquisition; and
ii: is no less than the amount of any part of the consideration that is in cash. Amount specified in notice
6: The consideration for the acquisition is the amount that the mining company and the person specify in the notice. amount associated mining operations associated person Commissioner income year mining company mining development expenditure mining exploration expenditure mining operations notice return of income 1994 No 164 s DN 1(10)-(12) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DU 3: Replacing or repairing asset
When subsections (2) to (4) apply
1: Subsections (2) to (4) apply when—
a: a mining company complies with section CU 6(2)
b: the company incurs expenditure in replacing or repairing the asset; and
c: the company has an excess amount because the expenditure is more than the total of—
i: the amount of insurance, indemnity, or compensation paid; and
ii: the amount (if any) payable to the company for the disposal of any scrap of the asset. Deduction
2: The company is allowed a deduction for the excess. Mining expenditure
3: The excess amount must be taken into account in the mining expenditure item of the formula in section DU 7(5) No other deduction
4: No other deduction for expenditure incurred in the circumstances described in subsection (1) is allowed under any other provision of this Act. When subsections (7) and (8) apply
5: Subsections (7) and (8) apply when—
a: a mining company complies with section CU 6(2)
b: the Commissioner considers a period to be a reasonable period within which to complete the replacement or repair; and
c: the company incurs expenditure in replacing or repairing the asset after the last day of the period; and
d: the company has an excess amount because the expenditure is more than the total of the following:
i: the amount of compensation paid; and
ii: the amount (if any) payable to the company for the disposal of any scrap of the asset. Deduction
6: The company is allowed a deduction for the excess. Limitation on calculation of excess amount
7: The expenditure incurred after the last day of the period must not be taken into account to determine the existence or amount of an excess amount for the purposes of subsection (1)(c). Mining expenditure
8: The expenditure incurred after the last day of the period must be taken into account in the mining expenditure item of the formula in section DU 7(5) Link with subpart DA
9: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation Commissioner deduction general limitation general permission mining company supplement 1994 No 164 s DN 1(14)(c)(i), (d), (h)
DU 4: Income appropriated to expenditure
When this section applies
1: This section applies when—
a: a mining company appropriates an amount of income to mining exploration expenditure or mining development expenditure; and
b: the company makes the appropriation within 2 months after the end of an income year or within a longer time allowed by the Commissioner; and
c: the amount that the company appropriates is no more than its net income in the income year, calculated as if this section did not exist. Deduction
2: The company is allowed a deduction for the part of the amount to which both the following apply:
a: it is not spent in the income year to which the appropriation relates; and
b: it will be, or is likely to be, used as mining exploration expenditure or mining development expenditure before the end of the second income year following the income year to which the appropriation relates. Timing of deduction
3: The deduction for the part of the amount is allocated to the income year to which the appropriation relates. Mining expenditure
4: The part of the amount to which subsection (2)(a) and (b) apply must be taken into account in the mining expenditure item of the formula in section DU 7(5) Link with subpart DA
5: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation Commissioner deduction general limitation general permission income income year mining company mining development expenditure mining exploration expenditure net income supplement 1994 No 164 s DN 1(6)
DU 5: Non-mining asset used to derive income from mining
When this section applies
1: This section applies when—
a: a mining company starts to use, or starts again to use, an asset to derive income from mining; and
b: immediately before that, the company used the asset to derive income other than income from mining. Adjustment
2: The Commissioner may make an adjustment to any deduction of the mining company for the asset for the income year, as between the part of the income year in which the company used the asset to derive income from mining and the part of the income year in which the company did not use the asset to derive income from mining. Commissioner to consider
3: The adjustment must be of a kind that the Commissioner considers equitable, having regard to—
a: any deduction for an amount of depreciation loss that the company has been allowed; and
b: any other deduction that the company has been allowed for the cost of the asset; and
c: any other matters that the Commissioner considers relevant. amount Commissioner deduction depreciation loss income income from mining income year mining company 1994 No 164 s DN 1(15)(a)
DU 6: Depreciation
When this section applies: first case
1: This section applies when—
a: a mining company acquires an asset by incurring—
i: mining exploration expenditure or mining development expenditure; or
ii: the exploration expenditure or development expenditure referred to in section DZ 12(2)(a)
b: the company is allowed a deduction for the expenditure; and
c: the company uses the asset, wholly or mainly, to derive income from mining. When this section applies: second case
2: This section also applies when—
a: a mining company complies with section CU 6(2)
b: the company incurs expenditure in replacing or repairing the asset; and
c: the company is allowed a deduction for the expenditure; and
d: the company uses the asset, wholly or mainly, to derive income from mining. No deduction (with exception)
3: The company is denied a deduction for an amount of depreciation loss for the asset from the time when it uses the asset wholly or mainly to derive income from mining until the time (if any) when it uses the asset wholly or mainly to derive income other than income from mining. Amount of depreciation loss
4: The asset has the value described in section CU 10(2) Link with subpart DA
5: Subsections (1) to (3) override the general permission. acquire amount deduction depreciation loss general permission income income from mining mining company mining development expenditure mining exploration expenditure 1994 No 164 s DN 1(7)(a)(ii), (c), (8)(c), (14)(c)(ii)
DU 7: Limit on deduction
Limit
1: When a mining company has a mining outgoing excess, there is a limit on the deduction that it is allowed in the income year for the amount taken into account in the mining expenditure item of the formula in subsection (5). Amount of deduction
2: The limit is the lesser of—
a: two-thirds of the mining outgoing excess; and
b: the greater of zero and the amount calculated using the formula— non-mining income – non-mining expenditure. Definition of items in formula
3: In the formula,—
a: non-mining income
b: non-mining expenditure Meaning of mining outgoing excess
4: Mining outgoing excess means the greater of zero and the amount that a mining company calculates for an income year using the formula— mining expenditure – income from mining. Definition of items in formula
5: In the formula,—
a: mining expenditure
i: all the expenditure or loss that the mining company incurs in the income year relating to deriving income from mining and for which it would be allowed a deduction that would be allocated to the income year; and
ii: any part of an amount described in section DU 4(4)
b: income from mining amount deduction income income from mining income year mining company mining outgoing excess 1994 No 164 ss DN 1(3), OB 1 mining outgoing excess
DU 8: Meaning of asset for sections DU 1 to DU 7
Mining company's share or interest in asset
1: Sections DU 1 to DU 7
a: to the extent to which the mining company acquired the share or interest by incurring—
i: mining exploration expenditure or mining development expenditure :
ii: the exploration expenditure or development expenditure referred to in section DZ 12(2)(a)
b: to the extent to which the mining company uses the share or interest for the purpose of deriving income from mining. Partner's share or interest in asset
2: For the purposes of sections DU 1 to DU 7 Replaced or repaired asset
3: For the purposes of sections DU 1 to DU 7
a: an asset that a mining company acquires by incurring expenditure in replacing or repairing the asset is the same asset as the one that was lost, destroyed, or damaged; and
b: part of an asset that a mining company acquires by incurring expenditure in repairing the asset is part of the asset that was damaged. asset income from mining mining company mining development expenditure mining exploration expenditure 1994 No 164 s DN 1(14)(f), (16), (17) Subsection (1)(a)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; or
DU 9: Application of sections to resident mining operators
Sections of this subpart applying to resident mining operators
1: Sections DU 1 to DU 3 DU 5 to DU 7 Additional modification of section DU 6
2: For the purposes of subsection (1), section DU 6(1)(a)(ii) section DZ 12(2)(b) Application of section DU 7
3: When a resident mining operator has a mining outgoing excess, the total of deductions that it is allowed in the income year for expenditure or loss taken into account in the mining expenditure section DU 7(5)
a: the total amount of the expenditure and loss; and
b: the prescribed amount for the income year. Meaning of prescribed amount
4: Prescribed amount Relationship with sections IE 1, IF 1, and IH 1
5: Expenditure or loss of a resident mining operator for which it would be allowed a deduction in an income year if subsection (3) did not exist is a net loss of the operator in the income year for the purposes of sections IE 1 IF 1 IH 1 amount associated mining operations deduction income income year loss mining company mining operations mining outgoing excess net loss prescribed amount resident mining operator 1994 No 164 ss DN 4(2), (3), (5), (7), OB 1 prescribed amount
DU 10: Application of sections to non-resident mining operators
Sections of this subpart applying to non-resident mining operators
1: Sections DU 1 to DU 6 IH 4(2) Application of section DU 1
2: Section DU 1 Application of section DU 3
3: Section DU 3 Application of section DU 4
4: Section DU 4 Additional modification of section DU 6
5: For the purposes of subsection (1), section DU 6(1)(a)(ii) section DZ 12(2)(b) associated mining operations income income from mining mining company mining operations mining venture non-resident mining operator 1994 No 164 s DN 5(2)(a), (c)
DU 11: Disposal of mining shares by company
Deduction
1: When a company disposes of a mining share, the company is allowed a deduction for the cost of the share to it. Amount of deduction
2: The cost of the share to the company is the difference between the following 2 sums:
a: the total of—
i: the consideration that the company gave to acquire the share; and
ii: any capital the company contributed later for the share :
b: the total of—
i: any reinvestment profit of the company included in the consideration that the company gave; and
ii: any reinvestment profit of the company included in the capital that the company contributed. Link with subpart DA
3: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation company deduction general limitation general permission mining share reinvestment profit 1994 No 164 s DN 2(1) Subsection (2)(a)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DU 12: Amount written off by holding company
Deduction
1: A holding company of a mining company is allowed a deduction for an amount written off a loan it made to the mining company. Exclusions
2: The following are not included within the words an amount written off a loan it made to the mining company
a: an amount of interest that the holding company writes off; or
b: an amount of a loan to the extent to which a mining holding company makes the loan from its reinvestment profit; or
c: an amount of a loan made on or after 1 October 1978 to the extent to which the loan—
i: is made to obtain an unfair advantage for tax purposes; and
ii: is excessive, having regard to previous loans made by the holding company and any other circumstances. Amount of deduction
3: The deduction is no more than the lesser of—
a: 50% of the amount that, if this section did not exist, would be the net income of the holding company in the income year
b: the prescribed proportion of the total amount of mining exploration expenditure and mining development expenditure incurred by the mining company before the end of the income year in which the amount referred to in subsection (1) is written off, reduced by the total amount of deductions the holding company is allowed under this section in all income years before the income year in which that amount is written off. Timing of deduction
4: The deduction for the amount written off is allocated to the tax year in which the amount is written off. Reduction of amount
5: The amount calculated under subsection (3) is reduced in the circumstances described in section DZ 12(4) Link with subpart DA
6: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction general limitation general permission holding company interest loan mining company mining development expenditure mining exploration expenditure net income prescribed proportion reinvestment profit supplement tax tax year 1994 No 164 s DN 3(1), (3), (10) Section DU 12(3)(a) amended 6 October 2009 section 767(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DU 12(3)(b) substituted 6 October 2009 section 767(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
DV: Expenditure specific to certain entities
Contents
Superannuation funds
DV 1: Publicising superannuation funds
When this section applies
1: This section applies when a superannuation fund incurs expenditure to which all the following apply:
a: it is incurred in developing, marketing, selling, promoting, or advertising the fund; and
b: it is not incurred in acquiring a building, equipment, land, machinery, or plant; and
c: it is assessable income of the recipient. Deduction
2: The superannuation fund is allowed a deduction for the expenditure. Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation and the exempt income limitation. The other general limitations still apply. assessable income capital limitation deduction exempt income limitation general limitation general permission superannuation fund supplement 1994 No 164 s DI 3(1)
DV 2: Transfer of expenditure to master fund
When this section applies
1: This section applies when—
a: a superannuation fund ( member superannuation fund master superannuation fund
b: while the member superannuation fund has funds invested in the master superannuation fund, the member superannuation fund incurs expenditure of a kind described in subsection (2). Expenditure on publicising or managing
2: The expenditure is expenditure to which all the following apply:
a: it is incurred—
i: in developing, marketing, selling, promoting, or advertising the fund; or
ii: in managing the fund; and
b: it is not incurred in acquiring a building, equipment, land, machinery, or plant; and
c: it is assessable income of the recipient. When expenditure becomes master superannuation fund's
3: The member superannuation fund may choose to treat some or all of the expenditure as expenditure incurred by the master superannuation fund in deriving assessable income. How election made
4: The member superannuation fund makes the election by giving notice to the Commissioner within 1 of the following times:
a: the time within which its return of income must be filed under section 37
b: a longer time allowed by the Commissioner. Effect of election
5: When the member superannuation fund makes an election, subsections (6) to (9) apply to the part or the whole, as chosen, of the expenditure. When expenditure incurred
6: The expenditure is treated as being incurred by the master superannuation fund in the same income year as that in which it was incurred by the member superannuation fund. Deduction allowed to master superannuation fund
7: The master superannuation fund is allowed a deduction for the expenditure. The amount of the deduction is limited by subsection (8). Amount of deduction
8: The formula in section DV 3 Deducted expenditure not incurred by member superannuation fund
9: The expenditure for which the master superannuation fund is allowed a deduction is treated as not being incurred by the member superannuation fund. Link with subpart DA
10: The link between this section and subpart DA
a: for subsection (7),—
i: it supplements the general permission :
ii: it overrides the capital limitation and the exempt income limitation :
iii: the other general limitations still apply :
b: subsection (9) overrides the general permission. amount assessable income capital limitation Commissioner deduction exempt income limitation general limitation general permission income year notice return of income superannuation fund supplement 1994 No 164 s DI 3(2), (8), (9)(a) Subsection (10)(a)(i) (iii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DV 3: Formula for calculating maximum deduction
Formula
1: The formula referred to in section DV 2(8) taxable income – non-resident withholding income. Definition of items in formula
2: The items in the formula are defined in subsections (3) and (4). Taxable income
3: Taxable income sections DV 2 to DV 4 Non-resident withholding income
4: Non-resident withholding income section NG 4 amount deduction non-resident withholding income superannuation fund tax year taxable income 1994 No 164 s DI 3(2)(d)
DV 4: Carry forward of expenditure
When this section applies
1: This section applies when—
a: the expenditure treated as being incurred by the master superannuation fund, under section DV 2(3) section DV 3
b: the member superannuation fund chooses to deal with the surplus expenditure under this section, rather than deducting it itself; and
c: the member superannuation fund has funds invested in the master superannuation fund at the time referred to in section DV 2(1)(b) section DV 2(3)
1A: For the avoidance of doubt, section 144 Surplus carried forward
2: The member superannuation fund carries the surplus expenditure forward to the next tax year and takes the following steps:
a: it gets the combined expenditure by adding the surplus expenditure to the expenditure (if any) incurred by it in the tax year that it chooses to treat as being incurred by the master superannuation fund :
b: it calculates the maximum deduction for the tax year, using the formula in section DV 3 :
c: if the combined expenditure is the same as or less than the maximum deduction, it—
i: treats the surplus expenditure as expenditure incurred by the master superannuation fund in deriving assessable income in the tax year; and
ii: applies subsections (4) to (7) :
d: if the combined expenditure is more than the maximum deduction, it—
i: carries forward the new surplus expenditure to the next tax year; and
ii: applies subsection (3). Surplus dealt with until gone
3: The member superannuation fund repeats the steps in subsection (2) for the following tax years until all surplus expenditure is deducted. Deduction allowed to master superannuation fund
4: Expenditure treated under subsection (2)(c)(i) as incurred by the master superannuation fund in deriving income is allowed as a deduction in the tax year in which it is so treated. The amount of the deduction is limited by subsection (5). Amount of deduction
5: The maximum amount of a deduction under subsection (4) is the maximum deduction for the tax year, calculated using the formula in section DV 3 Deducted expenditure not incurred by member superannuation fund
6: Expenditure for which the master superannuation fund is allowed a deduction is treated as not being incurred by the member superannuation fund. Sequential deductions
7: Expenditure for which the master superannuation fund is allowed a deduction must be deducted in sequence according to the tax year in which the member superannuation fund incurred it. Link with subpart DA
8: The link between this section and subpart DA
a: subsection (4) supplements the general permission and overrides the capital limitation. The other general limitations still apply :
b: subsection (6) overrides the general permission. amount assessable income capital limitation deduction general limitation general permission income superannuation fund supplement tax year 1994 No 164 s DI 3(3)-(9) Subsection (1A) inserted 1 December 2006 section 231 KiwiSaver Act 2006 See section 232 See clause 2(2) KiwiSaver Act Commencement Order 2006 Subsection (2)(a) (b) (c)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Subsection (8)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Other entities
DV 5: Investment funds: transfer of expenditure to master funds
When this section applies
1: This section applies when—
a: a group investment fund that derives category A income, a qualifying unit trust, or a superannuation fund ( member fund
b: while the member fund has funds invested in the master fund, the member fund incurs expenditure of a kind described in subsection (2); and
c: the member fund has some or all of its funds invested in the master fund throughout the period starting at the time at which the member fund incurs the expenditure and ending with the close of the last day of the tax year in which the expenditure is deducted by the master fund under this section. Expenditure described
2: The expenditure is expenditure for which the member fund is allowed a deduction,—
a: including expenditure on a financial arrangement that is denominated in New Zealand dollars and for which expenditure is allocated using the yield to maturity method set out in subpart EW (Financial arrangements rules); and
b: not including—
i: expenditure on any other financial arrangement; or
ii: expenditure on revenue account property. When expenditure becomes master fund's
3: The expenditure incurred by the member fund may be transferred to the master fund, subject to the following conditions:
a: the member fund and the master fund must agree to the transfer of the expenditure; and
b: the member fund may transfer expenditure only to the extent to which it has a net loss in the tax year, with the net loss calculated as if this section did not exist; and
c: a member fund that is a group investment fund that derives category A income may transfer only expenditure that relates to the category A income. Tax year in which investment stops
4: In the tax year in which the member fund stops investing in the master fund,—
a: neither the master fund nor the member fund is allowed a deduction for expenditure that would otherwise be transferable; and
b: the member fund must treat the expenditure as an available net loss. When expenditure incurred
5: The expenditure is treated as being incurred by the master fund in the tax year in which it is transferred by the member fund. Deduction allowed to master fund
6: The master fund is allowed a deduction for the expenditure, subject to the following conditions:
a: a master fund that is a group investment fund that derives category A income may deduct expenditure only from its category A income; and
b: the amount of the deduction is limited by subsection (7). Amount of deduction
7: The formula in section DV 6 Additional transfer
8: If, after the date on which the master fund has filed its return of income, the master fund is able to deduct more than the amount actually deducted, the Commissioner may allow the member fund to transfer expenditure to the extent of the difference after the return of income has been filed. Deducted expenditure not incurred by member fund
9: The expenditure for which the master fund is allowed a deduction is treated as not being incurred by the member fund. Link with subpart DA
10: The link between this section and subpart DA
a: subsection (6) supplements the general permission and overrides the capital limitation. The other general limitations still apply :
b: subsection (9) overrides the general permission. amount available net loss capital limitation category A income Commissioner deduction financial arrangement general limitation general permission group investment fund master fund net loss qualifying unit trust return of income revenue account property superannuation fund supplement tax year 1994 No 164 ss DI 3B(1)-(6), (9), DI 3C(2)-(4) Subsection (10)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DV 6: Formula for calculating maximum deduction
Formula used to calculate maximum deduction
1: The formula referred to in section DV 5(6) taxable income – non-resident withholding income. Definition of items in formula
2: The items in the formula are defined in subsections (3) and (4). Taxable income
3: Taxable income sections DV 5 to DV 7 Non-resident withholding income
4: Non-resident withholding income section NG 4 amount deduction master fund non-resident withholding income tax year taxable income 1994 No 164 s DI 3C(1)
DV 7: Carry forward of expenditure
Member fund carrying expenditure forward
1: For the purposes of section DV 5 Expenditure as available net loss
2: If the member fund carries forward expenditure in a tax year, the member fund may treat some or all of the expenditure as an available net loss. available net loss master fund tax year 1994 No 164 s DI 3B(7), (8)
DV 8: Non-profit organisations
When this section applies
1: This section applies when an incorporated or unincorporated organisation—
a: does not have the purpose of making a profit for a proprietor, member, or shareholder; and
b: has a constitution that prohibits a distribution of property in any form to a member, proprietor, or shareholder. Amount of deduction
2: The organisation is allowed a deduction for the lesser of—
a: $1,000; and
b: the amount that would be the organisation's net income if this section did not exist. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission net income shareholder supplement 1994 No 164 s DJ 17
DV 9: Trusts
No deduction
1: A person who derives beneficiary income is denied a deduction for expenditure or loss that a trustee incurs in deriving the income. Trustee income
2: For the purpose of determining the deductions that a trustee is allowed in a tax year, beneficiary income of beneficiaries of the trust in the tax year is treated as trustee income. Link with subpart DA
3: The link between this section and subpart DA
a: subsection (1) overrides the general permission :
b: subsection (2) supplements the general permission. The general limitations still apply. beneficiary income deduction general limitation general permission supplement tax year trustee trustee income 1994 No 164 ss DI 5, DI 6 Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DV 10: Building societies
Deduction
1: A building society is allowed a deduction for—
a: expenditure incurred on money borrowed by way of withdrawable shares :
b: interest and other financial charges incurred in providing money that is used to provide an interest-free loan to a person who holds a terminating share :
c: an amount incurred in purchasing a balloted loan right from a person who holds a terminating share. Timing of deduction
2: The deduction for the amount referred to in subsection (1)(c) is allocated to the income year in which the amount is paid. Meaning of balloted loan right
3: In this section, balloted loan right
a: is held by or for a building society; and
b: is of terminating shares; and
c: is held for the purpose of finding out which of the holders of the shares are entitled to receive an interest-free loan relating to their shares. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and other general limitations still apply. amount balloted loan right building society capital limitation deduction general limitation general permission income year terminating share withdrawable share 1994 No 164 s DI 1(1) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DV 10B: Distribution to member of co-operative company, excluded from being dividend
Deduction
1: A co-operative company, or a company owned by a co-operative company, is allowed a deduction for a distribution made for an income year to a member of the co-operative company if an amount of the distribution is excluded by section CD 24B Amount of deduction
2: The amount of the deduction is the amount of the distribution that is excluded by section CD 24B Timing of deduction
3: The deduction for the distribution is allocated to the income year for which the distribution is made. Link with subpart DA
4: This section supplements the general permission. The general limitations still apply. company co-operative company deduction general permission general limitation income year shareholder Section DV 10B inserted 3 April 2006 section 58(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
DV 10C: Cost base for shares when debt forgiven within economic group
For a shareholder of a company that is a calculation company under section CD 32(10B) or (10C) section OD 3 OD 4
a: the shareholder’s voting interests in the calculation company; or
b: the shareholder’s market value interest in the calculation company, if there is a market value circumstance. amount company expenditure market value circumstance market value interest share voting interest Section DV 10C inserted 30 March 2017 section 389(1) section 389(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
DV 11: Maori authorities: donations
Deduction
1: A Maori authority is allowed a deduction for—
a: a donation that it makes to a Maori association, as defined in the Maori Community Development Act 1962 :
b: a gift of money that it makes to a society, institution, association, organisation, trust, or fund of any of the kinds described in section KC 5(1) Amount of deduction
2: The deduction for the total of all donations and gifts made in a tax year is limited to Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction general limitation general permission Maori authority net income supplement tax year 1994 No 164 s DI 2 Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and Section DV 11(2) amended 19 December 2007 section 42(1) Taxation (Business Taxation and Remedial Matters) Act 2007
DV 12: Group companies
When this section applies
1: This section applies when,—
a: in a tax year, a company ( company A section CV 1
b: no other provision of this Act allows company A a deduction for the expenditure it incurs in deriving the income; and
c: if the wholly-owned group of companies were a single company, the single company would be allowed a deduction for the expenditure that company A incurs in deriving the income. Amount, and timing, of deduction
2: Company A is allowed a deduction for the expenditure in the tax year in which the income is derived. Link with subpart DA
3: This section supplements the general permission and overrides the exempt income limitation. The other general limitations still apply. company deduction exempt income limitation general limitation general permission income supplement tax year wholly-owned group of companies 1994 No 164 s DI 4
DV 13: Amalgamated company: expenditure on improvements for farming,
horticultural, When this section applies
1: This section applies when—
a: an amalgamating company ceases to exist because of a qualifying amalgamation; and
b: the amalgamated company acquires land or a business from the amalgamating company; and
c: the amalgamating company would have been allowed a deduction under any of section DO 4 DO 4B DO 4C DO 6 DP 3 Deduction
2: While the amalgamated company holds the land or carries on the business, it is allowed the deduction that the amalgamating company would have been allowed under section DO 4 DO 4B DO 4C DO 6 DP 3 Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amalgamated company amalgamating company business deduction general limitation general permission qualifying amalgamation supplement 1994 No 164 ss DL 7, DO 8 The heading was amended 1 October 2005 section 188(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word horticultural, farming, Subsection (1) amended 1 October 2005 section 188(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words DO 4B (Expenditure on land: planting of listed horticultural plants), DO 4C (Expenditure on land: horticultural replacement planting), or DO 6 Subsection (2) amended 1 October 2005 section 188(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the words DO 4B (Expenditure on land: planting of listed horticultural plants), DO 4C (Expenditure on land: horticultural replacement planting), or DO 6
DW: Expenditure specific to certain industries
Contents
DW 1: Airport operators
No deduction (with exception)
1: An airport operator is denied a deduction for expenditure or loss to the extent to which the expenditure or loss is, in terms of the joint venture agreement that relates to the airport operator, a charge against any part of the joint income of the parties to the agreement that has been allocated or distributed to any party. Meaning of expenditure
2: In subsection (1), expenditure section OC 1(2)(h) Link with subpart DA
3: This section overrides the general permission. airport operator deduction expenditure general permission income joint venture agreement 1994 No 164 s DK 4
DW 2: Bloodstock racing
No deduction
1: A person is denied a deduction for expenditure or loss that they incur—
a: on the racing of bloodstock; or
b: in relation to the racing of bloodstock. No deduction (with exception)
2: A person is denied a deduction for expenditure or loss that they incur in preparing bloodstock for racing, except, first, when—
a: the person is in the business of breeding bloodstock; and
b: they incur the expenditure or loss in preparing for sale bloodstock that they are preparing for racing; and
c: they do not race the bloodstock on which they incur the expenditure or loss. No deduction (with exception)
3: A person is denied a deduction for expenditure or loss that they incur in preparing bloodstock for racing, except, second, when—
a: the person incurs the expenditure or loss in preparing the bloodstock for racing; and
b: they receive consideration for preparing the bloodstock for racing; and
c: the consideration is income of the person. Link with subpart DA
4: This section overrides the general permission. bloodstock business deduction general permission income loss 1994 No 164 s DO 1
DW 3: Deduction for general insurance outstanding claims reserve
When this section applies
1: This section applies for—
a: an insurer who uses IFRS 4, Appendix D for general insurance contracts; and
b: general insurance contracts, excluding contracts having premiums to which section FC 14 When this section does not apply
1B: This section does not apply for contracts that section DZ 10 No deduction on account of claims
2: For an insurer's general insurance contracts, the insurer is not allowed a deduction relating to the insurer's outstanding claims liability or for a claim's expenditure or loss, except as provided by this section. Formula for insurer's OCR deduction
3: For an income year (the current year The following table is small in size and contains a formula. opening outstanding claims reserve Definition of items in formula
4: In the formula,—
a: opening outstanding claims reserve
i: the amount of the insurer's closing outstanding claims reserve for the income year before the current year (the prior year
ii: the amount of the insurer's reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer:
b: closing outstanding claims reserve Deduction for payments of current claims
5: The insurer is allowed a deduction for the amount of expenditure or loss of a claim paid to an insured under a general insurance contract. Link with subpart DA
6: This section supplements the general permission. The general limitations still apply. amount deduction general insurance contract general limitation general permission IFRS 4 income year insurer life insurer outstanding claims reserve Section DW 3 added 6 October 2009 section 768(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section DW 3(1B) heading inserted 17 July 2013 section 156(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section DW 3(1B) inserted 17 July 2013 section 156(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
DX: Other expenditure
Contents
DX 1: Testamentary annuities
When this section applies
1: This section applies when—
a: property is subject to the payment of an annuity—
i: because of a provision in a will; or
ii: because of a court order under the Family Protection Act 1955
iii: because of a deed of family arrangement; and
b: the property, or property substituted for it, is transferred to a beneficiary; and
c: the property transferred, or property that the beneficiary substitutes for it, is charged with the payment of the annuity or part of the annuity. Deduction
2: The owner of the property, or the substituted property, is allowed a deduction for an amount that they pay on account of the annuity. Exclusion
3: The owner is denied a deduction—
a: if the owner is not a beneficiary but a person who has bought the property subject to the condition that they assume the liability for the annuity (or a part of it) :
b: to the extent to which the annuity is payable under a court order or under a deed of family arrangement and represents consideration for the purchase of the property, or the substituted property, by the owner. Amount of deduction
4: The deduction is limited in a tax year to the amount that would be the net income of the owner for the tax year if the owner's only income in the tax year were from the property, or the substituted property. Meaning of beneficiary
5: In this section, beneficiary—
a: means—
i: a person to whom a testator has left the property in their will; or
ii: a person to whom the testator has given a right to buy the property in their will; and
b: includes a person who is entitled to the property under—
i: an order of a court under the Family Protection Act 1955
ii: a deed of family arrangement. Link with subpart DA
6: This section supplements the general permission and overrides the private limitation. The other general limitations still apply. amount arrangement beneficiary deduction general limitation general permission income net income private limitation supplement tax year 1994 No 164 s DD 2 Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DY: Deductions under Parts F to I
Contents
DY 1: Amounts that are deductions under Parts to be rewritten
Deduction
1: An amount of expenditure or loss is allowed as a deduction if it is allowed as a deduction under a provision in any of Parts F to I. General permission and general limitations
2: A provision in any of Parts F to I may, without expressly stating so, supplement the general permission or override any 1 or more of—
a: the general permission; or
b: the capital limitation; or
c: the private limitation; or
d: the exempt income limitation; or
e: the employment limitation; or
f: the withholding tax limitation; or
g: the non-residents' foreign-sourced income limitation. amount capital limitation deduction employment limitation exempt income limitation general limitation general permission loss non-residents' foreign-sourced income limitation private limitation supplement withholding tax limitation
DY 2: Amounts that are not deductions under Parts to be rewritten
No deduction
1: An amount of expenditure or loss is denied as a deduction if it is denied as a deduction under a provision in any of Parts F to I. General permission
2: A provision in any of Parts F to I may, without expressly stating so, override the general permission or any provision that supplements the general permission. amount deduction general permission loss supplement 1994 No 164 s BD 2(2)(f)
DZ: Terminating provisions
Contents
DZ 1: Commercial bills before 31 July 1986
Deduction
1: A person is allowed a deduction if they acquire a commercial bill from another person, other than under a relationship agreement section CZ 6 Amount of deduction
2: The amount of the deduction is the value of the commercial bill on the date on which the person acquired it. Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount commercial bill deduction general limitation general permission income matrimonial agreement supplement 1994 No 164 s DJ 16 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
DZ 2: Life insurers acquiring property before 1 April 1988
When this section applies
1: This section applies when—
a: a life insurer started carrying on the business of providing life insurance on or before the last day of the 1988-89 income year; and
b: on the last day of the 1987-88 income year the life insurer's Life Insurance Fund covered some or all of the following matters:
i: superannuation policies; and
ii: pre-1983 mortgage repayment insurance policies; and
iii: annuities that had been granted; and
c: the life insurer, as part of the business, acquired property before 1 April 1988; and
d: the life insurer, as part of the business, disposes of the property; and
e: either—
i: the life insurer has not already been allowed a deduction for the property, whether under section DR 2
ii: the life insurer has been allowed a deduction for the property, but only for an amount of depreciation loss or because of the application of the old financial arrangements rules or the financial arrangements rules; and
f: section DR 2 Deduction
2: The life insurer is allowed a deduction for the amount quantified in section EZ 1 Meaning of superannuation policy
3: Superannuation policy
a: that—
i: is vested in a superannuation fund that was or was treated as being a superannuation category 1 scheme on or before 17 December 1987, not including a scheme that was classified by the Government Actuary as a personal pension superannuation scheme and that admitted new members after 17 December 1987; or
ii: was effected for the purposes of any such superannuation fund; or
iii: was accepted by any such superannuation fund for the purposes of the fund; and
b: that has not ceased to be a policy for the purposes of the superannuation fund. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. amount business capital limitation deduction depreciation loss financial arrangements rules general limitation general permission income year life insurance Life Insurance Fund life insurance policy life insurer old financial arrangements rules property superannuation category 1 scheme superannuation fund superannuation policy superannuation scheme 1994 No 164 ss DK 3C, OB 1 superannuation policy
DZ 3: Petroleum mining: development expenditure from 1 October 1990 to 15 December 1991
Deduction
1: A petroleum miner is allowed a deduction for petroleum mining development expenditure incurred by them on or after 1 October 1990 and before or on 15 December 1991. This subsection is overridden by subsection (2). Relationship with section DZ 4
2: The petroleum miner is denied a deduction for petroleum mining development expenditure as described in subsection (1)
a: section DZ 4
b: sections 214D to 214M of the Income Tax Act 1976 section 15 of the Income Tax Amendment Act (No 5) 1992 Timing of deduction
3: The deduction is allocated under section EZ 3 Meaning of petroleum mining development expenditure
4: In this section, petroleum mining development expenditure section 214D of the Income Tax Act 1976 section 15 of the Income Tax Amendment Act (No 5) 1992 Link with subpart DA
5: This section supplements the general permission. The general limitations still apply. deduction general limitation general permission petroleum miner petroleum mining development expenditure supplement 1994 No 164 s DM 1(3)
DZ 4: Expenditure on abandoned exploratory well before 16 December 1991
Deduction
1: A petroleum miner is allowed a deduction for expenditure that they incur before 16 December 1991 in drilling, testing, completing, and abandoning an exploratory well if—
a: the miner seals and abandons the well before commercial production from the well starts; and
b: the expenditure has not been deducted in any previous income year. Sealing and abandoning well
2: To seal and abandon an exploratory well, a petroleum miner must make a declaration under the Oaths and Declarations Act 1957
a: to use the exploratory well in petroleum mining operations; or
b: to apply for a mining licence over the area containing the exploratory well. Timing of deduction
3: The deduction is allocated to the income year in which the well is sealed and abandoned. Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation commercial production deduction exploratory well general limitation general permission income year mining licence petroleum miner petroleum mining operations seal and abandonment 1994 No 164 ss DM 1(5)(c), OB 1 seal and abandonment
DZ 5: Farm-out arrangements for petroleum mining before 16 December 1991
Deduction: excess expenditure incurred before 16 December 1991
1: A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred before 16 December 1991 in a farm-out arrangement entered into before 16 December 1991, and for which a deduction has not been allowed in any previous income year. The deduction is allowed under section DT 1 Deduction: excess expenditure incurred on or after 16 December 1991
2: A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred on or after 16 December 1991 in a farm-out arrangement entered into before 16 December 1991 if the expenditure has the character of exploratory well expenditure, petroleum exploration expenditure, or petroleum development expenditure. The deduction is allowed under section DT 1 sections EJ 11 to EJ 14 Reduction of deductions
3: A transferor under a farm-out arrangement entered into before 16 December 1991 must reduce (but is denied as a deduction) the deductions described in subsection (4) by the amount determined under subsection (5). Deductions to which subsection (3) applies
4: The deductions to which subsection (3) applies are deductions for expenditure incurred before, on, or after 16 December 1991 that—
a: are not deductions of a kind referred to in subsection (5)(a) to (c); and
b: are attributable to—
i: the petroleum permit to which the farm-out arrangement relates; and
ii: a licence-specific asset or permit-specific asset held for conducting petroleum mining operations under the petroleum permit. Amount of reduction
5: The amount of the reduction under subsection (4), in an income year, is the same amount as would have been determined under section 214I(2) and (3) of the Income Tax Act 1976 section 15 of the Income Tax Amendment Act (No 5) 1992
a: residual expenditure; and
b: expenditure incurred on or before the date on which the application for a prospecting licence or prospecting permit for petroleum was submitted for the relevant licence area; and
c: expenditure that is neither petroleum exploration expenditure nor petroleum development expenditure. Some definitions
6: In subsections (2) to (5), excess expenditure farm-out arrangement licence-specific assets permit-specific asset transferee transferor section 214D of the Income Tax Act 1976 section 15 of the Income Tax Amendment Act (No 5) 1992 Link with subpart DA
7: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. amount capital limitation deduction excess expenditure exploratory well expenditure farm-out arrangement general limitation general permission income year licence-specific assets permit-specific asset petroleum petroleum development expenditure petroleum exploration expenditure petroleum mining operations petroleum permit prospecting licence prospecting permit residual expenditure supplement transferee transferor 1994 No 164 s DM 4(2), (3)
DZ 6: Partnership interests and disposal of part of asset before 16 December 1991
In sections DZ 3
a: a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their income interest in the partnership :
b: references to the disposal of an asset apply equally to the disposal of part of an asset. dispose income petroleum permit 1994 No 164 ss DM 9, DM 10 Section DZ 6 amended 1 October 2005 section 189 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression DZ 3 DZ 2 Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression : ; and
DZ 7: Petroleum mining operations outside New Zealand before 16 December 1991
Sections DZ 3
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by this Act. controlled foreign company New Zealand petroleum miner petroleum mining operations 1994 No 164 s DM 7(1) Section DZ 7 amended 1 October 2005 section 190 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression DZ 3 DZ 2
DZ 8: Buying patent rights before 1 April 1993
When this section applies
1: This section applies when a person buys patent rights before 1 April 1993 and uses them in deriving their income. In this section, if the person dies after incurring expenditure on buying the rights, references to the person include their personal representative, a trustee of their estate, and a beneficiary of their estate. Deduction
2: The person is allowed a deduction of the amount quantified in section EZ 5(2) Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income patent rights supplement trustee 1994 No 164 s EZ 5(1), (3), (4)
DZ 9: Premium paid on land leased before 1 April 1993
When this section applies
1: This section applies when a person (person A) leases land that they use in deriving their income and a grant or renewal of the lease occurs before 1 April 1993. Deduction
2: Person A is allowed a deduction of the amount quantified in section EZ 6(2) Link with subpart DA
3: This section supplements the general permission. The general limitations still apply. amount deduction general limitation general permission income lease premium supplement 1994 No 164 s EZ 6
DZ 10: General insurance with risk period straddling 1 July 1993
When this section applies
1: This section applies when—
a: a company carries on a business of providing general insurance or guarantees against loss, damage, or risk, immediately before and on 1 July 1993; and
b: the company, as insurer, enters into an insurance contract for the general insurance in the course of carrying on the business outside New Zealand; and
c: the contract covers a period of risk starting before 1 July 1993 and ending after 1 July 1993. No deduction (with exception)
2: The company is denied a deduction for an amount payable under the contract unless the event giving rise to the payment occurs on or after 1 July 1993. Link with subpart DA
3: This section overrides the general permission. amount business company deduction general insurance general permission insurance contract New Zealand pay payment 1994 No 164 s CZ 6(c)(i), (ii), (vi)
DZ 11: Film reimbursement scheme on or before 30 June 2001
Film reimbursement scheme
1: Section DS 3
a: the scheme is entered into on or before 30 June 2001; and
b: the film has, under section EJ 6
i: a final certificate that it is a New Zealand film; or
ii: a provisional certificate, not obtained by the provision of materially incorrect information to the New Zealand Film Commission, that it is a New Zealand film; and
c: the film had not been completed before 7 July 1999; and
d: before 7 July 1999,—
i: 1 or more contracts had been entered into for the supply of goods or services in New Zealand in relation to the film; and
ii: at least $1,000,000 of expenditure had been incurred under the contract or contracts; and
e: on or before 1 November 1999, a person who entered into a contract referred to in paragraph (d)(i) gave notice to the Commissioner that the requirements in paragraphs (c) and (d) were met; and
f: the expenditure for which persons are allowed a deduction under section DS 1
g: without limiting the application of section BG 1
i: all expenditure incurred by person A under the scheme; and
ii: a return on each amount of expenditure that is equivalent to the return on 5 year government stock measured on the date that the scheme is entered into; and
h: if the expenditure is incurred on depreciable intangible property of a kind listed in schedule 17 Circumstances for purposes of subsection (1)(h)
2: For the purposes of subsection (1)(h), the circumstances are that—
a: the amount paid is income of person B; or
b: at all times in the tax year in which the payment is made, person B—
i: is resident in a country or territory specified in schedule 3, part A
ii: is liable to income tax in that country or territory by reason of domicile, residence, place of incorporation, or place of management in that country or territory; and
iii: has calculated its income that is liable to income tax in that country or territory without applying a feature of the taxation law of the country or territory specified in schedule 3, part B Some definitions
3: In this section,— government stock Part 6 physical cost of production
a: in marketing or selling the film; and
b: on depreciable intangible property of a kind listed in schedule 17 Link with subpart DA
4: This section overrides the general permission. amount Commissioner completed deduction depreciable intangible property film general permission government stock income income tax New Zealand notice physical cost of production tax year year 1994 No 164 s EO 4A(2A), (2B), (8)
DZ 12: Mineral mining: 1954 to 2005
Section CU 4(1)(b)(ii)
1: For the purposes of section CU 4(1)(b)(ii)
a: for a mining company, the deduction is under—
i: section 153F of the Land and Income Tax Act 1954
ii: section 27 of the Land and Income Tax Amendment Act 1971
iii: section 216 of the Income Tax Act 1976
iv: section DN 1(5) of the Income Tax Act 1994
b: for a resident mining operator or a non-resident mining operator, the deduction is under—
i: section 153J of the Land and Income Tax Act 1954
ii: section 31 of the Land and Income Tax Amendment Act (No 2) 1972
iii: section 216 of the Income Tax Act 1976
iv: section DN 1(5) of the Income Tax Act 1994 Sections CU 11(1)(a)(ii) and DU 6(1)(a)(ii)
2: For the purposes of sections CU 11(1)(a)(ii) sections CU 3 to CU 10 DU 6(1)(a)(ii)
a: for a mining company, the expenditure is that referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971
b: for a resident mining operator or a non-resident mining operator,—
i: the expenditure, for section CU 11(1)(a)(ii) paragraph (i) a section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972
ii: the asset, for section DU 6(1)(a)(ii) paragraph (i) a section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972 Section DU 12
3: This subsection applies if section DU 12 Income Tax Amendment Act 1979 section 45 of the Income Tax Amendment Act 1979 Section DU 12(5)
4: For the purposes of section DU 12(5) section 159 of the Income Tax Act 1976 section DU 12(3) company deduction holding company mining company mining holding company non-resident mining operator resident mining operator 1994 No 164 ss DN 1(13)(a), DN 3(3), (11), DN 4(5), (7)
DZ 13: Enhancements to land unamortised at end of 2004-05 year
When this section applies
1: This section applies when—
a: a person is allowed under section DO 4(1) of the Income Tax Act 1994 section DO 4(3)(a) or (c) of that Act
b: at the end of the 2004-05 income year, part of the expenditure ( unamortised balance allowed as a deduction in later income years
c: Deduction can be claimed under sections DO 1 to DO 3
2: The person is allowed a deduction for the unamortised balance of expenditure in the income year in which the expenditure is of benefit to the business. Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general permission income year supplement Subsection (1)(a) substituted 1 April 2005 section 23(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1)(b) amended 1 April 2005 section 23(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting allowed as a deduction in later income years claimed as a deduction in later income years; and Subsection (1)(c) repealed 1 April 2005 section 23(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (2) substituted 1 April 2005 section 23(4) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
DZ 14: Patent applications before 1 April 2005
When this section applies
1: This section applies if—
a: a patent is granted to a person in their 2005–06 or later income year; and
b: the patent is granted in relation to a patent application owned by the person; and
c: the patent application, with a complete specification, was first lodged with the Intellectual Property Office of New Zealand or a similar office in another jurisdiction before 1 April 2005; and
d: a deduction for expenditure on the patent application is not allowed under another provision. Calculation of deduction
2: The person is allowed, in the income year in which the patent is granted, a deduction for expenditure on the patent application in any income year, calculated using the formula— Definition of items in formula
3: In the formula,—
a: cost
b: months of ownership Link with subpart DA
4: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. capital limitation deduction general limitation general permission income year Sections DZ 14 DZ 17 inserted 1 April 2005 section 27(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 27(2)
DZ 15: Geothermal wells between 31 March 2003 and 17 May 2006
When this section applies
1: This section applies to a person's geothermal well, if—
a: the well's geothermal energy proving period ends between 31 March 2003 and 17 May 2006; and
b: the well is—
i: both started and completed between 31 March 2003 and 17 May 2006:
ii: acquired between 31 March 2003 and 17 May 2006; and
c: a deduction for expenditure on the well is not allowed under any provision except this one. Deduction
2: The person is allowed, in the income year in which the well's geothermal energy proving period ends, a deduction for expenditure incurred on the well. Link with subpart DA
3: This section supplements the general permission and overrides the capital limitation. The other general limitations still apply. capital limitation deduction general limitation general limitation general permission geothermal energy proving period geothermal well income year supplement Sections DZ 14 DZ 17 inserted 1 April 2005 section 27(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 27(2)
DZ 16: Expenditure on improvements to aquacultural business before 1995-96 income year
When this section applies
1: This section applies to a person and an income year and expenditure—
a: incurred before the 1995-96 income year in making an improvement for the purposes of an aquacultural business; and
b: for which the person would be allowed under section DO 6 Deduction
2: The person is allowed a deduction in the income year for the expenditure. Amount of deduction
3: The amount of the deduction is calculated using the formula— 125% x schedule percentage × diminished value. Definition of items in formula
4: In the formula,—
a: schedule percentage schedule 7
b: diminished value Link with subpart DA
5: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. Sections DZ 14 DZ 17 inserted 1 April 2005 section 27(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 27(2)
DZ 17: Expenditure on improvements to forestry land before 1995-96 income year
When this section applies
1: This section applies to a person and an income year and expenditure—
a: incurred before the 1995-96 income year in making an improvement on land; and
b: for which the person would be allowed under section DP 3 Deduction
2: The person is allowed a deduction in the income year for the expenditure. Amount of deduction
3: The amount of the deduction is calculated using the formula— 125% x schedule percentage × diminished value. Definition of items in formula
4: In the formula,—
a: schedule percentage schedule 7
b: diminished value Link with subpart DA
5: This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply. Sections DZ 14 DZ 17 inserted 1 April 2005 section 27(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 27(2)
E: Timing and quantifying rules
Contents
EA: Matching rules: revenue account property, prepayments, and deferred payments
Contents
EA 1: Trading stock, livestock, and excepted financial arrangements
Property subject to matching rules
1: The matching rules described in this section apply to each of the following kinds of property:
a: trading stock valued under subpart EB :
b: livestock valued under subpart EC :
c: excepted financial arrangements that are revenue account property valued under subpart ED arrangements):
d: a share supplier's share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c). Application of section CH 1
2: When a person has any of those kinds of property at the end of an income year, its value is income of the person in the income year under section CH 1 Application of section DB 40
3: When a person has any of those kinds of property at the start of an income year, they are allowed a deduction for its value in the income year under section DB 40 Determination of values
4: The values are determined under—
a: section EB 3
b: section EC 2
c: section ED 1 deduction excepted financial arrangement income income year original share revenue account property share-lending right share supplier trading stock 1994 No 164 s EE 2(2), (4) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1)(c) amended 1 July 2006 section 59(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting arrangements): arrangements). Subsection (1)(d) inserted 1 July 2006 section 59(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 1 July 2006 section 59(2)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting original share The list of defined terms was amended 1 July 2006 section 59(2)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share-lending right The list of defined terms was amended 1 July 2006 section 59(2)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share supplier
EA 2: Other revenue account property
When this section applies
1: This section applies to revenue account property that is not—
a: trading stock valued under subpart EB :
b: livestock valued under subpart EC (Valuation of livestock) :
c: an excepted financial arrangement valued under subpart ED :
d: a film or a film right to which sections EJ 4 to EJ 8 :
e: property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections EJ 11 to EJ 18 :
f: a specified lease or a lease to which section EJ 9 :
g: a financial arrangement valued under subpart EW Timing of deduction
2: A deduction for the cost of revenue account property of a person is allocated to the earlier of—
a: the income year in which the person disposes of the property; and
b: the income year in which the property ceases to exist. deduction excepted financial arrangement film film right financial arrangement income year lease petroleum development expenditure petroleum exploration expenditure revenue account property specified lease trading stock 1994 No 164 s EF 2(1), (2) Subsection (1)(a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EA 3: Prepayments
When this section applies
1: This section applies when—
a: a person has been allowed a deduction for expenditure under this Act or an earlier Act; and
b: the expenditure was not incurred on the items described in subsection (2); and
c: some or all of the expenditure is unexpired under subsections (4) to (7) at the end of the person's income year. Exclusions
2: This section does not apply to expenditure incurred on—
a: revenue account property to which section EA 2 :
b: trading stock valued under subpart EB :
c: livestock valued under subpart EC :
d: an excepted financial arrangement valued under subpart ED :
e: a film or a film right to which sections EJ 4 to EJ 8 :
f: property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections EJ 11 to EJ 18 :
g: a specified lease or a lease to which section EJ 9 :
h: a financial arrangement valued under subpart EW Unexpired portion
3: The unexpired portion of a person's expenditure at the end of an income year—
a: is income of the person in the income year under section CH 2
b: is an amount for which the person is allowed a deduction in the following income year under section DB 41 Unexpired portion: expenditure on goods
4: An amount of expenditure on goods is unexpired at the end of an income year if, by the end of the income year,—
a: the person has not used up the goods in deriving income; and
b: the goods are not destroyed or rendered useless for the purpose of deriving income. Unexpired portion: expenditure on services
5: An amount of expenditure on services is unexpired at the end of an income year if the services have not been performed by the end of the income year. Unexpired portion: expenditure on choses in action
6: An amount of expenditure on a chose in action is unexpired at the end of an income year if the amount relates to a period of enforceability of the chose in action falling after the income year. Allowances reimbursing employees
7: In the case of expenditure subject to sections CW 13 CW 13B CW 13C CW 14 Commissioner's discretionary relief
8: The Commissioner may excuse a person from complying with this section under section 91AAC amount Commissioner deduction employee film film right goods income income year revenue account property services 1994 No 164 s EF 1(1)-(4), (5)(a), (b), (d), (5A) Subsection (2)(a) (g) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (4) substituted 1 October 2005 section 191 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Section EA 3(7) amended 6 October 2009 section 769 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (8) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting 91AAC 91AAA
EA 4: Deferred payment of employment income
When this section applies
1: This section applies when—
a: a person is allowed a deduction in an income year for an amount of expenditure on employment income; and
b: the person has not paid the amount at the end of—
i: the 63rd day after the end of the income year; or
ii: the period described in subsection (3), for employment income paid to a shareholder-employee. Unpaid amount
2: The unpaid amount is—
a: income of the person in the income year under section CH 3
b: an amount for which the person is allowed a deduction in the following income year under section DB 42 Extension of payment period for shareholder-employee
3: For employment income paid to a shareholder-employee, the 63 day period for payment in subsection (1)(b)(i) is extended until the last date by which the person could file a return of income for the income year if the time for filing were extended to its maximum under section 37(5) Sale of business: obligations transferred to non-associates
4: For the purposes of this section, a person ( seller buyer
a: the seller and the buyer are not associated persons at the time of the sale; and
b: the seller has incurred the obligation to pay the amount in the course of their business; and
c: the employee becomes an employee of the buyer under the sale arrangements; and
d: the seller and the buyer agree in writing, under the sale arrangements, that—
i: the buyer assumes the obligation to pay an amount of employment income to the employee; and
ii: the consideration payable by the buyer for the business, or the part of the business, reflects the buyer's assumption of the obligation. Sale of business: obligations transferred to associates
5: If subsection (4) would have applied but for the fact that the seller and the buyer are associated at the time of the sale,—
a: the amount of employment income is not treated as income of the seller in any income year following the sale, despite subsection (2)(a) and section CH 3
b: the seller is denied a deduction for the amount of employment income in any income year following the sale, despite subsection (2)(b) and section DB 42
c: the buyer may be allowed a deduction under section DC 9(3) No sale: obligations transferred to associates
6: If section DC 10
a: the amount of employment income is not treated as income of the transferor ( person A section CH 3
b: the transferor is denied a deduction for the amount of employment income in any income year following the sale, despite subsection (2)(b) and section DB 42
c: the transferee ( person B section DC 10 Accounting treatment of transferred obligations
7: For the purposes of this section, the buyer of a business, or a part of a business, who assumes at the time of the sale an obligation to pay an amount of employment income—
a: may account for the amount in a way that treats the relevant employee individually or treats the buyer's employees as a group; and
b: must account for the amount in the same way in each relevant income year. amount arrangement associated person business deduction employee employment income income income year return of income shareholder-employee time of the sale 1994 No 164 ss DF 11(3), EF 1(5)(c), (6), (6A), EF 1A
EB: Valuation of trading stock (including dealer's livestock)
Contents
Introductory provisions
EB 1: When this subpart applies
This subpart applies when a person who owns or carries on a business has trading stock for the purpose of selling or exchanging it in the ordinary course of the business. business trading stock 1994 No 164 s EE 1
EB 2: Meaning of trading stock
Meaning
1: In the provisions referred to in paragraph (a) of the definition of trading stock section OB 1 trading stock Inclusions
2: Trading stock includes—
a: work of the following kinds that would be trading stock under subsection (1) if it were completed:
i: partly completed work :
ii: work in progress :
b: materials that the person has for use in producing trading stock :
c: property on which the person has incurred expenditure, when the property would, if they had it, be trading stock under subsection (1) or paragraph (a) or (b) :
d: property leased under a hire purchase agreement when the property—
i: is treated as having been acquired by the lessor under section FC 10(2)
ii: is an asset of a business that the lessor carries on. Exclusions
3: Trading stock does not include—
a: land :
b: depreciable property :
c: a financial arrangement to which the financial arrangements rules or the old financial arrangements rules apply :
d: an excepted financial arrangement that a life insurer has :
db: an excepted financial arrangement held by a person if section CX 44C or New Zealand Superannuation Fund
e: livestock not used in a dealing business :
f: consumable aids to be used in the process of producing trading stock :
g: a spare part not held for sale or exchange:
h: an ETS unit. business depreciable property excepted financial arrangement financial arrangement hire purchase agreement land lessor life insurer trading stock 1994 No 164 ss DK 3E, EE 4, OB 1 trading stock Subsection (2)(a)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(b) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EB 2(3)(db) amended 1 October 2007 section 13 Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section EB 2(3)(db) inserted 1 October 2007 section 28 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section EB 2(3)(g) amended 26 September 2008 section 62 Climate Change Response (Emissions Trading) Amendment Act 2008 Section EB 2(3)(h) added 26 September 2008 section 62 Climate Change Response (Emissions Trading) Amendment Act 2008
EB 3: Valuation of trading stock
Valuation method
1: A person who carries on a business must determine the value of their trading stock at the end of each income year by a method that is available under this subpart for them to use. Use of value
2: The value determined under subsection (1) is—
a: the closing value of the trading stock for the income year for the purposes of section CH 1
b: the opening value of the trading stock for the next income year for the purposes of section DB 40 Excepted financial arrangements valued at cost
3: Despite anything in this subpart, the value of any trading stock that is an excepted financial arrangement must be determined under subpart ED business excepted financial arrangement income year trading stock 1994 No 164 s EE 2(1), (3)
EB 4: Trading stock valuation methods
Standard valuation
1: The standard valuation methods for trading stock are—
a: cost :
b: discounted selling price :
c: replacement price :
d: market selling value. Low-turnover valuation
2: A person who is a low-turnover trader may value closing stock by a method described in section EB 14 Low value trading stock
3: In certain circumstances, a person may value closing stock under section EB 23 closing stock cost low-turnover trader trading stock 1994 No 164 s EE 3(1) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EB 5: Transfers of trading stock within wholly-owned groups
When this section applies
1: This section applies in an income year to trading stock held by a company that is a member of a wholly-owned group of companies, when—
a: a group company (company A) originally acquires and holds the trading stock; and
b: from the time it is acquired to the end of the income year, the trading stock is held within the group by a company or companies that are resident in New Zealand; and
c: through transfers within the group, another group company (company B) holds the trading stock at the end of the income year; and
d: company A and company B remain members of the group at the end of the income year; and
e: either—
i: the income years of company A and company B end on the same date; or
ii: they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date. Choice of treatment
2: Company B may choose to value the closing stock at the cost of the trading stock to company A. When company stops being member of group
3: If the companies stop being members of the same wholly-owned group, company B is treated as disposing of and reacquiring the trading stock for its market value at the time. If the market value of the trading stock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value. business closing stock Commissioner company cost income year market value net income resident in New Zealand trading stock wholly-owned group of companies 1994 No 164 s EE 15 Standard valuation
EB 6: Cost
Valuation at cost
1: A person may determine the value of their closing stock at cost. If the person chooses this method, they must include and allocate costs under generally accepted accounting practice , unless subsection (1B) Valuation at cost: agricultural produce
1B: Despite subsection (1), a person who uses NZIAS 41 for their trading stock in their financial statements must—
a: value their closing stock at cost; and
b: include and allocate costs so that the value of their closing stock is not materially different from the value of the closing stock obtained by applying NZIAS 2 ignoring paragraph 20 of NZIAS 2. Whether valuation correct
2: For the purposes of subsection (1), the person has not complied with generally accepted accounting practice if the value of closing stock is materially different from the value obtained by applying, to the closing stock, NZIAS 2 Definitions
3: In this section, NZIAS 41 closing stock cost generally accepted accounting practice NZIAS 2 NZIAS 41 1994 No 164 s EE 5(1), (2) Section EB 6(1) amended 19 December 2007 section 43(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(1B) heading inserted 19 December 2007 section 43(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(1B) inserted 19 December 2007 section 43(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(2) amended 19 December 2007 section 43(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(3) heading added 19 December 2007 section 43(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6(3) added 19 December 2007 section 43(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6 list of defined terms NZIAS 2 inserted 19 December 2007 section 43(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 6 list of defined terms NZIAS 41 inserted 19 December 2007 section 43(5) Taxation (Business Taxation and Remedial Matters) Act 2007
EB 7: Cost allocation: cost-flow method
When this section applies: first case
1: This section applies when a person who determines the value of their closing stock at cost has items of trading stock that are not separately identifiable. Compulsory use of cost-flow method
2: The person must use 1 of the cost-flow methods described in subsection (5) to identify the items of trading stock included in closing stock and to determine the cost of the items. When this section applies: second case
3: This section also applies when a person who determines the value of their closing stock at cost has items of trading stock that are separately identifiable. Discretionary use of cost-flow method
4: The person may use 1 of the cost-flow methods described in subsection (5) to determine the cost of the items of trading stock. Cost-flow methods
5: The cost-flow methods of allocating costs are—
a: the first-in first-out cost method; and
b: the weighted average cost method. Consistent use
6: A person who determines the value of their closing stock at cost must use the same cost-flow method of allocating costs as they use in their financial statements for the income year. closing stock cost financial statements income year trading stock 1994 No 164 ss EE 5(5), (6), EE 6(1), (2)
EB 8: Cost allocation: budgeted method or standard cost method
When this section applies
1: This section applies when a person—
a: has a business of manufacturing or producing trading stock; and
b: determines the value of their closing stock at cost; and
c: allocates costs by—
i: a budgeted method; or
ii: a standard cost method; and
d: is not a low-turnover trader to whom section EB 17(3) Apportionment of difference required
2: If any difference arises between the estimated costs of production included in the financial statements of the business for the income year and the actual costs of production, the person must apportion the difference between the cost of trading stock sold during the income year and the closing stock. business closing stock cost financial statements income year low-turnover trader trading stock 1994 No 164 s EE 5(3)
EB 9: Discounted selling price
Valuation at discounted selling price
1: A person may determine the value of their closing stock at its discounted selling price if they use discounted selling price for their trading stock in their financial statements. Retailers
2: If the person is a retailer, the discounted selling price for each department or category of goods is the total of the retail selling prices of the goods minus the normal gross profit margin for the department or category of goods. This subsection is overridden by subsection (4). Normal gross profit margin for purposes of subsection (2)
3: For the purposes of subsection (2), the person must—
a: calculate the normal gross profit margin for the department or category of goods under NZIAS 2
b: calculate the normal gross profit margin for each income year for each department or category of goods; and
c: include all costs that sections EB 6 to EB 8 Retailers with turnover of $1,000,000 or less
4: A trader who is a retailer whose turnover is $1,000,000 or less may determine the discounted selling price of all closing stock valued under this method in an income year by discounting the total of the retail selling prices of the stock by the average gross profit margin for all closing stock valued under this method in the income year. Increase in specified sum
5: The Governor-General may make an Order in Council increasing the sum specified in subsection (4). Not retailers
6: If the person is not a retailer, the discounted selling price for each category of goods is the total market selling value of the goods minus the normal gross profit margin for the category of goods. Normal gross profit margin for purposes of subsection (6)
7: For the purposes of subsection (6), the person must—
a: calculate the normal gross profit margin for each income year for each category of goods; and
b: include all costs that sections EB 6 to EB 8 closing stock cost financial statements income year NZIAS 2 trading stock turnover 1994 No 164 ss EE 8, EE 10 Section EB 9(3)(a) amended 19 December 2007 section 44(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 9 list of defined terms NZIAS 2 inserted 19 December 2007 section 44(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EB 10: Replacement price
Valuation at replacement price
1: A person may determine the value of their closing stock at its replacement price if they use replacement price for their trading stock in their financial statements. Establishing replacement price
2: The replacement price—
a: is—
i: the market value of the trading stock on the last day of the income year; or
ii: if there is no such market value, the last price that the person paid during the income year to acquire equivalent trading stock; and
b: does not include an amount of input tax for the supply of the replacement trading stock to the person. closing stock financial statements income year input tax trading stock 1994 No 164 s EE 11(1)-(3)
EB 11: Market selling value
Valuation at market selling value
1: A person may determine the value of their closing stock at its market selling value if the market selling value is less than the cost of the stock. Establishing market selling value
2: The market selling value of closing stock is found by taking the amount that the person would normally expect to receive in the ordinary course of business from the sale of the trading stock and subtracting the following costs:
a: the estimated costs of completion; and
b: the expected costs of selling it. Expected costs of selling
3: For the purposes of subsection (2)(b), the expected costs of selling the stock are the costs that the person usually incurs for the following:
a: transport :
b: insurance :
c: sales commissions :
d: discounts to buyers. Expected costs of selling: financial statements
4: For the purposes of subsection (3), if the person prepares financial statements, the costs must have been taken into account in the statements in calculating net realisable value. Substantiating market selling value
5: If the person uses market selling value to value closing stock, they must be able to substantiate that value. If they cannot, they must use 1 of the following to value their closing stock:
a: cost, as described in sections EB 6 to EB 8 EB 15 to EB 18
b: discounted selling price, as described in section EB 9 EB 19
c: replacement price, as described in section EB 10 EB 20 amount business closing stock cost financial statements trading stock 1994 No 164 ss EE 3(1), EE 12 Subsection (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EB 12: Valuing closing stock consistently
In determining the value of closing stock at cost, discounted selling price, or replacement price, a person must comply with the consistency and disclosure requirements of NZIAS 8 closing stock cost NZIAS 8 1994 No 164 s EE 16(1) Section EB 12 amended 19 December 2007 section 45(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 12 list of defined terms NZIAS 8 inserted 19 December 2007 section 45(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Low-turnover valuation
EB 13: Low-turnover valuation
Options
1: A person who is a low-turnover trader may value closing stock—
a: by a standard valuation method, as described in sections EB 6 to EB 12
b: by a low-turnover valuation method, as described in sections EB 14 to EB 22
c: as low value trading stock, in the circumstances described in section EB 23 Meaning of low-turnover trader
2: In this subpart, low-turnover trader means a person who carries on a business when, in an income year, the total of the turnover of the business and the turnover of associated persons, as defined in section OD 8(1)(a)
a: $3,000,000; and
b: the sum specified by the Governor-General by Order in Council. Increase in specified sum
3: The Governor-General may make an Order in Council increasing the sum specified in subsection (2)(a). associated person business closing stock income year low-turnover trader turnover 1994 No 164 ss EE 20, OB 1 small taxpayer
EB 14: Low-turnover valuation methods
The low-turnover valuation methods are—
a: cost for low-turnover traders; and
b: discounted selling price for low-turnover traders; and
c: replacement price for low-turnover traders; and
d: market selling value for low-turnover traders. cost low-turnover trader
EB 15: Cost for low-turnover traders
A low-turnover trader may determine the value of their closing stock at cost. If the low-turnover trader chooses this method, they must include and allocate costs under—
a: generally accepted accounting practice; or
b: section EB 16
c: section EB 17
d: section EB 18 closing stock cost generally accepted accounting practice low-turnover trader 1994 No 164 s EE 5(7)
EB 16: Cost allocation: cost-flow method for low-turnover traders
Section EB 7(1) to (5) cost low-turnover trader 1994 No 164 s EE 5(5), (6)
EB 17: Costs: manufactured or produced stock of low-turnover traders
When this section applies
1: This section applies when a low-turnover trader—
a: has a business of manufacturing or producing trading stock; and
b: determines the value of their closing stock at cost. Costs to be included
2: In determining the value of their closing stock, the low-turnover trader must include the following costs of production:
a: direct and indirect material costs :
b: direct and indirect labour costs :
c: utilities costs :
d: costs of repairing and maintaining factory plant :
e: costs of rent of factory plant :
f: amounts of depreciation loss on factory plant :
g: costs additional to those described in paragraphs (a) to (f), if—
i: they are costs of production; and
ii: the low-turnover trader includes them in the financial statements for the income year. Apportionment of difference not required
3: If the low-turnover trader allocates costs by a budgeted method or a standard cost method, and if any difference arises between the estimated costs of production included in the financial statements of the business for the income year and the actual costs of production, the low-turnover trader is not required to apportion the difference between the cost of trading stock sold during the income year and the closing stock. amount business closing stock cost depreciation loss financial statements income year low-turnover trader trading stock 1994 No 164 ss EE 5(3), EE 7(1), (2) Subsection (2)(a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EB 18: Costs: other stock of low-turnover traders
When this section applies
1: This section applies when a low-turnover trader—
a: acquires trading stock other than by manufacture or production; and
b: determines the value of their closing stock at cost. Costs to be included
2: In determining the value of their closing stock, the low-turnover trader must include the following costs:
a: the purchase price; and
b: any direct transport and insurance costs that they incur in bringing the stock to the place and condition in which they have it. closing stock cost low-turnover trader trading stock 1994 No 164 s EE 7(3)
EB 19: Discounted selling price for low-turnover traders
Financial statements prepared
1: A low-turnover trader who prepares financial statements may determine the value of their closing stock at its discounted selling price if they use discounted selling price for their trading stock in their financial statements. Financial statements not prepared
2: A low-turnover trader who does not prepare financial statements may determine the value of their closing stock at its discounted selling price. Retailers with turnover of more than $1,000,000
3: If the low-turnover trader is a retailer whose turnover is more than $1,000,000, the discounted selling price for each department or category of goods is the total of the retail selling prices of the goods minus the normal gross profit margin for the department or category of goods. Normal gross profit margin for purposes of subsection (3)
4: For the purposes of subsection (3), the low-turnover trader must—
a: calculate the normal gross profit margin for the department or category of goods under NZIAS 2
b: calculate the normal gross profit margin for each income year for each department or category of goods; and
c: include all costs that sections EB 16 to EB 18 Not retailers
5: If the low-turnover trader is not a retailer, the discounted selling price for each category of goods is the total market selling value of the goods minus the normal gross profit margin for the category of goods. Normal gross profit margin for purposes of subsection (5)
6: For the purposes of subsection (5), the low-turnover trader must—
a: calculate the normal gross profit margin for each income year for each category of goods; and
b: include all costs that sections EB 16 to EB 18 closing stock cost financial statements income year low-turnover trader NZIAS 2 trading stock turnover 1994 No 164 ss EE 8-EE 10, EE 21 Section EB 19(4)(a) amended 19 December 2007 section 46(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 19 list of defined terms NZIAS 2 inserted 19 December 2007 section 46(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EB 20: Replacement price for low-turnover traders
Financial statements prepared
1: A low-turnover trader who prepares financial statements may determine the value of their closing stock at its replacement price if they use replacement price for their trading stock in their financial statements. Financial statements not prepared
2: A low-turnover trader who does not prepare financial statements may determine the value of their closing stock at its replacement price. Establishing replacement price
3: The replacement price is—
a: the market value of the trading stock on the last day of the income year; or
b: the last price that the low-turnover trader paid during the income year to acquire equivalent trading stock. financial statements income year low-turnover trader trading stock 1994 No 164 s EE 11
EB 21: Market selling value for low-turnover traders
Valuation at market selling value
1: A low-turnover trader may determine the value of their closing stock at its market selling value, whether that value is higher or lower than cost. However, if the value is higher than cost, the trader must be consistent from 1 income year to the next in their use of market selling value to determine the value of closing stock. Establishing market selling value
2: Section EB 11(2) to (4) closing stock cost income year low-turnover trader 1994 No 164 ss EE 3(2), EE 12, EE 16(3)
EB 22: Valuing closing stock consistently for low-turnover traders
Traders complying with generally accepted accounting practice
1: In determining the value of closing stock at cost, discounted selling price, or replacement price, a low-turnover trader who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 Other traders
2: A low-turnover trader who does not comply with generally accepted accounting practice must be consistent from 1 income year to the next in—
a: their choice of valuing closing stock at cost, discounted selling price, or replacement price; and
b: their use of market selling value, if it is greater than cost; and
c: their use of a cost-flow method of allocating costs under section EB 7(1) to (5)
d: the extent to which they include indirect costs in the cost of trading stock that they manufacture or produce; and
e: their method of calculating discounted selling price. When changes allowed
3: A low-turnover trader to whom subsection (2) applies may make changes in relation to the matters described in the subsection if—
a: the change is justified by sound commercial reasons. (The advancement, deferral, or reduction of an income tax liability is not a sound commercial reason.); or
b: the change is required by another provision in this subpart. Records
4: A low-turnover trader who makes a change as described in subsection (3) must keep sufficient details of the change, and the reasons for the change, under section 22 closing stock cost generally accepted accounting practice income tax liability income year low-turnover trader NZIAS 8 trading stock 1994 No 164 ss EE 6(3), EE 16(2)-(5) Section EB 22(1) amended 19 December 2007 section 47(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EB 22 list of defined terms NZIAS 8 inserted 19 December 2007 section 47(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Low value trading stock
EB 23: Valuing closing stock under $5,000
When this section applies
1: This section applies when a person, including a low-turnover trader,—
a: has a turnover of $1,300,000 or less in an income year; and
b: reasonably estimates that the value of their closing stock for the income year is less than $5,000. Closing value
2: The person may use the opening value of their trading stock as the value of their closing stock for the income year. closing stock income year low-turnover trader trading stock turnover 1994 No 164 s EE 2A
EC: Valuation of livestock
Contents
Introductory provisions
EC 1: Application of this subpart
When this subpart applies
1: This subpart applies to the valuation of property when a person who owns or carries on a business, other than of selling livestock, holds livestock for the purposes of sale or exchange in the ordinary course of carrying on the business. Groups of livestock
2: For the purposes of this subpart, livestock is divided into—
a: specified livestock :
b: non-specified livestock :
c: high-priced livestock :
d: bloodstock. bloodstock business high-priced livestock non-specified livestock specified livestock 1994 No 164 s EE 2(1) Section EC 1(1) heading replaced 2 November 2012 section 245(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EC 1(1) replaced 2 November 2012 section 245(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EC 2: Valuation of livestock
Valuation method
1: A person must determine the value of their livestock at the end of each income year by a method that is available under this subpart for them to use. Use of value
2: The value determined under subsection (1) is—
a: the closing value of the livestock for the income year for the purposes of section CH 1
b: the opening value of the livestock for the next income year for the purposes of section DB 40 income year 1994 No 164 s EL 1(1)
EC 3: Livestock valuation methods
Specified livestock
1: The value of specified livestock is determined under sections EC 6 to EC 27 Non-specified livestock
2: The value of non-specified livestock is determined under sections EC 28 to EC 31 High-priced livestock
3: The value of high-priced livestock is determined under sections EC 32 to EC 37 Bloodstock
4: The value of bloodstock is determined under sections EC 38 to EC 48 bloodstock high-priced livestock non-specified livestock specified livestock 1994 No 164 s EL 1(1)
EC 4: Value of livestock on death of person
Section EC 4 repealed 1 October 2005 section 24 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EC 5: Transfers of livestock within wholly-owned groups
When this section applies
1: This section applies in an income year to livestock held by a company that is a member of a wholly-owned group of companies, when—
a: a group company ( company A
b: from the time it is acquired to the end of the income year, the livestock is held within the group by a company or companies that are resident in New Zealand; and
c: through transfers within the group, another group company ( company B
d: company A and company B remain members of the group at the end of the income year; and
e: either—
i: the income years of company A and company B end on the same date; or
ii: they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date. Choice of treatment
2: Company B may choose to value the livestock at the cost of the livestock to company A. When company stops being member of group
3: If the companies stop being members of the same whollyowned group, company B is treated as disposing of and reacquiring the livestock for its market value at the time. If the market value of the livestock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value. business Commissioner company income year net income resident in New Zealand wholly-owned group of companies 1994 No 164 s EE 15
EC 5B: Transfer of livestock because of self-assessed adverse event
When this section applies
1: This section applies to livestock that is donated, or supplied for consideration with a value that is less than the market value of the livestock, to a recipient—
a: for use in a farming or agricultural business that is affected by a self-assessed adverse event; and
b: by a donor or supplier who is not associated with the recipient. Treatment by donor or supplier
2: The donor or supplier must treat the livestock as having on the day of the transfer of the livestock—
a: no value, if the livestock is donated to the recipient:
b: the value of the consideration provided by the recipient, otherwise. Treatment by recipient
3: The recipient must treat the livestock as having on the day of the transfer of the livestock—
a: no value, if the livestock is donated to the recipient:
b: the value of the consideration provided by the recipient, otherwise. market value self-assessed adverse event Section EC 5B inserted 3 April 2006 section 60(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Valuation of specified livestock
EC 6: Application of sections EC 7 to EC 27
Sections EC 7 to EC 27 specified livestock 1994 No 164 s EL 1(1)(d)
EC 7: Valuation methods
Methods
1: The methods available for valuing specified livestock are—
a: the herd scheme described in sections EC 14 to EC 21 :
b: the national standard cost scheme described in sections EC 22 to EC 24 :
c: 1 of the cost price, replacement price, or market value methods described in section EC 25 :
d: the method described in section EC 26 Person chooses
2: A person must choose which method to use, making their election by using the method chosen in their return of income for the income year. Election continues
3: When a person chooses a valuation method, that method continues to apply in the following income years unless they choose another method that is available to them. Commissioner's determination
4: If a person chooses a valuation method that is not available to them and they later make no effective election, the Commissioner must determine the method to be used. In doing so, the Commissioner must consult the person. Restrictions on use of valuation methods
5: Restrictions apply to the use of valuation methods, as described in sections EC 8 Exception to subsection (2): Express written notice required in certain cases
6: Subsection (2) does not apply to the extent to which an election requires a notice under section EC 11 Commissioner cost price herd scheme income year national standard cost scheme notice return of income specified livestock 1994 No 164 s EL 2(1), (8) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EC 7(5) heading replaced 17 July 2013 section 157(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(5) replaced 17 July 2013 section 157(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(6) heading inserted 17 July 2013 section 157(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7(6) inserted 17 July 2013 section 157(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EC 7 list of defined terms notice inserted 17 July 2013 section 157(2) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EC 8: Restrictions on use of herd scheme
Herd scheme: first restriction on use of other method
1: A valuation method other than the herd scheme is not available to a person, in an income year, for animals of a class for which they use the herd scheme if the animals remaining to be valued under the herd scheme would be reduced to a number smaller than the number of any animals of the class that the person valued under the herd scheme at the end of the previous income year. Herd scheme: second restriction on use of other method
2: A person who values livestock of a particular type under the herd scheme must value all male breeding stock of that type under the herd scheme in an income year if, in the income year, they also value any livestock of that type under the national standard cost scheme or under the cost price method. class cost price herd scheme income year national standard cost scheme type 1994 No 164 ss EL 2(2)(d), (e), EL 5(4), (5)
EC 9: Restrictions on use of national standard cost scheme
National standard cost scheme: first restriction on use of scheme
1: The national standard cost scheme is not available to a person to value specified livestock in an income year if they value any specified livestock in the income year under the cost price method. National standard cost scheme: second restriction on use of scheme
2: The national standard cost scheme is not available to a person to value specified livestock if, in the income year before the income year in which their election under section EC 7(2) section EC 11 National standard cost scheme: third restriction on use of scheme
3: The national standard cost scheme is not available to a person to value a type of specified livestock in an income year if they have made specified livestock available to another person under a profit-sharing arrangement and, in the income year, the other person (or another person has also made livestock of the type available under the profit-sharing arrangement) values any livestock of the type under the cost price method. National standard cost scheme: fourth restriction on use of scheme
4: The national standard cost scheme is not available to a person to value specified livestock in an income year if—
a: they have bailed the livestock to another person under a long-term bailment not made under a profit-sharing arrangement; or
b: they have leased the livestock to another person under a long-term bailment not made under a profit-sharing arrangement. National standard cost scheme: fifth restriction on use of scheme
5: The national standard cost scheme is not available to a person to value specified livestock in an income year if a determination made under section EC 24 Commissioner cost price income year lease long-term bailment national standard cost scheme profit-sharing arrangement specified livestock type 1994 No 164 ss EL 2(2)(a), (c), (f), (g), EL 4(2), (3), EL 7(2), (4)(a)
EC 10: Restrictions on use of cost price method
Cost price method: first restriction on use of method
1: The cost price method is not available to a person to value specified livestock in an income year if the person values other specified livestock in the income year under the national standard cost scheme. Cost price method: second restriction on use of method
2: The cost price method is not available to a person to value specified livestock if, in the income year before the income year in which their election under section EC 7(2) section EC 11 Cost price method: third restriction on use of method
3: The cost price method is not available to a person to value specified livestock in an income year if they have bailed or leased their specified livestock to another person, unless the livestock is bailed or leased under a profit-sharing arrangement. Cost price method: fourth restriction on use of method
4: The cost price method is not available to a person to value specified livestock in an income year if they have bailed or leased their specified livestock to another person—
a: under a long-term bailment; or
b: under a short-term bailment made between associated persons in which the consideration paid to the bailee is not a fair market value. Cost price method: fifth restriction on use of method
5: The cost price method is not available to a person to value a type of specified livestock in an income year if they have made specified livestock available to another person under a profit-sharing arrangement and, in the income year, the other person (or another person has also made livestock of the type available under the profit-sharing arrangement) values any livestock of the type under the national standard cost scheme. associated person Commissioner cost price income year lease long-term bailment national standard cost scheme profit-sharing arrangement short-term bailment specified livestock type 1994 No 164 ss EL 2(2)(b), (f), (g), EL 3(2), (3), EL 7(3), (4)(a)
EC 11: Restrictions on making of elections
Forms of notice
1: This section specifies the 2 forms of notice that a person must give to the Commissioner and when each must be used. When a person notifies the Commissioner of an election under this section, the election is irrevocable in the first income year in which it applies. When notice in same year required
2: For the elections described in this subsection, a person must give notice by the date of filing their return of income for the income year in which the election is first to apply. The elections are—
a: an election to value livestock of a particular type under the herd scheme, as described in section EC 14
b: an election to adopt a herd value ratio or the Chatham Islands adjustment to the herd value ratio for livestock of any type when the income year is the first income year in which the particular livestock is valued under the herd scheme, as described in sections EC 17 to EC 19 When 2 years' notice required
3: For the elections described in this subsection, a person must give notice by the date of filing their return of income for an income year that is at least 2 income years before the income year in which the election is first to apply. The elections are—
a: an election to stop valuing specified livestock of a particular type under the herd scheme, except when the person continues to value some livestock of that type under the herd scheme or when another valuation method is available, as described in section EC 14(2)
b: an election, after the herd scheme has been adopted, to adopt a herd value ratio or recalculated herd value ratio or the Chatham Islands adjustment for any livestock type, as described in sections EC 17 to EC 19
c: an election to value specified livestock under the national standard cost scheme when the person has, in the income year before the application of the new election, valued the same livestock under the cost price method; and
d: an election to value specified livestock under the cost price method when the person has, in the year before the application of the new election, valued the same livestock under the national standard cost scheme. Information for notices of election
4: A notice of election must state—
a: the income year in which the election is first to apply; and
b: the type, class, or other description of the applicable livestock; and
c: the existing and proposed methods of valuing the applicable livestock; and
d: for an election to use a herd value ratio or recalculated herd value ratio under section EC 17
i: the value assessed under section EC 17(4)
ii: the date on which the valuation of each animal was made; and
iii: the name and address of the valuer. class Commissioner cost price herd scheme herd value ratio income year national standard cost scheme notice notify return of income specified livestock type 1994 No 164 s EL 2(3)-(5)
EC 12: Interests in livestock
Joint election of valuation method
1: When specified livestock is owned jointly by 2 or more persons, the owners must choose a valuation method. For the election to be effective, it must be made jointly by all the owners. Ineffective election
2: If there is no effective election, specified livestock owned jointly is valued as follows:
a: if the owners bail or lease the livestock to another person during the income year, under the market value method; or
b: if the owners enter into a profit-sharing arrangement for the livestock, under the market value method; or
c: in any other case, under the national standard cost scheme. Profit-sharing arrangements
3: If the method used in an income year to calculate the value of livestock under a profit-sharing arrangement is the national standard cost scheme or the cost price method, all the following are treated as the single owner of the livestock:
a: the person who owns the livestock; and
b: the person who has the use of the livestock; and
c: any other person who has made livestock of the same type available to the person referred to in paragraph (b) under a profit-sharing arrangement. Partnerships interests
4: For the purpose of an election under this section, a person's interest in a partnership that owns livestock is treated separately from any other interest that the person has in livestock. Separate elections are required for the person's partnership interest and for their other livestock interests. The person is not required to choose the same valuation method in both cases. cost price income year lease national standard cost scheme profit-sharing arrangement specified livestock type 1994 No 164 ss EL 2(6), EL 7(4)(b)
EC 13: Changes in partnership interests
When this section applies
1: This section applies when—
a: a partnership owns specified livestock (old partnership); and
b: a new partnership is formed (new partnership); and
c: at the end of the income year in which the new partnership is formed, more than 50% of the property of the new partnership is owned by persons who, during that income year or in the previous income year,—
i: owned all the property of the old partnership; and
ii: derived income in either income year from specified livestock of the same type as that owned by the new partnership. Valuation
2: The value of specified livestock owned by the new partnership must be taken into account in the way the old partnership determines the value of livestock of the particular type at the end of the income year in which the new partnership is formed. If the old partnership has no specified livestock of the type on hand at the end of the income year, the value is taken into account as the old partnership would have determined it, had it owned specified livestock of that type. income income year specified livestock type 1994 No 164 s EL 1(2) Herd scheme
EC 14: Herd scheme
Election to use herd scheme
1: A person may choose to value specified livestock of any type and class under the herd scheme. Election of other method
2: A person who has chosen to value livestock of a particular type under the herd scheme may nevertheless value livestock of that type by another method, subject to the restrictions described in section EC 8 Election to leave herd scheme
3: A person who wishes to stop valuing livestock of a particular type under the herd scheme must give 2 income years' notice to the Commissioner in the way described in section EC 11 class Commissioner herd scheme income year notice specified livestock type 1994 No 164 s EL 2(4)
EC 15: Determining national average market values
Determined by Commissioner
1: The Commissioner must determine a national average market value schedule 8 Application to income year
2: The value applies to the income year for which it is determined, whether the income year started before, on, or after the date on which the determination is made. class Commissioner income year national average market value specified livestock 1994 No 164 s EL 8
EC 16: Valuation under herd scheme
Closing value of herd livestock
1: The closing value of herd livestock in an income year is either its herd value for the income year or, if a herd value ratio is adopted, its herd value multiplied by its herd value ratio. Opening value of herd livestock
2: The opening value of herd livestock in an income year is determined under subsection (3) if a person—
a: has valued the livestock under the herd scheme in the previous income year; and
b: has the livestock on hand at the start of the income year; and
c: has not chosen to value the livestock by a different method for the income year. Determining opening value
3: The opening value of herd livestock in an income year is either its herd value for the income year or, if the person has adopted a herd value ratio, its herd value for the income year multiplied by its herd value ratio for the previous income year. This subsection overrides section DB 40(3) herd livestock herd scheme herd value herd value ratio income year 1994 No 164 s EL 5(1), (2) Section EC 16(3) amended 29 August 2011 section 198(1) Taxation (Tax Administration and Remedial Matters) Act 2011
EC 17: Herd value ratio
Adoption of herd value ratio
1: A herd value ratio is available for a person to use in determining the value of specified livestock in the herd scheme. A person may adopt a herd value ratio for herd livestock of a particular type by giving notice in the way described in section EC 11 Chatham Islands livestock
2: Herd value ratios calculated under subsection (5) do not apply to livestock on the Chatham Islands. The Chatham Islands adjustment to the herd value ratio is dealt with in section EC 19 When herd value ratio applies
3: When a person adopts a herd value ratio for livestock of a particular type, the ratio applies in the income year specified in the notice and in later income years until—
a: the income year in which it is superseded by a recalculation of the ratio; or
b: the income year in which the person stops valuing, under an election, livestock of that type under the herd scheme; or
c: the income year following 2 consecutive income years in which the person has not valued livestock of that type under the herd scheme. Assessment of average value
4: For the purpose of calculating a herd value ratio, a person must obtain from a recognised livestock valuer an assessment of the value of an average animal of that person in each applicable class of livestock. The value is determined as at the 30 April that is closest to the day on which the national average market values are set. Calculation of herd value ratio
5: The herd value ratio for livestock of a particular type is calculated by using the formula in subsection (6) and rounding the result of the calculation to the nearest of the following figures: 0.9, 1.0, 1.1, 1.2, 1.3. Formula
6: The formula is— Definition of items in formula
7: In the formula,—
a: Σ is the total of the individual calculations for all applicable classes of livestock type valued under the herd scheme:
b: average value
c: number
d: herd value class herd livestock herd scheme herd value herd value ratio high-priced livestock income year livestock on the Chatham Islands national average market value notice specified livestock type 1994 No 164 s EL 6(1)-(3), (5)
EC 18: Inaccurate herd value ratio
The Commissioner may require a person who is using an inaccurate herd value ratio for a type of livestock in an income year to recalculate the herd value ratio. If the recalculation differs from the existing ratio for the income year, the Commissioner may amend the assessment of income tax for the income year and any later income year and may substitute the recalculated herd value ratio for that previously applied by the person. assessment Commissioner herd value ratio income tax income year type 1994 No 164 s EL 6(4)
EC 19: Chatham Islands adjustment to herd value
Adjustment for herd livestock on Chatham Islands
1: A person may adopt an adjustment for herd livestock on the Chatham Islands by giving notice in the way described in section EC 11 When adjustment applies
2: When a person adopts a Chatham Islands adjustment as a herd value ratio, it applies as a herd value ratio to a particular type of livestock on the Chatham Islands at the end of the income year specified in the notice and in later income years until—
a: the income year in which the person stops valuing, under an election, livestock of that type in the herd scheme; or
b: the income year following 2 consecutive income years in which the person has not valued livestock of that type on the Chatham Islands under the herd scheme. Setting adjustment
3: The Commissioner must set and may vary from time to time the level of Chatham Islands adjustment to the herd value ratio that applies in an income year. Commissioner herd livestock herd scheme herd value herd value ratio income year livestock on the Chatham Islands notice type 1994 No 164 s EL 6(6), (7)
EC 20: Herd livestock disposed of before values determined
When this section applies
1: This section applies when, in an income year, a person—
a: stops deriving income from specified livestock; and
b: disposes of herd livestock before the 1 February that precedes the determination of the national average market values for the income year; and
c: gives notice to the Commissioner before that 1 February that they choose that this section applies to the valuation of the herd livestock. Value of herd livestock
2: The value of herd livestock that is disposed of is either the herd value of the livestock for the previous income year or, if the person has adopted a herd value ratio, the herd value multiplied by the herd value ratio applying in the previous income year. Commissioner herd livestock herd value herd value ratio income income year national average market value notice specified livestock 1994 No 164 s EL 5(6)
EC 21: Herd livestock on death before values determined
When this section applies
1: This section applies when—
a: a person dies; and
b: herd livestock owned by the person is disposed of before the 1 February that precedes the determination of the national average market values for the income year in which the person dies; and
c: the person's return of income to the date of death is filed before the national average market values for the income year are determined. Value of herd livestock
2: The value of herd livestock that is disposed of is either the herd value of the livestock for the previous income year or, if the person has adopted a herd value ratio, the herd value multiplied by the ratio applying in the previous income year. herd livestock herd value herd value ratio income year national average market value return of income 1994 No 164 s EL 5(6) National standard cost scheme
EC 22: National standard cost scheme
Election to use national standard cost scheme
1: A person may choose to value specified livestock under the national standard cost scheme section EC 9 Closing value
2: The closing value of the livestock is the cost of the livestock calculated under the determination made by the Commissioner under section EC 24 Commissioner national standard cost scheme specified livestock 1994 No 164 s EL 4(1)
EC 23: Determining national standard costs
Determination of costs
1: The Commissioner must determine national standard costs for each category of specified livestock in schedule 9
a: the average breeding, rearing, and growing costs for animals in the category; and
b: the average rearing and growing costs for animals in the category. Application to income year
2: The national standard costs apply to the income year for which they are determined, whether the income year started before, on, or after the date on which the determination is made. Commissioner income year specified livestock 1994 No 164 s EL 3A(1)
EC 24: Methods for determining costs using national standard cost scheme
Determination of methods for calculation of cost
1: The Commissioner must determine the methods for calculating the cost of livestock listed in schedule 9 Average cost
2: For the purposes of subsection (1), the determination must establish a process for finding an average cost to be applied to all specified livestock valued under the national standard cost scheme. The process must take into account—
a: the number of homebred livestock that a person has on hand at any time in an income year, applying to the number the relevant national standard costs determined under section EC 23 :
b: in addition to paragraph (a), the number in each category of livestock listed in schedule 9 section EC 23 :
c: the number of livestock bought, applying to the number the purchase costs associated with the livestock. Content of determination
3: The matters that may be included in the determination are set out in section 91AAD Tax Administration Act 1994 Commissioner income year national standard cost scheme specified livestock 1994 No 164 s EL 4(4), (5) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting 91AAD 91AB Other methods
EC 25: Cost price, replacement price, or market value
Election
1: A person may choose to value specified livestock under the cost price method, subject to the restrictions described in, or under the replacement price method, or under the market value method. Changing to cost price method
2: If a person chooses in an income year to change to the cost price method from another valuation method, the opening value of the affected livestock is the closing value of the livestock at the end of the previous income year determined under the method used in that previous income year. cost price income year specified livestock 1994 No 164 ss EL 3(1), (4), EL 7(2)
EC 26: Bailee's treatment of livestock
When this section applies
1: This section applies when, under a bailment, lease, or other agreement,—
a: a person ( person A
b: person A is required—
i: to return the livestock to the person who made it available; or
ii: to pay the person full compensation for it. Closing livestock numbers
2: Person A is treated as owning, and must take into account at the end of an income year, the total number for all classes calculated using the formula— total livestock – bailed livestock. Definition of items in formula
3: In the formula,—
a: total
i: the livestock that they own; and
ii: the livestock that they have the use of under the bailment, lease, or other agreement:
b: bailed livestock Result of applying formula
4: If the result of applying the formula in subsection (2) is positive, person A is treated as the owner of any surplus livestock. If the result is negative, person A must adjust the total number described in subsection (2) by treating it as a negative number. class income year lease specified livestock 1994 No 164 s EL 7(1) Definitions
EC 27: Some definitions
In this subpart,— long-term bailment short-term bailment
a: at the time a person delivers livestock, the person expects to have the same livestock delivered back to them; and
b: the bailee or lessee did not provide consideration to the person for the delivery of the livestock; and
c: the term of the bailment or lease ends on or before the end of the income year following the income year in which the arrangement is made. arrangement income year lease long-term bailment short-term bailment 1994 No 164 s EL 7(2), (3)(b) Valuation of non-specified livestock
EC 28: Application of sections EC 29 to EC 31
Sections EC 29 to EC 31 non-specified livestock
EC 29: Determining standard values
Determined by Commissioner
1: The Commissioner may determine a standard value Application to income year
2: A standard value applies to the income year for which it is determined, whether the income year started before, on, or after the date on which the standard value is determined. Commissioner income year non-specified livestock standard value type 1994 No 164 s EL 9(3)
EC 30: Closing value methods
A person may choose 1 of the following methods to value non-specified livestock on hand at the end of an income year:
a: its cost price :
b: its replacement price :
c: its market value :
d: if the Commissioner agrees, its standard value. Commissioner cost price income year non-specified livestock standard value 1994 No 164 ss EL 1(1)(c), EL 9(1) Paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EC 31: Enhanced production
When this section applies
1: This section applies when a person who derives income from non-specified livestock—
a: enhances production in an income year by—
i: starting, or restarting, to derive income from non-specified livestock; or
ii: bringing land into production, or substantially increased production, for the purpose of deriving income from non-specified livestock; or
iii: acquiring additional land for the purpose of deriving income from non-specified livestock; and
b: as a result, in an income year or over the following 3 income years, buys more non-specified livestock that is not replacement livestock and that is valued at its standard value. Closing value
2: The closing value of the livestock bought is,—
a: for the income year in which the livestock was bought, its standard value plus two-thirds of the difference between the cost price of the livestock and the standard value :
b: for the following income year, its standard value plus one-third of the difference between the cost price of the livestock and the standard value :
c: for other income years, its standard value. cost price income income year non-specified livestock standard value 1994 No 164 s EL 9(2), (4) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Valuation of high-priced livestock
EC 32: Application of sections EC 33 to EC 37
Sections EC 33 to EC 37
1: Sections EC 33 to EC 37 Person chooses valuation method
2: A person may choose to use either the straight-line method or the diminishing value method to value high-priced livestock. Diminishing value method
3: If the person chooses to use the diminishing value method, they must give notice to the Commissioner that they are using the method at the time of filing their return of income for the first income year in which the value of the high-priced livestock is determined under section EC 34 Commissioner high-priced livestock income year notice return of income 1994 No 164 s EL 10(6)
EC 33: Determining depreciation percentages
Determined by Commissioner
1: The Commissioner must determine a depreciation percentage Purpose
2: The percentage represents the average percentage decline in the value of livestock of the type, class, or category. Factors
3: The Commissioner must take into account—
a: the average cost of livestock of the type, class, or category; and
b: the estimated useful life of the livestock; and
c: the average estimated residual market value of the livestock. class Commissioner depreciation percentage estimated residual market value estimated useful life high-priced livestock income year type 1994 No 164 ss EL 10(5), OB 1 assigned percentage
EC 34: General rule
Value in income year of purchase and later income years
1: The closing value of high-priced livestock at the end of the income year in which it is bought is its cost price minus the reduction applying in the income year. In a later income year, the value is its opening value minus the reduction applying in the income year until the value reaches or falls below the national average market value for the class to which the livestock belongs. Straight-line method
2: When a person has chosen to use the straight-line method, the reduction is calculated using the formula— cost price x depreciation percentage. Diminishing value method
3: When a person has chosen to use the diminishing value method, the reduction is calculated as follows:
a: in the first income year in which the election applies, the cost price multiplied by the diminishing value equivalent of the depreciation percentage for the income year :
b: in later income years, the opening value of the livestock multiplied by the diminishing value equivalent of the depreciation percentage for the income year. Meaning of diminishing value equivalent
4: In this section, diminishing value equivalent schedule 11
a: if no amount in column 2 is equal to the depreciation percentage, the amount closest to it is taken; and
b: if 2 amounts in column 2 are equidistant from the depreciation percentage, the depreciation percentage is rounded down. Exclusions
5: This section does not apply in the cases described in section EC 35 EC 36 amount class cost price depreciation percentage diminishing value equivalent high-priced livestock income year national average market value 1994 No 164 ss EL 10(1), OB 1 specified writedown diminishing value equivalent Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EC 35: Livestock reaching national average market value and livestock no longer used for breeding
Livestock at or less than national average market value
1: This section applies to a person's high-priced livestock whose value at the end of an income year is equal to or less than the national average market value for the class to which the livestock belongs. Livestock no longer used for breeding
2: This section also applies to high-priced livestock that, in an income year, a person—
a: does not expect to use for breeding for that or any later income year; and
b: does not intend to dispose of to any other person to use for breeding. Closing value
3: The closing value of the high-priced livestock at the end of the income year is determined as follows:
a: when the person values any specified livestock of that type under the herd scheme for the income year, the value of the animal under the herd scheme; and
b: when the person values all specified livestock of that type that is older than 1 year under the national standard cost scheme or the cost price method, the national average market value for the income year of livestock of the class to which the animal belongs; and
c: when the person values all specified livestock of that type that is older than 1 year under the market value method or the replacement price method, the market value or replacement price of the animal at the end of the income year. Valuation in later income years
4: In later income years, the animal that was high-priced livestock is treated as the person's specified livestock and is valued under the valuation method the person chooses for specified livestock of the type to which the animal belongs. Entry into herd scheme in later income years
5: This subsection applies if, in a later income year (year A), the person values any specified livestock of the same type as the animal under the herd scheme and, in the next year, values the animal under the herd scheme. The animal is treated as if it were valued under the herd scheme at the end of year A. class cost price herd scheme high-priced livestock income year national average market value national standard cost scheme specified livestock type year 1994 No 164 s EL 10(3), (4)
EC 36: Immature livestock and recently bought livestock
Immature livestock
1: This section applies to high-priced livestock that is less than 1 year old at the end of the income year in which it is bought. Recently bought livestock
2: This section also applies to high-priced livestock that is bought within 6 months of the end of an income year and, during that time,—
a: is not used for insemination, in the case of male livestock; and
b: is not used for the collection of semen; and
c: does not give birth; and
d: does not have ova removed. Closing value
3: The closing value of the high-priced livestock at the end of the income year is its cost price. cost price high-priced livestock income year year 1994 No 164 s EL 10(2)
EC 37: Bailment
In section EC 26 high-priced livestock specified livestock 1994 No 164 s EL 7(1), (3)(b) Valuation of bloodstock
EC 38: Application of sections EC 39 to EC 48
Sections EC 39 to EC 48 bloodstock
EC 39: First income year in breeding business
Bloodstock to which this section applies
1: This section applies to bloodstock that is 2 years of age or older at the end of the first income year in which a person—
a: uses the bloodstock for breeding in their breeding business; or
b: forms the intention of using the bloodstock for breeding in their breeding business; or
c: buys the bloodstock, with the intention of using it for breeding in their breeding business. Special group of broodmares to which this section applies
2: This section also applies to a broodmare that is 2 years of age or older at the end of a person's first income year after 1 April 2001 in which the person—
a: first uses the broodmare for breeding in their breeding business; or
b: first forms the intention of using the broodmare for breeding in their breeding business; or
c: buys the broodmare, with the intention of using it for breeding in their breeding business. Closing value
3: The closing value of the bloodstock at the end of the first income year is its cost price minus the reduction applying in that income year. Determination of reduction
4: The reduction that applies is determined under section EC 41 EC 42 EZ 4B EZ 4C bloodstock broodmare business cost price income year year 1994 No 164 s EM 1(1)(a), (ab) Subsection (4) amended 1 August 2006 section 61 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting section EC 41, EC 42, EZ 4B, or EZ 4C section EC 41 or EC 42
EC 40: Later income years in breeding business
What this section applies to
1: This section applies to the income years that follow the first income year described in section EC 39 Closing value
2: The closing value of the bloodstock is its opening value minus the reduction applying in that income year. Closing value not previously taken into account
3: If the person has not taken the closing value of the bloodstock into account in the previous income year, the closing value is the cost price of the bloodstock minus the reduction applying in the income year in which the person makes the calculation. Determination of reduction
4: The reduction that applies is determined under section EC 41 EC 42 EZ 4B EZ 4C bloodstock cost price income year 1994 No 164 s EM 1(1)(b), (ba) Subsection (4) amended 1 August 2006 section 62 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting section EC 41, EC 42, EZ 4B, or EZ 4C section EC 41 or EC 42
EC 41: Reduction: bloodstock not previously used for breeding in New Zealand
other than as shuttle stallions Bloodstock to which this section applies
1: This section applies to bloodstock that—
a: was not used for breeding in New Zealand before 16 December 1991; and
b: before a person ( person A Further bloodstock to which this section applies
1B: This section also applies to bloodstock that, before person A acquired it, was used by another person for breeding in New Zealand if—
a: the other person transferred the bloodstock to person A under a matrimonial agreement to which section FF 12
b: the other person was a company in the same wholly-owned group as person A at the time person A acquired the bloodstock from the other person:
c: the bloodstock is a stallion that, for each year in which the stallion was used for breeding in New Zealand before being acquired by person A, was—
i: owned by a non-resident; and
ii: removed from New Zealand after the breeding season; and
iii: not subject to a reduction under this section. Stallion
2: For the purposes of sections EC 39 EC 40 50% Stallion valued by reducing value method
3: When person A chooses to value the stallion by the reducing value method, the reduction applying to the value of the stallion is 75% 75%
4:
5: Broodmare when first used on or after 1 April 2001
6: For the purposes of sections EC 39 EC 40 section EC 39(2) Definition of item in formula
7: In the formula, age of broodmare
a: 8 years of age; or
b: the actual age in years, if the broodmare is 7 years of age or less at the end of the income year. Relationship with subject matter
8: This section is overridden by section EZ 4B bloodstock broodmare Commissioner company cost price income year matrimonial agreement New Zealand notice return of income stallion wholly-owned group year 1994 No 164 s EM 1(4), (5) Section EC 41 heading amended 19 December 2007 section 48(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1)(b) substituted 19 December 2007 section 48(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1B) heading inserted 19 December 2007 section 48(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EC 41(1B) inserted 19 December 2007 section 48(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (2) amended 1 August 2006 section 63(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 50% 25% Subsection (3) amended 1 August 2006 section 63(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 75% 37.5% Subsections (4) (5) repealed 1 August 2006 section 63(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (6) amended 1 August 2006 section 63(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 9 11 Subsection (8) inserted 1 August 2006 section 63(e) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EC 42: Reduction: bloodstock previously used for breeding in New Zealand
Stallion
1: For the purposes of sections EC 39 EC 40 section EC 41
2:
3: Broodmare when first used on or after 1 April 2001
4: For the purposes of sections EC 39 EC 40 section EC 39(2) section EC 41 Definition of item in formula
5: In the formula, age of broodmare
a: 8 years of age; or
b: the actual age in years, for a broodmare that is 7 years of age or less at the end of the income year. Relationship with subject matter
6: This section is overridden by section EZ 4C bloodstock broodmare cost price income year stallion year 1994 No 164 s EM 1(4), (5) Subsections (2) (3) repealed 1 August 2006 section 64(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (4) amended 1 August 2006 section 64(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 9 11 Subsection (6) inserted 1 August 2006 section 64(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EC 43: Accident, birth deformity, or infertility
When this section applies
1: This section applies when a person has bloodstock on hand at the end of an income year whose market value is, because of accident, birth deformity, or infertility, less than 50% of what its market value would have been if the accident, birth deformity, or infertility had not occurred. Value
2: The person may value the bloodstock at its market value. Later income years
3: If the person applies subsection (2), the closing value of the bloodstock in later income years is its market value in the applicable income year. bloodstock income year 1994 No 164 s EM 1(2)
EC 44: Other bloodstock
If sections EC 39 to EC 43 bloodstock cost price 1994 No 164 s EM 1(1)(c)
EC 45: Residual value of bloodstock
If the closing value of any bloodstock would be less than $1 in the absence of this section, the closing value is $1. bloodstock 1994 No 164 s EM 1(3)
EC 46: Use of bloodstock for racing
General treatment
1: If in an income year a bloodstock owner uses bloodstock for racing, and they are in the business of breeding bloodstock for sale, the use of the bloodstock for racing is treated as use in the course of the business. Bloodstock not used in business
2: If bloodstock used in an income year for racing is not actually used in the course of a business of breeding bloodstock for sale, the bloodstock owner may apply to the Commissioner to have the use of the bloodstock treated otherwise than under subsection (1). Non-breeding bloodstock
3: If a bloodstock owner expects that bloodstock will not be able to be used for future breeding, the use in an income year of the bloodstock for racing is not treated as use in the course of a business of breeding bloodstock for sale. However, if the bloodstock owner uses the bloodstock in the course of their business of breeding bloodstock for sale, they may apply to the Commissioner to have the use of the bloodstock treated as use in the course of the business. Application to Commissioner
4: The application must be made in writing with the supporting information that the Commissioner requires within 1 month after the day on which the bloodstock is first prepared for racing by the bloodstock owner or the day on which it is first raced by the bloodstock owner, whichever is earlier. bloodstock business Commissioner income year 1994 No 164 s EM 2(1)-(5)
EC 47: Change of use of bloodstock in course of business
Use outside business
1: If a bloodstock owner who is in the business of breeding bloodstock for sale starts to use bloodstock other than in the course of the business, they are treated as having disposed of the bloodstock. The disposal is treated as having occurred at market value on the day on which they changed the use of the bloodstock. Use in business
2: If a bloodstock owner who is in the business of breeding bloodstock for sale has been using bloodstock for other purposes, and they start to use the bloodstock in the course of the business, the bloodstock is treated as having been bought by the bloodstock owner. The purchase is treated as having occurred at market value on the day on which the bloodstock owner changed the use of the bloodstock. bloodstock business 1994 No 164 s EM 2(6), (7)
EC 48: Replacement breeding stock
When this section applies
1: This section applies when—
a: a bloodstock owner—
i: disposes of bloodstock ( breeding stock
ii: buys replacement breeding stock
b: a bloodstock owner—
i: receives a payment of insurance, indemnity, or compensation for the loss or death of, or permanent injury to, bloodstock ( breeding stock
ii: buys replacement breeding stock Amount determined
2: The bloodstock owner may apply to the Commissioner to determine the amount Maximum amount
3: The amount must not be more than the net gain calculated using the formula— gross proceeds – value of breeding stock. Definition of items in formula
4: In the formula,—
a: gross proceeds
i: the amount of the proceeds of disposing of the breeding stock; or
ii: the amount paid by way of insurance, indemnity, or compensation for the breeding stock:
b: value of breeding stock Reduction in income
5: The bloodstock owner may reduce their income by the amount determined under subsection (2). If they reduce their income in this way, they must also reduce the cost of the replacement breeding stock by the same amount. Time limit
6: Replacement breeding stock must be acquired within 6 months after the end of the income year in which the amount determined under subsection (2) would otherwise be income or, if the Commissioner approves in a case or in a class of cases, a longer period. Delay in replacing breeding stock
7: In the case of lost, dead, or permanently injured breeding stock, the Commissioner may extend the time limit under subsection (6). However, valid commercial reasons must exist for the delay in replacing the breeding stock and the replacement breeding stock must have been acquired before the end of the second income year following the income year in which the loss, death, or permanent injury occurred. Application to Commissioner
8: An application under subsection (2) must be made in writing within the relevant time limits described in subsections (6) and (7). The application must relate only to replacement breeding stock bought before the application is made. amount bloodstock business Commissioner income income year 1994 No 164 s EM 3 Subsection (1)(a)(ii) amended 1 April 2005 section 65(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting buys applies the proceeds in buying Subsection (1)(b)(ii) amended 1 April 2005 section 65(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting buys applies the payment in buying Subsection (2) amended 1 April 2005 section 65(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by repealing the words of the proceeds of sale under subsection (1)(a) subsection (1)(b)
ED: Valuation of excepted financial arrangements
Contents
ED 1: Valuation of excepted financial arrangements
Valuation methods for excepted financial arrangements
1: A person who has revenue account property that is an excepted financial arrangement must determine the value of the arrangement at the end of each income year at cost. Valuation method for right to acquire share under share-lending arrangement
1B: Despite subsection (1), a share supplier's share-lending right has the value at the end of each income year that is equal to the amount described in subsection (1D). Valuation method for share acquired by share supplier under share-lending arrangement
1C: Despite subsection (1), the original share or an identical share acquired by a share supplier from a share user under a share-lending arrangement has the value at the end of each income year that is equal to the amount described in subsection (ID). Amount
1D: For subsections (1B) and (1C), the amount is the value of the original share at cost, determined by applying this section to the share immediately before the share supplier's disposal of the share under the relevant share-lending arrangement. Cost-flow methods
2: The person must use 1 of the following cost-flow methods to allocate costs:
a: the first-in first-out cost method; or
b: the weighted average cost method. Persons complying with generally accepted accounting practice
3: A person who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 Other persons
4: A person who does not comply with generally accepted accounting practice—
a: must be consistent from 1 income year to the next in their choice of 1 of the cost-flow methods described in subsection (2); and
b: may change their cost-flow method if—
i: the change is justified by sound commercial reasons. (The advancement, deferral, or reduction of an income tax liability is not a sound commercial reason.); or
ii: the change is required by another provision in this subpart; and
c: must keep sufficient details of any such change, and the reasons for it, under section 22 Worthless arrangements
5: If an excepted financial arrangement has no present or likely future market value and has been written off as worthless, its closing value is zero. Closing value for replacement ETS unit
5B: A replacement ETS unit has a closing value of zero for each income year. Use of value
6: The value determined under this section is—
a: the closing value of the excepted financial arrangement for the purposes of section CH 1
b: the opening value of the excepted financial arrangement for the next income year for the purposes of section DB 40 excepted financial arrangement generally accepted accounting practice identical share income tax liability income year NZIAS 8 original share replacement ETS unit revenue account property share-lending arrangement share-lending right share supplier share user 1994 No 164 ss EE 3(3), EE 13, EE 16 The heading to subsection (1) substituted 1 July 2006 section 66(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsections (1B) to (1D) inserted 1 July 2006 section 66(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section ED 1(3) amended 19 December 2007 section 49(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section ED 1(5B) heading inserted 26 September 2008 section 63(1) Climate Change Response (Emissions Trading) Amendment Act 2008 Section ED 1(5B) inserted 26 September 2008 section 63(1) Climate Change Response (Emissions Trading) Amendment Act 2008 Section ED 1 list of defined terms NZIAS 8 inserted 19 December 2007 section 49(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section ED 1 list of defined terms replacement ETS unit inserted 26 September 2008 section 63(2) Climate Change Response (Emissions Trading) Amendment Act 2008 The list of defined terms was amended 1 July 2006 section 66(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting identical share The list of defined terms was amended 1 July 2006 section 66(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting original share The list of defined terms was amended 1 July 2006 section 66(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share-lending arrangement The list of defined terms was amended 1 July 2006 section 66(3)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share-lending right The list of defined terms was amended 1 July 2006 section 66(3)(e) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share supplier The list of defined terms was amended 1 July 2006 section 66(3)(f) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share user
ED 2: Transfers of certain excepted financial arrangements within wholly-owned groups
When this section applies
1: This section applies when—
a: a company in a wholly-owned group of companies ( company A company B
ab: the transfer of the excepted financial arrangement is not made under a share-lending arrangement; and
b: both companies are resident in New Zealand on the date of the transfer; and
c: the market value of the excepted financial arrangement on the date of the transfer is less than its cost to company A. Transfer at cost
2: The consideration for the transfer is treated as being equal to the cost of the excepted financial arrangement to company A. Company stops being member of group
3: If company B stops being a member of the wholly-owned group, the company is treated as disposing of and reacquiring the excepted financial arrangement at its market value at the time the company stops being a member of the group. Not dividend
4: A transfer of an excepted financial arrangement to which this section applies does not give rise to a dividend. company dividend excepted financial arrangement resident in New Zealand revenue account property wholly-owned group of companies 1994 No 164 s EE 14 Subsection (1)(ab) inserted 1 July 2006 section 67 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EE: Depreciation
Contents
Introductory provision
EE 1: What this subpart does
Quantifies amounts of depreciation loss and depreciation recovery income
1: This subpart—
a: quantifies the amount of depreciation loss for which a person is allowed a deduction if the provisions of Part D (Deductions) are met; and
b: quantifies the amount of depreciation recovery income that is income under Part C (Income). When amount of depreciation loss arises
2: A person has an amount of depreciation loss
a: the person owns an item of property, as described in sections EE 2 to EE 5
b: the item is depreciable property, as described in sections EE 6 to EE 8
c: the item is used, or is available for use, by the person in the income year; and
d: the amount of depreciation loss is calculated for the person, the item, and the income year under sections EE 9 to EE 11 When amount of depreciation recovery income arises
3: A person has an amount of depreciation recovery income
a: the person owns an item of property, as described in sections EE 2 to EE 5
b: the item is depreciable property, as described in sections EE 6 to EE 8
c: the item is disposed of or an event of a kind described in section EE 40
d: the amount of depreciation recovery income is calculated for the person, the item, and the income year under any of sections EE 22(5) EE 31(4) EE 41(1) EE 42(2) EE 43(3) EE 44(3) Amounts of loss incurred and income derived
4: To avoid doubt,—
a: an amount of depreciation loss is treated as being incurred in the income year for which it is calculated; and
b: an amount of depreciation recovery income is treated as being derived in the income year for which it is calculated. Choice for allocation of deduction for depreciation loss—property used for research, development, market development
4B: A person who in an income year uses an item for research or development or for market development that gives rise to a deduction allocated under section EJ 20
a: to an income year after the income year for which the person has the depreciation loss; and
b: in the way required by section EJ 21 Partial income-producing use
5: Subpart DE section FB 7 amount deduction depreciable property depreciation loss depreciation recovery income dispose general permission income income year own property research 1994 No 164 s EG 1(1) Subsection (4B) inserted 1 October 2005 section 68(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 1 October 2005 section 68(2)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting development The list of defined terms was amended 1 October 2005 section 68(2)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting research Meaning of own
EE 2: Nature of ownership of item
Kinds of ownership
1: Own
a: means legal or equitable ownership; and
b: includes ownership of the kinds described in sections EE 3 to EE 5 Shared ownership
2: When more than 1 person owns an item of depreciable property, own depreciable property own 1994 No 164 s EG 19(8)
EE 3: Ownership of goods subject to reservation of title
When this section applies
1: This section applies when—
a: a person ( buyer
b: the contract is not a hire purchase agreement and the item is not a hire purchase asset that is the subject of a hire purchase agreement; and
c: the contract is subject to the Sale of Goods Act 1908
d: title to the item does not pass until the purchase price is paid in full; and
e: the buyer takes possession of the item before title to it passes. Buyer treated as owner
2: The buyer is treated as owning, and the seller is treated as not owning, the item from the later of the following times:
a: the time at which the buyer enters into the contract; and
b: the time at which the buyer takes possession of the item. Buyer ceases to be treated as owner
3: Subsection (2) ceases to apply when 1 of the following occurs:
a: title to the item passes to the buyer; or
b: the seller repossesses the item. depreciable property hire purchase agreement hire purchase asset own 1994 No 164 s EG 1B
EE 4: Ownership of lessee's improvements: lessee
When this section applies
1: This section applies when—
a: a lessee of land incurs expenditure during the period during which the land is leased to the lessee in erecting a fixture on the land or making an improvement to the land; and
b: the lessor owns the fixture or improvement.
2: The following apply to the ownership of the fixture or improvement:
a: in the period during which the land is leased to the lessee,—
i: the lessee is treated as owning the fixture or improvement; and
ii: the lessor is treated as not owning the fixture or improvement; and
iii: a person to whom the lessor disposes of the land during the period is treated as not owning the fixture or improvement; and
b: after the period during which the land is leased to the lessee,—
i: the lessor is treated as not owning the fixture or improvement, unless the lessor incurs a cost relating to it at the end of the period; and
ii: a person to whom the lessor disposes of the land during the period is treated as not owning the fixture or improvement. improvement lessee lessor own 1994 No 164 s EG 1A(1)-(3)
EE 5: Ownership of lessee's improvements: other person
When this section applies: first case
1: This section applies when—
a: a lessee of land incurs expenditure during the term of the lease in erecting a fixture on the land or making an improvement to the land; and
b: the lessee has been allowed a deduction for an amount of depreciation loss for the fixture or improvement; and
c: the lessee disposes of their interest in the lease to another person; and
d: the other person pays the lessee for the fixture or improvement. When this section applies: second case
2: This section also applies when—
a: a lessee of land has been allowed a deduction for an amount of depreciation loss for a fixture on the land, or an improvement to the land, that a previous lessee erected or made; and
b: the lessee disposes of their interest in the lease to another person; and
c: the other person pays the lessee for the fixture or improvement. Other person treated as owner
3: The other person is treated as owning the fixture or improvement from the time at which they pay the lessee for it. amount deduction depreciation loss dispose improvement lease lessee own term of the lease 1994 No 164 s EG 1A(4) Meaning of depreciable property
EE 6: What is depreciable property?
Description
1: Depreciable property
a: in deriving assessable income; or
b: in carrying on a business for the purpose of deriving assessable income. Subsections (2) to (4) Property: tangible
2: An item of tangible property is depreciable property if—
a: it is described by subsection (1); and
b: it is not described by section EE 7 Property: intangible
3: An item of intangible property is depreciable property if—
a: it is within the definition of depreciable intangible property
b: it is described by subsection (1); and
c: it is not described by section EE 7 Property: geothermal wells
4: For the purposes of this subpart, a person who owns a geothermal well is, for the geothermal energy proving period, treated as acquiring the well as property that declines in value and is to be available for use in carrying on a business for the purpose of deriving assessable income. assessable income business depreciable intangible property depreciable property geothermal energy proving period geothermal well 1994 No 164 s OB 1 depreciable property Subsection (1) amended 17 May 2006 section 29(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting Subsections (2) to (4) Subsections (2) and (3) Subsection (4) inserted 17 May 2006 section 29(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 17 May 2006 section 29(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by adding geothermal energy proving period geothermal well
EE 7: What is not depreciable property?
The following property is not depreciable property
a: land, although buildings, fixtures, and the improvements listed in schedule 16 section EE 6(1) :
b: trading stock :
c: livestock to which subpart EC :
d: financial arrangements :
e: excepted financial arrangements other than depreciable intangible property:
f: property that will not decline in value, as far as its owner is concerned, because, when they dispose of it, they have a right to be compensated for any decline in its value :
g: property that its owner chooses, under section EE 8 :
h: property that its owner chooses, under section EE 31 :
i: property for whose cost a person other than the property's owner is allowed a deduction :
j: property for whose cost a person is allowed a deduction under a provision of this Act outside this subpart or under a provision of an earlier Act, except for an asset to which section DU 6(4) deduction depreciable property dispose excepted financial arrangement financial arrangement own property trading stock 1994 No 164 s OB 1 depreciable property Paragraphs (a) (i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EE 7(c) amended 30 June 2014 section 199(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EE 7(e) replaced 17 July 2013 section 158(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013
EE 8: Election that property not be depreciable
Item acquired
1: A person may choose that an item of property they acquire not be depreciable property even though, in the absence of the election, it would be depreciable property. Item changing use
2: A person may choose that an item of property they own ceases to be depreciable property if—
a: the use of the item changes; and
b: before the use changes, the person was denied a deduction for an amount of depreciation loss for the item; and
c: after the use changes, in the absence of the election, the person would have been allowed a deduction for an amount of depreciation loss for the item. Retrospective election
3: A person who has deducted none of the amounts of depreciation loss for which they were allowed a deduction for an item of property, in the income year in which they acquired it and in each later year, may retrospectively choose that the item not be depreciable property. How elections made
4: An election under this section is made as follows:
a: a person makes an election under subsection (1) by giving the Commissioner notice of it in their return of income for the income year in which they acquire the item; and
b: a person makes an election under subsection (2) by giving the Commissioner notice of it in their return of income for the income year in which the item's use changes; and
c: a person makes an election under subsection (3) by giving the Commissioner notice of it in their return of income for any income year after they acquire the item, including an income year after they dispose of the item. Effect of election
5: An election under this section has effect for the person for—
a: the income year for which they make the election; and
b: all later income years until—
i: the item is disposed of, although this reference to disposal does not include the disposal of an item of intangible property as part of an arrangement to replace it with an item of the same kind; or
ii: an event described in section EE 40 Retrospective effect of election
6: An election made under subsection (3) also has retrospective effect for the person for—
a: the income year in which they acquire the property; and
b: all intervening income years until the year in which they make the election. acquire amount Commissioner deduction depreciable property depreciation loss dispose income year notice property return of income 1994 No 164 s EG 16A How amounts of depreciation loss and depreciation recovery income are calculated
EE 9: Description of elements of calculation
Depreciation methods
1: Sections EE 12 to EE 24
a: the straight-line method, which is dealt with in sections EE 13 to EE 19
b: the diminishing value method, which is also dealt with in sections EE 13 to EE 19
c: the pool method, which is dealt with in sections EE 20 to EE 24 Depreciation rates
2: Sections EE 25 to EE 29
a: the economic rate, which is dealt with in section EE 25
b: the annual rate, which is dealt with in sections EE 26 EE 27
c: a special rate or a provisional rate, both of which are dealt with in sections EE 28 EE 29 Improvements, low value items, and items no longer used
3: Sections EE 30 to EE 32
a: an improvement made to an item of depreciable property; and
b: an item of depreciable property that is of low value; and
c: an item of depreciable property that is no longer used. Transfers
4: Sections EE 33 to EE 36 Disposals and similar events
5: Sections EE 37 to EE 44 Interpretation provisions
6: Sections EE 45 to EE 58
a: section EE 45
b: sections EE 46 to EE 51 adjusted tax value
c: sections EE 52 to EE 58 Relationship with sections EZ 8 to EZ 26
7: Sections EZ 8 to EZ 26 adjusted tax value amount annual rate associated person depreciable property depreciation loss diminishing value method dispose economic rate GST improvement pool method property provisional rate special rate straight-line method 1994 No 164 s EG 3
EE 10: Calculation rule: item temporarily not available
An item of depreciable property is treated as being available for use while subject temporarily to repair or inspection, if it was used or available for use immediately before going for repair or inspection. depreciable property 1994 No 164 s EG 2(2A)
EE 11: Calculation rule: income year in which item disposed of
Generally no amount of depreciation loss
1: A person does not have an amount of depreciation loss for an item of depreciable property for the income year in which they dispose of it. Exclusion: building or petroleum-related depreciable property
2: A person has an amount of depreciation loss for an item of depreciable property for the income year in which they dispose of it, if it is—
a: a building; or
b: an item of petroleum-related depreciable property. Exclusion: empty pool
3: A person has the amount of depreciation loss calculated under section EE 22(4)(a) Exclusion: consideration less than adjusted tax value
4: A person has the amount of depreciation loss calculated under section EE 41(2) Exclusion: item partly used for business
5: A person has the amount of depreciation loss calculated under section FB 7(6) section Exclusion: recent acquisition of item partly used for business
6: A person has the amount of depreciation loss calculated under section FB 7(9) adjusted tax value amount business depreciable property depreciation loss dispose income year petroleum-related depreciable property 1994 No 164 s EG 1(2) Subsection (5) amended 1 April 2005 section 26 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting section subsection Subsection (5) amended 1 October 2005 section 192 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting FB 7(6) (Depreciation: partial income-producing use) EE 42 Subsection (6) inserted 18 December 2006 section 30(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Methods
EE 12: Depreciation methods
Meaning of depreciation method
1: Depreciation method
a: a method that a person may use to calculate an amount of depreciation loss:
b: a rate determined by the Commissioner under section 91AAF 91AAG
c: a maximum pooling value determined by the Commissioner under section 91AAL Methods described
2: The depreciation methods are—
a: the diminishing value method, which—
i: may be used for any item of depreciable property except one referred to in subparagraph (ii) or (iii); and
ii: must not be used for an item of fixed life intangible property :
iii: must not be used for an item of property in the circumstances described in section EZ 8
b: the straight-line method, which—
i: may be used for any item of depreciable property; and
ii: must be used for an item of fixed life intangible property :
c: the pool method, which—
i: may be used for any item of poolable property except one referred to in subparagraph (ii); and
ii: must not be used for an item of fixed life intangible property; and
iii: must be used for an item of property in the circumstances described in section EZ 8 Person chooses
3: A person chooses which of the depreciation methods they will use for each item of depreciable property they own. How person chooses
4: The person chooses the method by using the chosen method for the item in their return of income for the income year for which they make the election. Diminishing value or straight-line method fixed for income year
5: If the person chooses the diminishing value method or the straight-line method, they must use the method for the item and the income year and must not change the election for the income year. Pool method fixed for income year and later income years
6: If the person chooses the pool method, they must use the method for the item and the income year and must not change the election for—
a: the income year; or
b: a later income year in which the item is still poolable property that they own. amount depreciable property depreciation loss diminishing value method fixed life intangible property income year own pool method poolable property property return of income straight-line method 1994 No 164 s EG 3(1)-(4) Subsection (1) amended 1 October 2005 section 25 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting loss, and includes a rate determined by the Commissioner under section 91AAF, 91AAG, or 91AAL of the Tax Administration Act 1994 loss. Subsection (1) substituted 1 April 2005 section 31(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (2)(a)(ii) (b)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Amount of depreciation loss under diminishing value method or straight-line method
EE 13: Application of sections EE 14 to EE 19
Sections EE 14 to EE 19 amount depreciation loss diminishing value method straight-line method
EE 14: Diminishing value or straight-line method: calculating amount of depreciation loss
Most depreciable property
1: The amount of depreciation loss that the person has for an income year for an item of depreciable property is the lesser of the amounts dealt with in sections EE 15 EE 16 Exclusion: petroleum-related depreciable property
2: The amount of depreciation loss that the person has for an income year for an item of petroleum-related depreciable property is the lesser of the amounts dealt with in sections EE 15 EE 17 amount depreciable property depreciation loss income year petroleum-related depreciable property 1994 No 164 s EG 2(1)
EE 15: Amount of adjusted tax value
For the purposes of the comparison of amounts required by section EE 14(1) adjusted tax value amount deduction depreciation loss income year 1994 No 164 s EG 2(1)(c)
EE 16: Amount resulting from standard calculation
Amount
1: For the purposes of the comparison of amounts required by section EE 14(1) Definition of items in formula
2: The items in the formula are defined in subsections (3) to (5). Annual rate
3: Annual rate Value or cost
4: Value or cost
a: when the person uses the diminishing value method, the item's adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year :
b: when the person uses the straight-line method,—
i: if subparagraph (ii) does not apply, the item's cost to the person excluding expenditure for which the person is allowed a deduction under a provision of this Act outside this subpart (variations to cost sections EE 18 EE 19
ii: if the item is a patent or plant variety rights and the person has been allowed a deduction for depreciation loss for the patent application or plant variety rights application relating to the item, the item's adjusted tax value at the start of the month in which the person acquires the item (a variation to cost section EE 19 Months: income year of normal length or shorter
5: Months
a: 12; and
b: the number of whole or part calendar months (or whole calendar months in the case of a patent application)
i: the person owns the item; and
ii: the person uses the item or has it available for use for any purpose. Months: income year of longer than normal length
6: Months (or whole months in the case of a patent application)
a: the person owns the item; and
b: the person uses the item or has it available for use for any purpose. adjusted tax value amount annual rate deduction depreciable property depreciation loss diminishing value method income year own straight-line method 1994 No 164 s EG 2(1)(a) Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (4)(b) substituted 1 October 2005 section 32(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (5)(b) amended 1 October 2005 section 32(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting (or whole calendar months in the case of a patent application) part calendar months Subsection (6) amended 1 October 2005 section 32(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting (or whole months in the case of a patent application) part months
EE 17: Amount resulting from petroleum-related depreciable property calculation
Amount
1: For the purposes of the comparison of amounts required by section EE 14(2) Definition of items in formula
2: The items in the formula are defined in subsections (3) to (5). Annual rate
3: Annual rate Value or cost
4: Value or cost
a: when the person uses the diminishing value method, the item's adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year :
b: when the person uses the straight-line method, the item's cost to the person. (A variation to cost is in section EE 18 Days
5: Days
a: the person owns the item; and
b: the person uses the item or has it available for use for any purpose. adjusted tax value amount annual rate deduction depreciable property depreciation loss diminishing value method income year own straight-line method 1994 No 164 s EG 2(1)(b) Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EE 18: Cost: change from diminishing value to straight-line method
When this section applies
1: This section applies when a person changes from the diminishing value method to the straight-line method for an item of property for an income year. How straight-line method applies
2: For the purposes of the formulas in sections EE 16 EE 17 adjusted tax value amount deduction depreciation loss diminishing value method income year property straight-line method 1994 No 164 s EG 3(6)
EE 19: Cost: fixed life intangible property
When this section applies
1: This section applies when—
a: a person owns an item of fixed life intangible property; and
b: the person incurs additional costs in an income year for the item; and
c: the person is denied a deduction for the additional costs other than a deduction for an amount of depreciation loss. Additional costs for fixed life intangible property
2: For the purposes of the formula in section EE 16
a: the item's adjusted tax value at the start of the income year; and
b: the additional costs the person incurs. adjusted tax value amount deduction depreciation loss fixed life intangible property income year own 1994 No 164 s EG 2(3) Amount of depreciation loss under pool method
EE 20: Application of sections EE 21 to EE 24
Sections EE 21 to EE 24 amount depreciation loss pool method
EE 21: Pool method: calculating amount of depreciation loss
Amount of depreciation loss subtracted from pool's value
1: The amount of depreciation loss that a person has for an income year for a pool of depreciable property is—
a: first, calculated under subsection (2); and
b: second, subtracted from the pool's adjusted tax value at the end of the income year. Amount
2: The amount of depreciation loss is calculated using the formula— Definition of items in formula
3: The items in the formula are defined in subsections (4) to (8). Rate
4: Rate
a: if the same rate applies to all items depreciated in the pool in the income year, that rate; or
b: if different rates apply to items depreciated in the pool in the income year,—
i: the lower of the rates, if there are 2 items in the pool; or
ii: the lowest of the rates, if there are 3 or more items in the pool. Starting adjusted tax value
5: Starting adjusted tax value
a: the pool's adjusted tax value at the start of the income year, increased as applicable by the amount referred to in section EE 22(2)(b)
b: zero, if the pool did not exist at the start of the income year. Ending adjusted tax value
6: Ending adjusted tax value
a: increased by the amounts referred to in section EE 22(1) and (2)(a)
b: decreased by the amount referred to in section EE 22(3) Months
7: Months
a: is the number of whole or part months in their income year:
b: may be more or less than 12. Months: income year of longer than normal length
8: adjusted tax value amount deduction depreciable property depreciation loss diminishing value rate income year own pool 1994 No 164 ss EG 2(2), EG 11(1), (2) Section EE 21(5) heading substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(5) substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(6) heading substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(6) substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(7) heading substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(7) substituted 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(8) heading repealed 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 21(8) repealed 6 October 2009 section 770(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EE 22: Cases affecting pool
Acquired item included
1: If a person chooses in an income year to include in a pool an item of poolable property that they acquire in the income year, the pool's adjusted tax value is increased by the item's cost. Separately depreciated item included
2: If a person chooses in an income year to include in a pool an item of poolable property that they depreciated separately in the previous income year,—
a: the pool's adjusted tax value is increased by the item's adjusted tax value on the date it is included in the pool; and
b: the item's adjusted tax value at the end of the previous income year is included in starting adjusted tax value in section EE 21(5) Item disposed of
3: If a person disposes of an item included in a pool, any consideration they derive from the disposal is subtracted from the adjusted tax value of the pool in which the item was included on the date of the disposal. All items disposed of
4: If, on the last day of an income year, the adjusted tax value of a person's pool is positive but the person has disposed of all items that were in the pool,—
a: the amount of depreciation loss that the person has for the pool for the income year is the pool's adjusted tax value; and
b: on the first day of the following income year, the pool's adjusted tax value is zero. Negative adjusted tax value
5: If, on the last day of an income year, the adjusted tax value of a person's pool is negative,—
a: the amount by which the adjusted tax value is negative is an amount of depreciation recovery income of the person derived in the income year; and
b: on the first day of the following income year the pool's adjusted tax value is zero. Relationship with section EZ 9
6: Section EZ 9 acquire adjusted tax value amount depreciation loss depreciation recovery income dispose income income year pool poolable property 1994 No 164 s EG 11(3)-(4A)
EE 23: Combined pools
Combining pools allowed
1: A person using the pool method may at any time combine any number of pools to form a single pool. Consequences
2: When a person combines pools,—
a: the new pool's adjusted tax value is the same as the sum of the adjusted tax values of the constituent pools; and
b: the adjusted tax value of each of the constituent pools at the end of the income year in which the pools are combined is zero; and
c: each of the constituent pools ceases to exist. adjusted tax value income year pool pool method 1994 No 164 s EG 11(5)
EE 24: Property ceasing to qualify for pool
If a person starts using an item of property included in a pool in such a way as to cause the item to cease to meet section EE 57(4)
a: they disposed of it for its market value; and
b: they immediately reacquired it for its market value. acquire dispose pool property 1994 No 164 s EG 11(8)
EE 24B: Depreciation loss for plant variety rights application upon grant of rights in 2005–06 or later income year
When this section applies
1: This section applies if—
a: plant variety rights are granted to a person in their 2005–06 or later income year; and
b: the plant variety rights are granted in relation to a plant variety rights application owned by the person; and
c: a deduction for expenditure is not allowed under another provision. Calculation of deduction
2: A person is allowed a deduction for the income year in which the plant variety rights are granted, for expenditure on the plant variety rights application, calculated using the formula— Definition of items in formula
3: In the formula,—
a: cost
b: months of ownership
c: depreciation months amount deduction depreciation loss income year plant variety rights Section EE 24B inserted 1 October 2005 section 33 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Depreciation rates
EE 25: Setting of economic depreciation rate
Relevant provisions
1: The economic depreciation rate that applies to a kind of item of depreciable property is set under—
a: section EE 25B
i: are not buildings, fixed life intangible property, excluded depreciable property, or property for which an economic rate is given by section EE 25D section EE 25E
ii: are acquired on or after 1 April 2005:
b: section EE 25C
i: are acquired on or after 19 May 2005; and
ii: do not have an economic depreciation rate set under section EZ 21B
c: section EE 25D
d: section EE 25E
i: have an estimated residual market value greater than 13.5% of cost:
ii: would, in the absence of section EE 25E section EE 25B EE 25C
e: section EZ 21B
i: are not buildings, fixed life intangible property, or excluded depreciable property and are acquired before 1 April 2005:
ii: are buildings acquired before 19 May 2005:
iii: are buildings acquired on or after 19 May 2005, as relationship property or from a company in the same wholly-owned group of companies, from a person who applied to the item an economic depreciation rate set under section EZ 21B No rate for fixed life intangible property or excluded depreciable property
2: An economic depreciation rate must not be set for a kind of item of depreciable property that is fixed life intangible property or excluded depreciable property. Relationship with subject matter: election under section EE 26B
3: Subsection (1)(a), (c), and (d) are overridden by section EE 26B depreciable property economic rate estimated residual market value excluded depreciable property fixed life intangible property Subsection (2)(b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting 91AAF 91AD Section EE 25 substituted 3 April 2006 section 69(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (3) substituted 3 April 2006 section 34(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 25B: Economic rate for certain depreciable property
What this section is about
1: This section is about setting the economic depreciation rate that applies to a kind of item of depreciable property. Exclusion
2: This section does not apply to buildings, fixed life intangible property, excluded depreciable property, or property for which an economic rate is given by section EE 25D section EE 25E Rate set by Commissioner
3: The Commissioner sets the rate from time to time by—
a: following the procedure set out in this section; and
b: issuing a determination under section 91AAF Procedure for setting economic rate
4: To set the diminishing value rate for a kind of item of depreciable property, the Commissioner—
a: gets a figure by applying the formula in subsection (5) to items of that kind; and
b: rounds the figure up or down to the nearest rate specified in schedule 11B
c: sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
i: the rate calculated for each kind; and
ii: the reduction in compliance costs that is likely to be achieved. Formula
5: The formula is— Definition of item in formula
6: In the formula, estimated useful life Commissioner depreciable property diminishing value rate economic rate estimated useful life excluded depreciable property fixed life intangible property Sections EE 25B to EE 25E inserted 3 April 2006 section 70(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EE 25C: Economic rate for buildings
What this section is about
1: This section is about setting the economic depreciation rate that applies to a kind of item of depreciable property that is a building and for which an economic rate is not set under section EE 25E EZ 21B Rate set by Commissioner
2: The Commissioner sets the rate from time to time by—
a: following the procedure set out in this section; and
b: issuing a determination under section 91AAF Procedure for setting economic rate
3: To set the straight-line rate for a kind of item of depreciable property, the Commissioner—
a: gets a figure by applying the formula in subsection (4) to items of that kind; and
b: rounds the figure up or down to the nearest rate specified in schedule 11B
c: sets the same rate for some or all of the kinds of buildings that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
i: the rate calculated for each kind; and
ii: the reduction in compliance costs that is likely to be achieved. Formula
4: The formula is— Definition of item in formula
5: In the formula, estimated useful life is the estimated useful life Contracts existing at 19 May 2005
6: Despite subsection (1), a person who before 19 May 2005 enters into a binding contract for the purchase or construction of a building must apply to the building the economic rate for the type of the building determined under section EZ 21B Commissioner depreciable property diminishing value rate economic rate estimated useful life excluded depreciable property fixed life intangible property Sections EE 25B to EE 25E inserted 3 April 2006 section 70(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EE 25D: Economic rate for certain aircraft and motor vehicles
What this section does
1: This section gives the economic depreciation rate for certain aircraft and motor vehicles. Rate for certain aircraft
2: The economic rate for an aircraft is a diminishing value rate of 10% or a straight-line rate of 7% if the aircraft—
a: is self-propelled; and
b: has fixed wings; and
c: is not an international aircraft; and
cb: is not used for top-dressing or spraying; and
d: is not a helicopter. Rate for certain motor vehicles
3: The economic rate for a motor vehicle that is designed exclusively or mainly to carry persons, and has seats for no more than 12 persons,
a: is not available for hire:
b: is available for hire for a hire period of more than 1 month:
c: is a taxi:
d: is a minibus. diminishing value rate economic rate international aircraft minibus straight-line rate Sections EE 25B to EE 25E inserted 3 April 2006 section 70(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (2)(cb) inserted 3 April 2006 section 35(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (3) amended 3 April 2006 section 35(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting that is designed exclusively or mainly to carry persons, and has seats for no more than 12 persons, having seats for no more than 12 persons
EE 25E: Economic rate for plant, equipment, or building, with high residual value
What this section is about
1: This section is about setting the economic depreciation rate that applies to items of a kind of depreciable property if—
a: the kind of depreciable property is not fixed life intangible property, or excluded depreciable property, for which an economic rate cannot be set; and
b: the estimated residual market value for the item is more than 13.5% of cost; and
c: the items are—
i: plant or equipment acquired on or after 1 April 2005:
ii: buildings acquired on or after 19 May 2005. Rate set by Commissioner
2: The Commissioner sets the rate from time to time by—
a: following the procedure set out in this section; and
b: issuing a determination under section 91AAF Procedure for setting economic rate
3: To set the diminishing value rate for a kind of item of depreciable property, the Commissioner—
a: gets a figure by applying the formula in subsection (4) to items of that kind; and
b: rounds the figure up or down to the nearest rate specified in schedule 11
c: sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
i: the rate calculated for each kind; and
ii: the reduction in compliance costs that is likely to be achieved. Formula
4: The formula is— Definition of item in formula
5: In the formula,—
a: residual value
i: estimated residual market value, which is defined in section EE 58
ii: 13.5% of cost:
b: cost
c: estimated useful life section EE 54 Commissioner depreciable property diminishing value rate economic rate estimated residual market value estimated useful life excluded depreciable property fixed life intangible property Sections EE 25B to EE 25E inserted 3 April 2006 section 70(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (1) substituted 3 April 2006 section 36(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section EE 25E(1)(b) substituted 6 October 2009 section 771(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EE 26: Annual rate for item acquired in person's 1995-96 or later income year
What this section is about
1: This section is about the annual rate that applies to an item of depreciable property that a person acquires , other than under section FCB 3 sections EE 27 EZ 14 Rate
2: The rate is 1 of the following:
a: the item's economic rate, special rate, or provisional rate, for an item not described in either paragraph (b) or (c):
b: the item's economic rate, special rate, or provisional rate multiplied by 1.2, for an item that—
i: has not been used or held for use in New Zealand as an item of depreciable property before the date on which the person acquires it; and
ii: is not a building; and
iii: is not a used imported motorcar; and
iv: is not an international aircraft :
c: a diminishing value rate of 15% or a straight-line rate of 10%, for an international aircraft. acquire annual rate depreciable property diminishing value rate economic rate excluded depreciable property fixed life intangible property income year international aircraft New Zealand straight-line rate 1994 No 164 ss EG 6, EG 7 Subsection (1) amended 3 April 2006 section 71(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting , other than under section FCB 3 a person acquires Section EE 26(2)(a) substituted 6 October 2009 section 772(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EE 26(2)(b) amended 6 October 2009 section 772(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2)(b)(iv) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EE 26B: Election in respect of certain depreciable property acquired on or after 1 April 2005
When this section applies
1: This section applies if a person acquired an item of depreciable property that is not a building—
a: on or after 1 April 2005; and
b: before the commencement of the person's income year corresponding to the 2006–07 tax year. Election to use economic depreciation rate determined under section EZ 21B
2: The person may elect to calculate the depreciation loss for the item of depreciable property for income years corresponding to the 2005–06 and subsequent tax years in accordance with the economic depreciation rate determined for the type of item under section EZ 21B Election to be made in return of income
3: The person must make an election under subsection (2) in the person's return of income for the 2005-06 tax year. depreciable property depreciation loss income year return of income tax year Section EE 26B inserted 3 April 2006 section 72(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EE 27: Annual rate for fixed life intangible property
What this section is about
1: This section is about the annual rate that applies to an item of fixed life intangible property , not including—
a: an item of excluded depreciable property for which a rate is set in section EZ 14
b: a patent for which a rate is set in section EE 27B
c: Rate
2: The rate is the rate calculated using the formula— Definition of item in formula
3: In the formula, legal life
a: if section EE 19
b: if section EE 19 How rate expressed
4: The rate given by the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down. acquire annual rate excluded depreciable property fixed life intangible property income year legal life 1994 No 164 s EG 8 Subsection (1) amended 1 October 2005 section 27 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting , not including— (not including an item of excluded depreciable property, for which a rate is set in section EZ 14 Subsection (1)(a) to (c) inserted 1 October 2005 section 27 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1)(b) substituted 1 October 2005 section 37(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1)(c) repealed 1 October 2005 section 37(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 27B: Annual rate for patent granted in 2005–06 or later income year
When this section applies
1: This section applies to an item that is a patent, if the patent is acquired by a person in their 2005–06 or later income year. Rate
2: The rate is calculated using the formula— Definition of item in formula
3: In the formula, legal life
a: the patent's remaining legal life from the start of the income year in which the person incurs the additional costs referred to in that section, if section EE 19
b: the patent's remaining legal life from the time at which the person acquires the patent, if—
i: section EE 19
ii: the person has not been allowed a deduction for depreciation loss for the patent application relating to the patent; or
c: the remaining legal life of the patent application relating to the patent from the start of the income year in which the person acquires the patent application, if—
i: section EE 19
ii: the person has been allowed a deduction for depreciation loss for the patent application; and
iii: section EE 19
d: the remaining legal life of the patent application relating to the patent from the start of the income year in which the person acquires the patent, if—
i: section EE 19
ii: the person has been allowed a deduction for depreciation loss for the patent application; and
iii: section EE 19 How rate expressed
4: The rate calculated using the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down. acquire deduction depreciation loss income year legal life Sections EE 27B to EE27E inserted 1 October 2005 section 28 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section EE 27B substituted 1 October 2005 section 38 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 27C: Annual rate for patent applications lodged with complete specifications on or after 1 April 2005
Sections EE 27B to EE27E inserted 1 October 2005 section 28 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Sections EE 27C to EE27E repealed 1 October 2005 section 38 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 27D: Annual rate for patents: applications lodged with complete specifications on or after 1 April 2005
Sections EE 27B to EE27E inserted 1 October 2005 section 28 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Sections EE 27C to EE27E repealed 1 October 2005 section 38 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 27E: Annual rate for plant variety rights
Sections EE 27B to EE27E inserted 1 October 2005 section 28 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Sections EE 27C to EE27E repealed 1 October 2005 section 38 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 28: Special rate or provisional rate
Rate set for item of depreciable property
1: A special rate or a provisional rate is set for an item of depreciable property under sections 91AAG to 91AAJ No special rate for excluded depreciable property
2: A special rate may not be set for an item of excluded depreciable property. No provisional rate for fixed life intangible property or excluded depreciable property
3: A provisional rate may not be set for an item of fixed life intangible property or an item of excluded depreciable property. Exception
4: This section is subject to section FC 8I(8) depreciable property excluded depreciable property fixed life intangible property provisional rate special rate Section EE 28 amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting 91AAG to 91AAJ 91AE to 91AH Section EE 28 substituted 1 October 2005 section 29 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section EE 28(4) heading added 19 December 2007 section 50 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 28(4) added 19 December 2007 section 50 Taxation (Business Taxation and Remedial Matters) Act 2007
EE 29: Using economic rate or provisional rate instead of special rate
Allowed to use economic or provisional rate
1: A person may depreciate an item to which a special rate applies by applying, instead, the economic rate applicable to the item or a provisional rate applicable to the item. This subsection is overridden by subsection (2). Not allowed to use economic or provisional rate
2: The person must not depreciate the item by applying the economic rate or the provisional rate, if—
a: a special rate applies to the item; and
b: the special rate is higher than the economic rate; and
c: the person applies the special rate to the item for an income year; and
d: in a later income year, the item's market value declines at a rate equal to or greater than the special rate; and
e: it is a reasonable conclusion from all the circumstances of the case that the person's purpose, or 1 of the person's purposes, in wanting to change from the special rate to the economic rate or the provisional rate for the later income year is to enable the person to defer the deduction that the person is allowed for the amount of depreciation loss for the item's decline in value. amount deduction depreciation loss economic rate income year provisional rate special rate 1994 No 164 s EG 10(10), (11) Improvements, items of low value, or items no longer used
EE 30: Improvements
When this section applies
1: This section applies when a person makes an improvement to an item of depreciable property. Income year in which improvement made
2: In the income year in which the person makes the improvement, the provisions of this subpart apply to the improvement, as if it were a separate item of depreciable property, in the period that—
a: starts at the start of the month in which the person first uses the improvement or has it available for use; and
b: ends at the end of the income year. Following income years
3: For income years following the income year in which the person makes the improvement,—
a: a person who uses the diminishing value method or the straight-line method for the item that was improved may choose to apply subsection (4) or (5) :
b: a person who uses the pool method for the item that was improved must apply subsections (6) and (7). Improvement treated as separate item
4: For the purposes of subsection (3)(a), a person may choose to treat the improvement as a separate item of depreciable property. Improvement treated as part of item
5: For the purposes of subsection (3)(a), a person may choose to treat the improvement as part of the item of depreciable property that was improved. They must do 1 of the following for the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use:
a: if they use the diminishing value method for the item, add the improvement's adjusted tax value at the start of the income year to the item's adjusted tax value at the start of the income year :
b: if they use the straight-line method for the item,—
i: add the improvement's adjusted tax value at the start of the income year to the item's adjusted tax value at the start of the income year; and
ii: add the improvement's cost to the item's cost. Pool method
6: For the purposes of subsection (3)(b), a person who uses the pool method for the item that was improved must treat the improvement as a separate item of depreciable property. If its cost is equal to or less than its maximum pooling value, they must include it in a pool in the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use. Adjustment of pool's value
7: When an improvement is included in a pool under subsection (6),—
a: the pool's adjusted tax value is increased by the improvement's adjusted tax value on the date it is included in the pool; and
b: the improvement's adjusted tax value at the end of the previous income year is included in starting adjusted tax value section EE 21(5) adjusted tax value depreciable property diminishing value method improvement income year maximum pooling value pool pool method straight-line method Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (5)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EE 31: Items of low value
When this section applies
1: This section applies for an item of property that a person acquires, in an income year, if—
a: the total cost for the item is equal to or less than the threshold value given for the item by subsection (1B); and
b: the person uses the item, or has the item available for use, in the income year; and
c: the item would be depreciable property if the person did not deal with it under this section; and
d: the item has not been and will not become part of any other property that is depreciable property; and
e: the person is denied a deduction for the cost of the item if the person does not deal with the item under this section; and
f: when the item is one of a group of items, acquired at the same time and from the same supplier, to which the same depreciation rate would apply if they were all treated as items of depreciable property,—
i: if subparagraph (ii) does not apply, the total cost for all the items in the group is equal to or less than the threshold value given for the item by subsection (1B):
ii: if the items generally constitute the person's trading stock, the total cost for all the items in the group not treated by the person solely as trading stock is equal to or less than the threshold value given for the item by subsection (1B). Threshold value for item
1B: The threshold value for an item is—
a: $200, if the item is acquired before 19 May 2005:
b: $500, if the item is acquired on or after 19 May 2005. Amount of depreciation loss
2: If the person chooses to deal with the item under this section, the amount of depreciation loss that the person has for the item for the income year is the item's cost. How election made
3: The person makes the election by claiming, in their return of income for the income year for which the election is made, a deduction for the amount of depreciation loss described in subsection (2). Amount of depreciation recovery income
4: If the person disposes in an income year of an item for which they have been allowed a deduction on a claim under subsection (2), the consideration they derive from the disposal is an amount of depreciation recovery income for the income year. Change of use treated as disposal
5: Subsection (6) applies when—
a: a person has been allowed a deduction on a claim under subsection (2) for an item; and
b: at a later time, the person stops using the item, or having the item available for use, mainly in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
c: the use to which the item is put at the later time is not subject to fringe benefit tax. Disposal
6: The person is treated as having disposed of the item for its market value at the later time. Increase in specified sum
7: The Governor-General may make an Order in Council increasing the sum specified in subsection (1)(a) and (f). acquire amount assessable income business deduction depreciable property depreciation loss depreciation recovery income dispose fringe benefit tax income year property return of income trading stock 1994 No 164 ss EG 16, OB 1 low value property Subsection (1) substituted 19 May 2005 section 73(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (1B) inserted 19 May 2005 section 73(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EE 32: Items no longer used
When this section applies
1: This section applies when a person in an income year has an item of depreciable property that—
a: is no longer used or, because the geothermal energy proving period has ended, becomes unavailable for use under section EE 6(4)
b: is not a building, unless the item satisfies subsection (1B); and
c: has not been depreciated using the pool method. Buildings
1B: This section applies to a building that satisfies subsection (1)(a) and (c) if—
a: the building has been irreparably damaged and rendered useless for the purpose of deriving income; and
b: the damage occurs—
i: in the 2005-06 or a subsequent income year:
ii: as a result of the extreme climatic conditions that occurred during the month of February 2004 in New Zealand:
iii: as a result of the storm event that occurred during the month of July 2004 in the Bay of Plenty area; and
c: the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person. Amount of depreciation loss under this section
2: The person has an amount of depreciation loss under this section and under no other provision of this subpart. Circumstances
3: The person has an amount of depreciation loss if—
a: they no longer use the item in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
b: neither they nor a person associated with them intends to use the item in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
c: the costs of disposing of the item would be more than any consideration they could derive from disposing of it. Amount
4: The amount of depreciation loss is the item's adjusted tax value at the start of the income year. Adjusted tax value at end of year
5: The item's adjusted tax value at the end of the income year is zero. adjusted tax value amount assessable income associated person business depreciable property depreciation loss dispose income year pool method 1994 No 164 s EG 12(1)-(3), (5), (6) Subsection (1) substituted 1 October 2005 section 30 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1)(a) substituted 17 May 2006 section 39(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1B) inserted 1 October 2005 section 30 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Transfers of depreciable property: associated persons and non-qualifying amalgamations This heading was substituted Transfers of depreciable property: first, non-qualifying amalgamations and, second, associated persons 1 April 2005 section 40(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 33: Transfer of depreciable property on or after 24 September 1997
When this section applies
1: This section applies when, on or after 24 September 1997, a person ( person A Associated person
2: The associated person must be a person to whom 1 of the following paragraphs applies:
a: the associated person is allowed a deduction for an amount of depreciation loss for the item for the income year in which person A acquires it:
b: the associated person would have been allowed a deduction for an amount of depreciation loss for the item for the income year in which person A acquired it, if section EE 11(1)
c: the associated person was allowed a deduction for an amount of depreciation loss for the item for the income year before the income year in which person A acquired it:
d: the associated person has been allowed a deduction for the item under section DZ 9
e: the associated person has been allowed a deduction for the item under section section DZ 9
f: the associated person would have been allowed a deduction for an amount of depreciation loss for the item for the income year in which person A acquired it, if the associated person had incurred a cost for the item for which the person was denied any other deduction and if section EE 11(1)
g: the associated person would have been allowed a deduction for an amount of depreciation loss for the item for the income year before the income year in which person A acquired it, if the associated person had incurred a cost for the item for which the person was denied any other deduction:
h: the associated person would have been allowed a deduction for the item under section section DZ 9
i: the associated person would have been allowed a deduction for the item under section section DZ 9
j: the associated person would have been a person to whom any of paragraphs (a) to (i) applied, if the associated person had not made an election under section EE 8 Cost of item to person A
3: For the purpose of determining the amount of depreciation loss that person A has, the cost of the item to person A is treated as 1 of the following:
a: if section EE 49
i: the cost of the item to person A:
ii: the item's market value when the associated person starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
b: if section EE 49
i: the cost of the item to person A:
ii: the cost of the item to the associated person. Exclusions
4: Subsection (3) does not apply—
a: if—
i: the item is not depreciable intangible property; and
ii: the Commissioner decides that it is appropriate to use the cost of the item to person A for the purposes of determining the amount of depreciation loss that person A has for the item:
b: if the cost to person A is income of the associated person, other than under section EE 41(1)
c: if person A acquires the item under a relationship agreement or a matrimonial agreement to which section FF 16 Rate
5: The annual rate that person A applies to the item must be 1 of the following (not including an item of fixed life intangible property, for which the rate is set in section EE 27
a: if person A uses the same depreciation method for the item as that used by the associated person for it, the annual rate that person A applies to it must not be more than the annual rate that the associated person applied to it:
b: if person A uses a depreciation method for the item different from the method that the associated person used for it, the annual rate that person A applies to it must not be more than a rate equivalent to the rate that the associated person applied to it, as determined by schedule 10 Relationship with section EE 34 and subpart FI
6: This section—
a: is overridden by section EE 34
b: does not apply to a bequest of property, if it is property to which subpart FI acquire amount annual rate assessable income associated person business Commissioner deduction depreciable intangible property depreciation loss fixed life intangible property income income year matrimonial agreement property relationship agreement 1994 No 164 s EG 17(1)–(5), (8) Sections EE 33 EE 34 substituted 1 April 2005 section 40(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (3)(a)(ii) substituted 18 December 2006 section 41(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 34: Transfer of depreciable property in non-qualifying amalgamation on or after 14 May 2002
When this section applies
1: This section applies when, on or after 14 May 2002, an amalgamated company acquires, directly or indirectly, an item of property from an amalgamating company, and—
a: the amalgamated company's acquiring of the item is part of an amalgamation that is not a qualifying amalgamation; and
b: the amalgamating company is an associated person of the amalgamated company, treating the amalgamating company as existing at the time that the amalgamated company is treated under section FE 5(1)(b)
c: 1 of the paragraphs in section EE 33(2) Cost of item to person
2: For the purposes of determining the amount of depreciation loss that the amalgamated company has, the cost of the item to it is treated as 1 of the following:
a: if section EE 49
i: the value given by section FE 5
ii: the item's market value when the amalgamating company starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
b: if section EE 49
i: the value given by section FE 5
ii: the cost of the item to the amalgamating company. Exclusions
3: Subsection (2) does not apply—
a: if—
i: the item is not depreciable intangible property; and
ii: the Commissioner decides that it is appropriate to use the cost of the item to the amalgamated company for the purposes of determining the amount of depreciation loss that it has for the item; or
b: if the cost to the amalgamated company is income of the amalgamating company, other than under section EE 41(1) Rate
4: The annual rate that the amalgamated company applies to the item must be 1 of the following (not including an item of fixed life intangible property, for which the rate is set in section EE 27
a: if the amalgamated company uses the same depreciation method for the item as that used by the amalgamating company for it, the annual rate that the amalgamated company applies to it must not be more than the annual rate that the amalgamating company applied to it; or
b: if the amalgamated company uses a depreciation method for the item different from the method that the amalgamating company used for it, the annual rate that the amalgamated company applies to it must not be more than a rate equivalent to the rate that the amalgamating company applied to it, as determined by schedule 10 acquire amalgamated company amalgamating company amalgamation amount annual rate assessable income business Commissioner depreciable intangible property depreciation loss fixed life intangible property income matrimonial agreement property qualifying amalgamation relationship agreement 1994 No 164 ss EG 17(3B), FE 5(2) Subsection (2)(a) (i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (4)(a)(ii) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (4)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (5)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (6) inserted 1 October 2005 section 31 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Sections EE 33 EE 34 substituted 1 April 2005 section 40 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (2)(a)(ii) substituted 18 December 2006 section 42(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 35: Transfer of radiocommunications licence right on or after 24 September 1997
When this section applies
1: This section applies when, on or after 24 September 1997, the holder of management rights created under the Radiocommunications Act 1989 Exclusion
2: This section does not apply when the Crown acting by and through the Secretary of Commerce is named as the manager under section 11(1) Cost of licence right
3: For the purposes of determining the amount of depreciation loss that the associated person has, the cost of the licence right to the associated person is treated as zero. amount associated person depreciation loss 1994 No 164 s EG 17(6), (8)
EE 36: Transfer of depreciable intangible property on or after 1 July 1997
When this section applies
1: This section applies when, on or after 1 July 1997, a person ( person A
a: was not depreciable property of the associated person because it was not of a kind listed in schedule 17
b: was not an item for whose cost the associated person was allowed a deduction, other than a deduction for an amount of depreciation loss, under a provision of this Act outside this subpart. No amount of depreciation loss
2: Person A does not have an amount of depreciation loss for the item. acquire amount associated person deduction depreciable intangible property depreciable property depreciation loss 1994 No 164 s EG 17(7) Disposals and similar events
EE 37: Application of sections EE 41 to EE 44
When sections apply
1: Sections EE 41 to EE 44
a: the consideration is consideration of a kind described in section EE 38
b: either—
i: the item is an item of a kind described in section EE 39
ii: the event is an event of a kind described in section EE 40 Exclusion
2: Sections EE 41 to EE 44
a: when a person disposes of an item of intangible property as part of an arrangement to replace it with an item of the same kind:
b: when a person's patent application has concluded because a patent is granted to the person in relation to the patent application:
c: when a person's geothermal well becomes unavailable for use under section EE 6(4) arrangement consideration dispose geothermal energy proving period geothermal well property 1994 No 164 s EG 19(9)(b) Subsection (2) substituted 1 October 2005 section 43(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 43(3) The list of defined terms was amended 17 May 2006 section 39(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting geothermal energy proving period See section 39(3) The list of defined terms was amended 1 October 2005 section 43(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting geothermal energy proving period geothermal well See section 43(4)
EE 38: Consideration for purposes of section EE 37
General rule: amount derived
1: For the purposes of section EE 37 consideration
a: if the person is a registered person, the amount that the person derives :
b: any amount that they incur This subsection is overridden by subsections (2) to (8). Amount derived may be nil or negative
1B: For the purposes of section EE 37 Other than market value
2: If the person derives a consideration that is not the item's market value, the consideration for the purposes of section EE 37
a: if the person makes a taxable supply, market value :
b: this subsection does not apply to a transfer under a relationship agreement :
c: this subsection does not apply in a case described in any of subsections (3) to (8). Link with subpart FI
2B: Subsection (2) does not apply to a disposal of property to which any of sections FI 4 FI 5 Change of use or location of use
3: The consideration that a person derives from the event described in section EE 40(2)
a: if the person makes a taxable supply, market value :
b: this subsection does not apply to a transfer under a relationship agreement Loss or theft
4: The consideration that a person derives from the event described in section EE 40(3) amount A section 5(13) Irreparable damage
5: The consideration that a person derives from the event described in section EE 40(4) amount A section 5(13) Repossession
6: The consideration that a person derives from the event described in section EE 40(5)
a: if the person is a registered person, the consideration that the person derives :
b: net amount paid Unused geothermal well brought into use
6B: The consideration that a person derives from the event described in section EE 40(5B) section EE 32(4) Other items
7: The consideration that a person derives from the disposal of an item along with any other item, or from the occurrence of an event involving an item that also involves other items, is the item's market value. Two qualifications are—
a: if the person makes a taxable supply, market value :
b: this subsection does not apply to a transfer under a relationship agreement Item leaving New Zealand permanently
8: The consideration that a person derives from the event referred to in section EE 40(10) section EZ 20(1) Sections EE 38 EE 40 amount consideration deduction depreciation loss dispose GST GST charged matrimonial agreement New Zealand registered person services taxable supply 1994 No 164 ss ED 4(6)(a), (c), (d), EG 19(6A), (7), (10)(b)-(10B) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (1B) inserted 3 April 2006 section 74(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (2)(b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2B) inserted 1 October 2005 section 32 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (6)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (6B) inserted 17 May 2006 section 44(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (7)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (7)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
EE 39: Items for purposes of section EE 37
Items to which sections EE 41 to EE 44 apply
1: For the purposes of section EE 37 sections EE 41 to EE 44
a: an item for which the person has been allowed a deduction for an amount of depreciation loss they have had under section EE 32
b: an item to which section CZ 11 Exclusions
2: Sections EE 41 to EE 44
a: an item of property that, on the date on which the disposal or the event occurs, is accounted for in a pool; or
b: an item of petroleum-related depreciable property; or
c: an item of intangible property that is excluded depreciable property, other than software; or
d: a land improvement that is excluded depreciable property of a kind for which no deduction for depreciation was allowed under section 108 of the Income Tax Act 1976 amount deduction depreciable property depreciation loss excluded depreciable property own petroleum-related depreciable property pool property 1994 No 164 ss EG 12(4), EG 19(1)
EE 40: Events for purposes of section EE 37
Events to which sections EE 41 to EE 44 apply
1: For the purposes of section EE 37 sections EE 41 to EE 44 Change of use or location of use
2: The first event is the change of use, or change of location of use, of an item of property, as a result of which a person is denied a deduction for an amount of depreciation loss for the item for the next income year. The event is treated as occurring on the first day of the next income year. Loss or theft
3: The second event is the loss or theft of an item of property, if the item is not recovered in the income year in which the loss or theft occurs. Irreparable damage
4: The third event is the irreparable damage of an item of property. Repossession
5: The fourth event is the seller's repossession of an item of property to which section EE 3 Unused geothermal well brought into use
5B: The fifth event is, for a person's geothermal well that is unavailable for use under section EE 6(4)
a: using the well in deriving assessable income or carrying on a business for the purposes of deriving assessable income:
b: having the well available for use in deriving assessable income or carrying on a business for the purposes of deriving assessable income. Statutory acquisition
6: The sixth
7: Cessation of ownership under section EE 4 or EE 5
8: The seventh event is the cessation of ownership of a fixture or improvement—
a: that a lessee is treated as having under section EE 4(2)
b: that a person is treated as having under section EE 5(3) Cessation of rights in intangible property
9: The eighth event is an occurrence that has the effect that the owner of an item of intangible property is no longer able, and will never be able, to exercise the rights that constitute or are part of the item. Item leaving New Zealand permanently
10: The ninth event is described in section EZ 20(2) Sections EE 38 EE 40 amount assessable income business deduction depreciation loss geothermal energy proving period geothermal well improvement income year lessee New Zealand own property 1994 No 164 s EG 19(9), (10A) Subsection (5B) inserted 17 May 2006 section 45(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (6) amended 17 May 2006 section 45(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting sixth fifth Subsection (7) repealed 1 October 2005 section 33 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 The list of defined terms was amended 17 May 2006 section 45(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting assessable income business geothermal energy proving period geothermal well
EE 41: Effect of disposal or event
Amount of depreciation recovery income
1: For the purposes of section EE 37
a: the amount by which the consideration is more than the item's adjusted tax value on the date on which the disposal or the event occurs; and
b: the total of the amounts of depreciation loss for which the person has been allowed deductions for the item including, for an item to which section CZ 11 Amount of depreciation loss
2: For the purposes of section EE 37 When this section does not apply
3: Subsection (2)
a: the building has been irreparably damaged and rendered useless for the purpose of deriving income; and
b: the damage occurs—
i: in the 2005-06 or a subsequent income year:
ii: as a result of the extreme climatic conditions that occurred during the month of February 2004 in New Zealand:
iii: as a result of the storm event that occurred during the month of July 2004 in the Bay of Plenty area; and
c: the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person. acquire adjusted tax value amount consideration deduction depreciation loss depreciation recovery income dispose income income year 1994 No 164 s EG 19(2), (3) Subsection (2) amended 1 October 2005 section 193(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting This subsection does not apply if the item is a building unless the item has been destroyed or rendered useless for the purpose of deriving income as a result of an event that is a qualifying event for the purpose of paragraph (a) or (b) This subsection does not apply if the item is a building. Subsection (2) amended 1 October 2005 section 34(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by repealing the words This subsection does not apply if the item is a building unless the item has been destroyed or rendered useless for the purpose of deriving income as a result of an event that is a qualifying event for the purpose of paragraph (a) or (b) Subsection (3) inserted 1 October 2005 section 34(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (3) amended 1 October 2005 section 75(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting Subsection (2) This section Section EE 41 amended 1 October 2005 section 193(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting income, income year, qualifying event income year The list of defined terms was amended 1 October 2005 section 34(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by repealing the words qualifying event
EE 42: Amount of depreciation recovery income when item partly used for business
Item to which this section applies
1: This section applies to an item of property that—
a: is an item to which this section applies, as described in section EE 39
b: is, at any time during the period the person owns it, dealt with in—
i: subpart DE
ii: any applicable paragraph in section EZ 10
iii: section FB 7 Depreciation recovery income
2: If the consideration referred to in section EE 37 Formula
3: The formula is— Definition of items in formula
4: The items in the formula are defined in subsections (5) to (8). All deductions
5: All deductions Base value
6: Base value sections EE 48 to EE 50 Adjusted tax value
7: Adjusted tax value Amount of depreciation recovery income
8: Amount of depreciation recovery income section EE 41(1)(a) adjusted tax value amount business deduction depreciation loss depreciation recovery income income year own property 1994 No 164 s EG 19(4) Section EE 42(8) amended 30 March 2017 section 390(1) section 390(3) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EE 43: Amount of depreciation recovery income when lost or stolen items recovered
When this section applies
1: This section applies when an item of property to which section EE 40(3)
a: is recovered in a later income year; and
b: is still owned by the person; and
c: is still used or available for use by the person. Person treated as acquiring item
2: The person is treated as having acquired the item, on the date of recovery, for its adjusted tax value at the start of the income year in which it was lost or stolen. Person treated as deriving income: amount
3: The person is treated as deriving an amount of depreciation recovery income equal to the amount of depreciation loss that the person has under section EE 41(2) Person treated as deriving income: income year
4: The income year in which the person derives the depreciation recovery income is—
a: the income year in which the item is lost or stolen, if the person chooses that year; or
b: the income year in which the item is recovered, in any other case. adjusted tax value amount deduction depreciation loss depreciation recovery income income year own property 1994 No 164 s EG 19(6B)
EE 44: Amount of depreciation recovery income when compensation received
When this section applies
1: This section applies when a person receives insurance, indemnity, or compensation for an item of property to which this section applies (as described in section EE 39 Compensation subtracted
2: An amount must be subtracted from the item's adjusted tax value. The amount is the amount by which the insurance, indemnity, or compensation that the person receives is more than the expenditure that the person incurs because of the event for which the person receives the insurance, indemnity, or compensation. Depreciation recovery income
3: If the item's adjusted tax value becomes negative in an income year through the application of subsection (2), the negative amount is an amount of depreciation recovery income derived by the person in the income year. adjusted tax value amount depreciation recovery income income year property 1994 No 164 s EG 19(5), (6)
EE 44B: Unused geothermal well brought into use
When this section applies
1: This section applies to a person when an event occurs to which section EE 40(5B) Person treated as acquiring geothermal well
2: The person is treated as having acquired the geothermal well, on the day the event occurs, for the cost of the well under this subpart before the event occurs. geothermal well Section EE 44B inserted 17 May 2006 section 46(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Interpretation provisions
EE 45: Cost: GST
When this section applies
1: This section applies when an amount of depreciation loss or an amount of depreciation recovery income is calculated by reference to the cost of an item of depreciable property to a person. Cost reduced: input tax
2: The item's cost is reduced by subtracting the amount (if any) of input tax applying to the supply of the item to the person. This subsection is overridden by subsection (3). Cost reduced: input tax
3: This subsection applies to an item that was not acquired or produced for the principal purpose of making taxable supplies but is applied in an income year principally for that purpose. The item's cost is reduced by subtracting a proportion of the amount (if any) calculated under sections 21F 21G section 20(3)(e) Cost increased: output tax
4: This subsection applies to an item that was acquired or produced for the principal purpose of making taxable supplies but is applied in an income year other than for that purpose. The item's cost is increased by adding the amount (if any) of output tax charged in the income year for the supply of the item because section 21 Goods and Services Tax Act 1985 amount depreciable property depreciation loss depreciation recovery income GST income year input tax output tax taxable supply 1994 No 164 s ED 4(4), (6)(b) Adjusted tax value
EE 46: Meaning of adjusted tax value
1: Adjusted tax value
a: for an item of depreciable property, the amount calculated using the formula in section EE 47 :
b: for a pool, the total adjusted tax value determined under section EE 21 Exception
2: This section is subject to section FC 8I(7) adjusted tax value amount depreciable property pool 1994 No 164 s OB 1 adjusted tax value Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EE 46(1)(b) substituted 6 October 2009 section 773(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EE 46(2) heading added 19 December 2007 section 51 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 46(2) added 19 December 2007 section 51 Taxation (Business Taxation and Remedial Matters) Act 2007
EE 47: Formula
Formula
1: The formula referred to in section EE 46 base value – total deductions. Definition of items in formula
2: In the formula,—
a: base sections EE 48 EE 49 EE 50 EZ 21(1) section EE 47
b: total section EE 51 1994 No 164 s OB 1 adjusted tax value
EE 48: Base value in section EE 47 when none of sections EE 49, EE 50, and EZ 21(1) applies
When this section applies
1: This section applies when none of sections EE 49 EE 50 EZ 21(1) section EE 47 Base value
2: Base value Cost
3: In this section, cost
a: expenditure is excluded from it if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under section EE 31(2) EE 41(2) Income Tax Act 1994 :
b: expenditure is not excluded from it if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under any other provision of this subpart or the corresponding provision of the Income Tax Act 1994 :
c: expenditure is excluded from it if it is expenditure for which a person has been allowed a deduction under any other subpart or the corresponding provision of the Income Tax Act 1994 :
d: expenditure—
i: is not excluded from it if it is described in section EZ 21(2)(a) section EE 47 :
ii: is excluded from it if it is described in section EZ 21(2)(b) section EE 47 amount deduction depreciation loss 1994 No 164 s OB 1 adjusted tax value Subsection (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(d)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EE 49: Base value in section EE 47 when no previous deduction
When this section applies
1: This section applies when all the following apply to the item:
a: it is not a building; and
b: it is not an item of petroleum-related depreciable property; and
c: it is not an item that the person—
i: acquired to use or have available for use in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
ii: first used for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
d: it has been, since the person acquired it and first used it or had it available for use for any purpose, an item for which the person could not in any income year have been allowed a deduction for an amount of depreciation loss, whether because of the nature of the person's use of the item or the person's non-residence or for any other reason; and
e: in relation to the 1992-93 income year,—
i: it was acquired by the person after the end of that income year; or
ii: it was an item described in section EZ 21(3) section EE 47 Base value
2: Base value acquire amount assessable income business deduction depreciation loss income year petroleum-related depreciable property 1994 No 164 s OB 1 adjusted tax value Subsection (2) substituted 18 December 2006 section 47(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EE 50: Base value in section EE 47 when property is petroleum-related depreciable property
When this section applies
1: This section applies when the item is an item of petroleum-related depreciable property to which both the following apply:
a: section EZ 21(1) section EE 47
b: the person (person A) acquires it from an associated person. Base value
2: Base value
a: the cost of the item to person A; and
b: the total of the amounts described in subsections (3) and (4). First amount for purposes of subsection (2)(b)
3: The amount is the cost of the item to—
a: the associated person, if the associated person did not acquire the item from either person A or another person associated with person A; or
b: whoever owned the item, whether person A or the associated person, at the start of an unbroken chain of ownership made up of person A and 1 or more persons associated with person A. Second amount for purposes of subsection (2)(b)
4: The amount is all expenditure incurred for the item by person A and the associated person or associated persons before the date on which person A acquired the item. Cost and expenditure
5: In this section, cost expenditure
a: expenditure is excluded from them if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under section EE 31(2) EE 41(2) Income Tax Act 1994 :
b: expenditure is not excluded from them if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under any other provision of this subpart or the corresponding provision of the Income Tax Act 1994 :
c: expenditure is excluded from them if it is expenditure for which a person is allowed a deduction under any other subpart or the corresponding provision of the Income Tax Act 1994 :
d: expenditure is excluded from them if it is expenditure for which a person would have been allowed a deduction under any other subpart if this Act had applied or the corresponding provision of the Income Tax Act 1994 acquire amount associated person deduction depreciation loss own petroleum-related depreciable property 1994 No 164 s OB 1 adjusted tax value Subsection (5)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EE 51: Total deductions in section EE 47
Total deductions
1: Total deductions
a: the amount described in subsection (2); and
b: the amount described in subsection (3); and
c: the amount of a deduction under section EE 24B First amount for purposes of subsection (1)
2: The amount is all amounts that 1 or more of the following provisions has required to be subtracted from the item's adjusted tax value since the start of the 1993-94 income year:
a: section EE 44(2) :
b: section EG 19(5) of the Income Tax Act 1994 :
c: the provision described in section EZ 21(4) section EE 47 Second amount for purposes of subsection (1)
3: The amount is all deductions for amounts of depreciation loss, calculated using the method described in subsection (4), that, in the period described in subsection (5),—
a: the person was allowed for the item and for,—
i: if the item is a patent, the patent application in relation to which the item was granted:
ii: if the item is a geothermal well that a person acquired under section EE 44B(2)
b: the person would have been allowed if they had used the item wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income. Treatment of assets not available for use
3B: Subsection (3)(b) does not apply in relation to an amount of depreciation loss for an item that is not available for use section EE 32 Method
4: The method is—
a: the depreciation method that the person used in each relevant income year; or
b: the diminishing value method, if the person did not make deductions for amounts of depreciation loss for the item. Period
5: The period ends with the end of the income year before the income year in which the particular time occurs, and starts with,—
a: for an item to which section EE 48
i: unless subparagraph (ii) or (iii) applies, the date on which the person acquired the item; or
ii: if the item is a geothermal well that a person acquired under section EE 44B(2) section EE 6(4)
iii: if the item is a patent and the person acquired the patent application in relation to which the patent was granted, the date on which the person acquired the patent application; or
b: for an item to which section EE 49
i: unless subparagraph (ii) applies, the beginning of the month in which the person started to use the item, or to have it available for use, for the purpose of deriving assessable income or carrying on business for the purpose of deriving assessable income; or
ii: if the item is a patent and the person acquired the patent application in relation to which the item was granted, the start of the month in which the person acquired the patent application; or
c: for an item to which section EE 50
d: for an item to which section EZ 21(1) section EE 47 acquire adjusted tax value amount assessable income associated person business deduction depreciation loss diminishing value method geothermal well income year 1994 No 164 s OB 1 adjusted tax value Subsection (1)(b) amended 1 October 2005 section 48(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting subsection (3) subsection (3) Subsection (1)(c) inserted 18 December 2006 section 48(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (3)(a) substituted 18 December 2006 section 48(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section EE 51(3B) heading inserted 7 September 2010 section 199(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EE 51(3B) heading replaced 17 July 2013 section 159(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Section EE 51(3B) inserted 7 September 2010 section 199(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EE 51(3B) amended 17 July 2013 section 159(1) Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 Subsection (5)(a) to (d) substituted 18 December 2006 section 48(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 The list of defined terms was amended 18 December 2006 section 48(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting geothermal well Definitions
EE 52: Meaning of annual rate
Meaning
1: Annual rate 1995-96 income year or later
2: The rate is the rate set by section EE 26(2)(a)
a: the person acquires it in their 1995-96 income year or a later income year; and
b: the item is not dealt with in any of subsections (3) to (6). 1995-96 income year or later: international aircraft
3: The rate is the rate set by section EE 26(2)(c) Fixed life intangible property
4: The rate is the rate set by section EE 27
a: the item is an item of fixed life intangible property; and
b: the item is not an item of excluded depreciable property. Patents, applications: complete specification before 1 April 2005
4B: The rate is the rate set by section EE 27B section EE 27B Patent applications: lodged with complete specification on or after 1 April 2005
4C: Patents: application lodged with complete specification on or after 1 April 2005
4D: Plant variety rights
4E: 1994-95 income year
5: The rate is the rate set by section EZ 12
a: the person acquired it before the end of their 1994-95 income year; and
b: the item is not an item of fixed life intangible property; and
c: the item is not an item of excluded depreciable property. Excluded depreciable property
6: The rate is the rate set by section EZ 14 Exception
7: This section is subject to section FC 8I(8) acquire annual rate depreciable property excluded depreciable property fixed life intangible property income year international aircraft own 1994 No 164 s OB 1 annual depreciation rate Subsections (4B) to (4E) inserted 1 October 2005 section 35 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsections (4C) to (4E) repealed 1 October 2005 section 49 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section EE 52(7) heading added 19 December 2007 section 52 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EE 52(7) added 19 December 2007 section 52 Taxation (Business Taxation and Remedial Matters) Act 2007
EE 53: Meaning of depreciable intangible property
Meaning
1: Depreciable intangible property means the property listed in schedule 17 Criteria for listing in schedule 17
2: For property to be listed in schedule 17
a: it must be intangible; and
b: it must have a finite useful life that can be estimated with a reasonable degree of certainty on the date of its acquisition. Schedule 17 prevails
3: Property that is listed in schedule 17 acquire depreciable intangible property property 1994 No 164 s OB 1 depreciable intangible property
EE 54: Meaning of estimated useful life
Meaning for item of depreciable property (not copyright in sound recording)
1: Estimated useful life
a: the passage of time, likely wear and tear, exhaustion, and obsolescence; and
b: an assumption of normal and reasonable maintenance. Meaning for copyright in sound recording
2: Estimated useful life assessable income business depreciable property estimated useful life income year sound recording 1994 No 164 s OB 1 estimated useful life
EE 55: Meaning of excluded depreciable property
Meaning
1: Excluded depreciable property
a: depreciable property for whose purchase or construction the person entered into a binding contract before 16 December 1991; or
b: depreciable property that the person used or had available for use for any purpose whatever within New Zealand, other than as trading stock, before 1 April 1993; or
c: depreciable property that is an intangible item that the person used or had available for use before 1 April 1993; or
d: depreciable property that is or has been a qualifying asset for the person; or
e: depreciable property to the extent to which it is or has been a qualifying improvement for the person. Exclusion
2: Excluded depreciable property
a: it existed at the end of the 1992-93 income year; and
b: the Commissioner allowed it to be accounted for in that income year using the standard value method, the replacement value method, or the annual revaluation method. Commissioner depreciable property excluded depreciable property income year New Zealand property qualifying improvement qualifying asset trading stock 1994 No 164 s OB 1 excluded depreciable property
EE 56: Meaning of maximum pooling value
Meaning
1: Maximum pooling value
a: $2,000; and
b: the value set in a determination issued under section 91AAL Increase in specified sum
2: The Governor-General may make an Order in Council increasing the sum specified in subsection (1)(a). depreciable property maximum pooling value 1994 No 164 s OB 1 maximum pooling value Subsection (1)(b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting 91AAL 91AJ
EE 57: Meaning of poolable property
Meaning
1: Poolable property Not a building
2: The item is not a building. Maximum pooling value or globo method
3: The item—
a: is acquired in the income year for a cost equal to or less than its maximum pooling value; or
b: was previously accounted for separately but has, as at the start of the income year, an adjusted tax value equal to or less than its maximum pooling value; or
c: was accounted for at the end of the 1992-93 income year using, with the Commissioner's permission, the globo accounting method. Wholly used or subject to fringe benefit tax
4: The item—
a: is wholly used or available for use by the person in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
b: to the extent to which it is not wholly used or available for use by the person in deriving assessable income or carrying on a business for the purpose of deriving assessable income, is used in a way that is subject to fringe benefit tax. acquire adjusted tax value assessable income business Commissioner depreciable property fringe benefit tax income year maximum pooling value own poolable property 1994 No 164 s OB 1 poolable property
EE 58: Other definitions
In this Act,— depreciation method section EE 12 diminishing value method diminishing value rate economic rate sections EE 25B to EE 25E economic rate: this definition was amended 3 April 2006 section 76(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting sections EE 25B to EE 25E section EE 25 estimated residual market value fixed life intangible property
a: is depreciable intangible property; and
b: has a legal life that could reasonably be expected, on the date of the property's acquisition, to be the same length as the property's remaining estimated useful life improvement international aircraft legal life
a: for an item to which paragraphs (b) and (c) do not apply, means the number of years, months, and days for which an owner's interest in an item of intangible property exists under the contract or statute that creates the owner's interest, assuming that the owner exercises any rights of renewal or extension that are either essentially unconditional or conditional on the payment of predetermined fees:
b: for an item that is a patent application or a patent, means the legal life under paragraph (a) that a patent would have if granted when a patent application is first lodged:
c: for an item that is plant variety rights, means the total of—
i: the legal life that the rights would have under paragraph (a); and
ii: the number of whole calendar months during which the person owns the plant variety rights application in relation to which the rights are granted legal life: this definition was substituted 1 October 2005 section 50(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 50(2) petroleum-related depreciable property
a: petroleum drilling rigs; or
b: support vessels for offshore petroleum drilling rigs; or
c: support vessels for offshore petroleum production platforms pool section EE 12 pool method section EE 21 provisional rate section EE 28 special rate section EE 28 straight-line method straight-line rate acquire adjusted tax value amount depreciable intangible property depreciable property depreciation loss diminishing value method diminishing value rate economic rate estimated residual market value estimated useful life fixed life intangible property improvement income year international aircraft legal life New Zealand own petroleum petroleum-related depreciable property pool method pool property provisional rate straight-line method special rate straight-line rate 1994 No 164 s OB 1 basic economic depreciation rate capital improvement diminishing value method estimated residual market value fixed life intangible property international aircraft legal life pool pool method schedule depreciable property straight-line method
EF: Taxes and levies
Contents
EF 1: Fringe benefit tax
Fringe benefit tax for which a deduction is allowed may be deducted only in the income year in which the relevant fringe benefits are provided or granted, whether or not the tax actually becomes due and payable in the income year. deduction fringe benefit tax income year 1994 No 164 s ED 2
EF 2: Specified superannuation contribution withholding tax
Specified superannuation contribution withholding tax for which a deduction is allowed may be deducted only in the income year in which the specified superannuation contributions to which the tax relates are made, whether or not the tax actually becomes due and payable in the income year. deduction income year specified superannuation contribution specified superannuation contribution withholding tax 1994 No 164 s ED 3
EF 3: ACC levies and premiums
Timing of deduction
1: A deduction that an employer or self-employed person is allowed for an ACC levy or premium is allocated to the income year in which it becomes due and payable, except as provided in subsection (2) or (3). Earlier income year
2: If a deduction for an ACC levy or premium has been allocated to an income year earlier than the income year in which the levy or premium becomes due and payable and, because of the time bar or for another reason, the Commissioner cannot lawfully amend the assessment for the income year, the deduction is allocated to the income year in which it was allowed. Balance dates between 1 October and 6 April
3: If a person's income year ends on a balance date falling between 1 October and 6 April (both dates inclusive), an ACC levy or premium that is due on a date in schedule 13 column H (Dates for payment of provisional tax) is treated as if it were due and payable on the relevant date in schedule 13, part A References to dates in schedule 13
4: For the purposes of subsection (3) schedule 13
a: the definition of instalment date
b: sections MB 1(3) MB 19 to 23 MC 1 Meaning of ACC levy or premium
5: In this section, ACC levy or premium means any of the following levies, premiums, or penalties:
a: the following levy or premium:
i: a levy to fund the Work Account section 168 of the Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: an employer's premium to fund the Employers' Account under section 281B of the Accident Insurance Act 1998 :
b: a Residual Claims levy under—
i: section 193 of the Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: section 304 of the Accident Insurance Act 1998 :
c: the following levy or premium:
i: a levy to fund the Work Account under section 168B or 211 of the Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: a premium to fund the Self-Employed Work Account under section 300 of the Accident Insurance Act 1998 :
d: the following levy or premium:
i: a levy to fund the Earners' Account under section 219(1) of the Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: a premium to fund the Earners' Account under section 283(1) of the Accident Insurance Act 1998 :
e: the following levy:
i: an Earners' Account Residual levy under section 219(2) of the Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: an Earners' Account levy under section 283(2) of the Accident Insurance Act 1998 :
f: a levy to meet the costs of the Regulator under section 236 of the Accident Insurance Act 1998 :
g: a contribution to the Insolvent Insurers Fund under section 246 or 247 of the Accident Insurance Act 1998 :
h: a levy or penalty payable to the Non-Compliers Fund under section 263 of the Accident Insurance Act 1998 :
i: a base premium under sections 466 to 470 of the Accident Insurance Act 1998 ACC levy or premium Commissioner deduction employer income year time bar 1994 No 164 ss ED 1-ED 1B Section EF 3(3) amended 1 October 2007 section 77(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section EF 3(4) substituted 1 October 2007 section 77(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (5)(a)(i) amended 1 April 2007 section 13(2) Injury Prevention, Rehabilitation, and Compensation Amendment Act 2007 by substituting Work Account Employers' Account See sections 14 to 16 Subsection (5)(a)(ii) (b)(ii) (c)(ii) (d)(ii) (e)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (5)(c)(i) amended 1 April 2007 section 13(2) Injury Prevention, Rehabilitation, and Compensation Amendment Act 2007 by substituting Work Account under section 168B Self-Employed Work Account under section 202 See sections 14 to 16 Subsection (5)(f) (h) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EF 3 list of defined terms first instalment date omitted 1 October 2007 section 77(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section EF 3 list of defined terms second instalment date omitted 1 October 2007 section 77(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section EF 3 list of defined terms third instalment date omitted 1 October 2007 section 77(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EF 4: Use of money interest payable by Commissioner
Timing of income
1: Income that is interest payable by the Commissioner to a person under Part 7 Interest paid in same year as liability arises
2: If the Commissioner pays the interest in the same tax year as that to which the original assessment relates, the income that is interest is allocated to the following income year. Effect of amended assessment
3: If the Commissioner amends the person's assessment, income that is interest payable (or overpaid interest repayable) by the Commissioner as a result of the amended assessment is allocated to the income year following the income year in which the Commissioner issues the notice of amended assessment. Amended assessment in same year
4: For the purposes of subsection (3), if the Commissioner amends the person's assessment more than once in a tax year, only the last amended assessment is taken into account. assessment Commissioner income income year interest notice pay tax year 1994 No 164 ss ED 6(2), (3), ED 7(1)(b), (c), (2)
EF 5: Use of money interest payable by person
Timing of deduction
1: A deduction for interest payable by a person to the Commissioner under Part 7 Assessment made in same year as liability arises
2: If the original assessment is made in the same tax year as that to which the assessed liability Effect of amended assessment
3: If the Commissioner amends the person's assessment, a deduction for interest payable (or overpaid interest repayable) to the Commissioner as a result of the amended assessment is allocated to the income year following the income year in which the Commissioner issues the notice of amended assessment. This subsection does not apply in the circumstances described in subsection (4). Terminal amended assessment
4: If the Commissioner amends the person's assessment, a deduction for interest payable (or overpaid interest repayable) to the Commissioner as a result of the amended assessment is allocated to the income year in which the Commissioner issues the notice of amended assessment, in the following circumstances:
a: the person dies, goes into liquidation, or otherwise ceases to exist before the income year following that in which the Commissioner issues the notice of amended assessment; and
b: the person would have been allowed a deduction for the interest payable or repayable if it had been incurred in the income year in which the Commissioner issues the notice of amended assessment; and
c: the person's executor or other representative asks the Commissioner. Amended assessment in same year
5: For the purposes of subsection (4), if the Commissioner amends the person's assessment more than once in a tax year, only the last amended assessment is taken into account. assessment Commissioner deduction income tax liability interest income year liquidation notice pay tax year 1994 No 164 ss ED 6(1), (3), ED 7(1)(a), (d), (2), (3) Section EF 5(2) amended 2 November 2012 section 246 Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
EF 6: Different tax years
Sections EF 4 EF 5 income tax liability interest pay payment tax year 1994 No 164 s ED 8
EG: Recognition of accounting treatment
Contents
EG 1: Election to use balance date used in foreign country
When this section applies
1: This section applies when—
a: a person has foreign source income or foreign expenditure that is taken into account in determining the income tax (not merely the withholding tax) payable by them in a foreign country or territory; and
b: the foreign source income or foreign expenditure has been included in 1 of their income tax returns in the country or territory; and
c: the annual income tax balance date that is relevant for them for the income tax return in the country or territory falls in a period that is an income year for them; and
d: if the person did not make an election under this section,—
i: the foreign source income would be allocated to their previous income year; or
ii: the foreign expenditure would be a deduction allocated to the previous income year if the only income of the person were foreign source income to which this section applies. Election to allocate
2: If the person has not already included the foreign source income or foreign expenditure in their return of income for the previous tax year, they may choose to allocate the foreign source income or the foreign expenditure to the income year referred to in subsection (1)(c). How election made
3: The person makes the election by including the foreign source income or foreign expenditure in their return of income for the income year referred to in subsection (1)(c). What election applies to
4: The election applies to all the person's foreign source income and foreign expenditure to which subsection (1) applies, except for—
a: income or expenditure under the financial arrangements rules, unless the Commissioner agrees in writing; or
b: dividends, unless the Commissioner agrees in writing and the person is not a company; or
c: attributed CFC income; or
d: FIF income or income derived from an attributing interest; or
e: in the case of foreign expenditure, foreign expenditure that would be allowed as a deduction if the only income of the person were income to which paragraphs (a) to (d) apply. Timing of income
5: The foreign source income and foreign expenditure to which the election applies is allocated to the income year referred to in subsection (1)(c). Election treated as continuing
6: An election made by a person under subsection (2) applies for the income year referred to in subsection (1)(c) and all later income years
a: the Commissioner agrees in writing to allow the person to revoke the election; or
b: the person's net income for the relevant income year would be more than $100,000 if their only income in the income year were foreign source income. Net income of more than $100,000
7: If subsection (6)(b) applies,—
a: foreign source income and foreign expenditure is allocated to the income year referred to in subsection (1)(c) only if it was derived or incurred in that year; and
b: foreign source income and foreign expenditure to which the election would have applied if subsection (6)(b) had not existed is allocated to the previous income year; and
c: if necessary, the previous tax year's return is amended. Factors considered
8: In deciding whether to agree to an election applying to income or expenditure under the financial arrangements rules or dividends, the Commissioner must consider—
a: whether the person is likely to incur significant compliance costs if the Commissioner does not agree to the election; and
b: the risk to the revenue if the Commissioner agrees to the election; and
c: any other factors the Commissioner considers relevant. Person ceasing to be, or becoming, resident
9: If the person ceases to be, or becomes, resident in New Zealand, this section applies in the same way as for other persons except that—
a: it does not apply to income or expenditure that is allocated, other than under this section, to a period when the person is not resident in New Zealand; and
b: if it allocates foreign source income derived or foreign expenditure incurred while the person is resident in New Zealand to a period after the person has ceased to be resident in New Zealand,—
i: the foreign source income is assessable income in the income year in which the foreign source income is allocated under this section, despite section BD 1(5)(c)
ii: the foreign expenditure is allowed as a deduction in the income year to which the foreign expenditure is allocated under this section. Some definitions
10: In this section,— annual income tax balance date foreign expenditure foreign source income annual income tax balance date assessable income attributed CFC income attributing interest Commissioner company deduction derived from New Zealand dividend exempt income FIF income financial arrangements rules foreign expenditure foreign source income income income year net income resident in New Zealand return of income tax year 1994 No 164 s EP 1 Section EG 1(6) amended 30 June 2014 section 200(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014
EG 2: Adjustment for changes to accounting practice
When this section applies
1: This section applies in an income year (year of change) when a person changes from—
a: a cash accounting method to an accrual accounting method of calculating their income tax liability; or
b: an accrual accounting method to a cash accounting method of calculating their income tax liability. From cash to accrual accounting method
2: If subsection (1)(a) applies,—
a: an amount owed to the person on the last day of the income year before the year of change is income of the person in the year of change; and
b: an amount owed by the person on the last day of the income year before the year of change is allowed as a deduction in the year of change. From accrual to cash accounting method
3: If subsection (1)(b) applies,—
a: an amount equal to the total of all amounts owing by the person in the year of change that have been allowed as a deduction in previous income years is income of the person in the year of change; and
b: an amount equal to the total of all amounts owing to the person in the year of change that have been treated as income of the person in previous income years is allowed as a deduction in the year of change. Some definitions
4: In this section,— accrual accounting method cash accounting method accrual accounting method amount cash accounting method deduction generally accepted accounting practice income income tax liability income year 1994 No 164 s EC 1
EG 3: Allocation of
income, deductions, and credits When this section applies
1: This section applies for the calculation of a portfolio tax rate entity's liability for income tax for a tax year. Allocation shown in accounts
2: Income and deductions of the portfolio tax rate entity are allocated—
a: to portfolio allocation periods as—
i: reflected in the entity's valuations of portfolio investor interests, if the entity makes such valuations; or
ii: shown in the entity's financial statements, if subparagraph (i) does not apply:
b: to portfolio investor classes and investors as—
i: reflected in the entity's valuations of portfolio investor interests, if the entity makes such valuations; or
ii: shown in the entity's financial statements, if subparagraph (i) does not apply. Credits
3: A credit received by a portfolio tax rate entity is allocated to the portfolio allocation period under subsection (2) of the income to which the credit relates. deduction income income tax investor portfolio allocation period portfolio investor class portfolio tax rate entity tax year Section EG 3 added 1 October 2007 section 51 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Section EG 3 heading amended 19 December 2007 section 53(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EG 3(3) heading added 19 December 2007 section 53(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EG 3(3) added 19 December 2007 section 53(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EH: Income equalisation schemes
Contents
Introductory provisions
EH 1: Income equalisation schemes
Description
1: An income equalisation scheme allows a person to reduce their income for a tax year by making a deposit with the Commissioner. Three schemes
2: The 3 income equalisation schemes are—
a: the main income equalisation scheme sections EH 3 to EH 37 :
b: the adverse event income equalisation scheme sections EH 38 to EH 64 :
c: the thinning operations income equalisation scheme sections EH 65 to EH 81 Meaning of terms
3: Terms used in the 3 schemes are defined as follows:
a: terms used specifically in the main income equalisation scheme are defined in sections EH 34 to EH 37 :
b: terms used specifically in the adverse event income equalisation scheme are defined in sections EH 62 to EH 64 :
c: terms used specifically in the thinning operations income equalisation scheme are defined in sections EH 80 EH 81 adverse event income equalisation scheme Commissioner deposit income main income equalisation scheme person tax year thinning operations income equalisation scheme Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EH 2: Income Equalisation Reserve Account
Account
1: There is a Crown Bank Account called the Income Equalisation Reserve Account that is operated under the Public Finance Act 1989 Deposits paid into account
2: Every deposit a person makes with the Commissioner under a scheme referred to in section EH 1(2)
a: is public money; and
b: must be paid into the Income Equalisation Reserve Account. Commissioner deposit person 1994 No 164 s EI 1(2) Main income equalisation scheme Application
EH 3: Persons to whom main income equalisation scheme applies
Meaning of farmer, fisher, and forester for main income equalisation scheme
1: The main income equalisation scheme applies to—
a: a farmer, which means a person carrying on a farming or agricultural business on land in New Zealand; or
b: a fisher, which means a person carrying on a fishing business; or
c: a forester, which means a person who—
i: derives income from forestry; and
ii: is not a company, a public authority, a Maori authority, or an unincorporated body. Meaning of person for main income equalisation scheme
2: In the main income equalisation scheme, person means a farmer, fisher, or forester. business company farmer fisher fishing business forester income from forestry main income equalisation scheme Maori authority New Zealand person public authority 1994 No 164 s EI 1(1) Deposits and accounts
EH 4: Main deposit
Deposit for business or forestry
1: A person may make a payment to the Commissioner for entry in their main income equalisation account for a tax year as follows:
a: a farmer may make a payment for the farmer's farming or agricultural business :
b: a fisher may make a payment for the fisher's fishing business :
c: a forester may make a payment for the forester's income from forestry. Upper limit of deposit
2: A person must not make, for a tax year, deposits that in total are more than their main maximum deposit for the tax year. Lower limit of deposit
3: A person must not make, for a tax year, a deposit less than the lesser of—
a: $200; and
b: the difference between—
i: the total of the deposits the person has previously made for the tax year; and
ii: the person's main maximum deposit for the tax year. Time of making deposit
4: A person makes a deposit for a tax year by—
a: making the deposit during the tax year; or
b: doing both the following:
i: making the deposit during the specified period for the tax year; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the tax year; or
c: doing both the following:
i: making the deposit within a time that is after the end of the specified period for the tax year but that is allowed by the Commissioner in a case or class of cases; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the tax year. Limit on making deposit
5: If a refund has been made to a person for a tax year under section EH 13 EH 15 business Commissioner deposit farmer fisher fishing business forester income from forestry main deposit main income equalisation account main maximum deposit notice person specified period tax year 1994 No 164 ss EI 1(3), EI 3 Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EH 5: Main income equalisation account
Person's account
1: The Commissioner must keep a main income equalisation account in the name of every person who makes a deposit with the Commissioner. Deposits in account
2: Every deposit a person makes with the Commissioner must be entered in the person's main income equalisation account. Amounts in accounts
3: The only amounts that may be entered in a person's main income equalisation account are—
a: deposits made by the person with the Commissioner; and
b: interest paid under section EH 6 Amounts not available to others
4: Despite section FI 3
a: be assigned or charged in any way; or
b: pass by operation of law to, or into the custody or control of, someone else, except when the person is bankrupt or has been put into liquidation; or
c: be assets for the payment of the person's debts or liabilities, except when the person is bankrupt or has been put into liquidation; or
d: be assets for the payment of the debts or liabilities of a dead person's estate. Amounts available only for refunds
5: The only payments that may be made from a person's main income equalisation account are refunds under any of sections EH 8 EH 10 EH 13 EH 15 EH 17 EH 19 EH 23 EH 25 amount Commissioner deposit interest liquidation main income equalisation account pay person 1994 No 164 s EI 1(2), (5) Subsection (4) amended 1 October 2005 section 36 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting Despite section FI 3 Amounts Interest
EH 6: Interest on deposits in main income equalisation account
No interest payable
1: No interest is payable on a deposit in a main income equalisation account that is refunded within 1 year of the date of deposit. Interest payable
2: Interest is payable on every other deposit in a main income equalisation account. Period
3: Interest is computed with daily rests from the date of acknowledgment of the receipt of the deposit until the date the deposit is refunded. Date to which accrues
4: Interest on a deposit accrues until the earlier of—
a: 31 March in each year; and
b: the date the deposit is refunded. Added to deposit
5: Accrued interest on a deposit is added to the deposit. Rate
6: The interest rate is 3% a year. deposit interest main income equalisation account pay year 1994 No 164 s EI 2 Deduction
EH 7: Deduction of deposit
When this section applies
1: This section applies when a person is allowed a deduction under section DQ 1 Amount of deduction
2: The amount of the deduction is the lesser of—
a: the total of the person's deposits for the tax year; and
b: their main maximum deposit for the tax year. Timing of deduction
3: The person is allowed the deduction in the tax year. amount deduction deposit main maximum deposit person tax year 1994 No 164 s EI 3 Refunds: automatic
EH 8: Refund of excess deposit
When this section applies
1: This section applies when a person's deposits for a tax year are more than their main maximum deposit for the tax year. Refund
2: The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends. Commissioner date the deposit ends deposit main maximum deposit person tax year 1994 No 164 s EI 1(4)
EH 9: Income does not include excess deposit
A refund under section EH 8 section CX 43 excluded income 1994 No 164 s EI 1(4)
EH 10: Refund at end of 5 years
When this section applies
1: This section applies when a deposit is in a person's main income equalisation account at the end of 5 years after the end of the tax year for which the deposit was made. Refund
2: The Commissioner must refund the deposit to the person. Section EH 28 Commissioner deposit main income equalisation account person tax year year 1994 No 164 s EI 9
EH 11: Income when refund given at end of 5 years
A refund under section EH 10 section CB 24 income person tax year 1994 No 164 s EI 9 Refunds: on application
EH 12: Application for refund by person, trustee of estate, Official Assignee, or liquidator
Who may apply
1: The following may apply to the Commissioner for a refund of some or all of the amount in a person's main income equalisation account:
a: the person may apply under section EH 13 EH 15 EH 17 :
b: the trustee of the person's estate may apply under section EH 19 :
c: the Official Assignee having charge of the person's estate may apply under section EH 23 :
d: the liquidator appointed for the person may apply under section EH 25 Application
2: An application for a refund must—
a: be in writing; and
b: state the grounds on which it is made; and
c: state the amount applied for. amount Commissioner liquidation main income equalisation account person trustee 1994 No 164 ss EI 4(1), EI 5(1), EI 6(1), EI 7(1), EI 8(1), EI 9 Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EH 13: Refund on request
When this section applies
1: This section applies when a person wants a refund of some or all of the amount in their main income equalisation account, and none of sections EH 8 EH 10 EH 15 EH 17 EH 19 EH 23 EH 25 Refund
2: The Commissioner must refund to the person the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person's main income equalisation account for at least 1 year before the date the deposit ends. Section EH 28 amount Commissioner date the deposit ends deposit main income equalisation account person year 1994 No 164 s EI 4(1), (2)
EH 14: Income when refund given on request
Year of income
1: A refund under section EH 13 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the Commissioner receives the application for a refund in the specified period for a tax year or, if the Commissioner allows in a case or class of cases, within a longer period; and
b: the person chooses in the application that the refund is to be income in the tax year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 24 Commissioner income person specified period tax year 1994 No 164 s EI 4(5)
EH 15: Refund for development or recovery
Refund for development: application of subsection (2)
1: Subsection (2) applies when a person wants a refund of some or all of the amount in their main income equalisation account for either or both of the following purposes:
a: to enable them to undertake, immediately after the refund is given, planned development or maintenance work for their farming or agricultural business, fishing business, or forestry operation :
b: to enable them to buy, immediately after the refund is given, livestock for use in their farming business, other than livestock replacing livestock disposed of or lost as a result of a self-assessed adverse event. Refund
2: If the Commissioner is satisfied that the person will use the refund for either or both of the purposes, the Commissioner must refund to them the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in their main income equalisation account for at least 6 months before the date the deposit ends. Section EH 28 Refund for recovery: application of subsection (4)
3: Subsection (4) applies when a person wants a refund of some or all of the amount in their main income equalisation account for 1 or more of the following purposes:
a: to enable them to buy, immediately after the refund is given, livestock for use in their farming business to replace livestock disposed of or lost as a result of a selfassessed adverse event :
b: to avoid them suffering serious hardship :
c: to do anything else that the Commissioner determines, in a case or class of cases, is a purpose for which a refund should be given. Refund
4: If the Commissioner is satisfied that the person will use the refund for 1 or more of the purposes, the Commissioner must refund to them the amount applied for, regardless of the length of time it has been in the account. Section EH 28 amount business Commissioner date the deposit ends deposit fishing business main income equalisation account person self-assessed adverse event 1994 No 164 s EI 4(3), (4) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (3)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 16: Income when refund given for development or recovery
Year of income
1: A refund under section EH 15 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the Commissioner receives the application for a refund in the specified period for a tax year or, if the Commissioner allows in a case or class of cases, within a longer period; and
b: the person chooses in the application that the refund is to be income in the tax year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 24 Commissioner income person specified period tax year 1994 No 164 s EI 4(5)
EH 17: Refund on retirement
When this section applies
1: This section applies when a farmer or a fisher—
a: has a main income equalisation account; and
b: is neither a company nor a trustee; and
c: retires from the farming or agricultural business or the fishing business. Refund
2: The Commissioner must refund to the person the amount that, on the date the deposit ends, is in their main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 amount business Commissioner company date the deposit ends farmer fisher fishing business main income equalisation account person trustee 1994 No 164 s EI 5(1)
EH 18: Income when refund given on retirement, and election to allocate amount to earlier year
Year of income
1: A refund under section EH 17 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the refund includes a deposit made for a tax year earlier than the tax year in which the person retires; and
b: the person chooses to allocate some or all of the deposit to the earlier tax year. Different year of income
3: The amount allocated by the person to the earlier tax year is income, under section CB 24 How election made
4: A person makes an election under this section by giving the Commissioner notice within 1 of the following times:
a: the time within which the person is required to file a return of income for the tax year in which they retire :
b: a further time allowed by the Commissioner in a case or class of cases. amount Commissioner deposit income notice person return of income tax year 1994 No 164 s EI 5(1), (2) Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 19: Refund on death
When this section applies
1: This section applies when a person—
a: has a main income equalisation account; and
b: dies. Refund
2: Despite section FI 3 Section EH 28 amount Commissioner date the deposit ends main income equalisation account person trustee 1994 No 164 s EI 6(1) Subsection (2) amended 1 October 2005 section 37 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting Despite section FI 3 The Commissioner
EH 20: Income when refund given on death
Year of income
1: A refund under section EH 19 section CB 24 When year of income may be different
2: However, section EH 21 EH 22 section EH 21(1) EH 22(1) income person 1994 No 164 s EI 6(1)
EH 21: Income when refund given on death, and election to allocate amount to earlier year
When this section applies
1: This section applies when—
a: a refund under section EH 19
b: the trustee of the person's estate chooses to allocate some or all of the deposit to the earlier tax year. Different year of income
2: The amount allocated by the trustee to the earlier tax year is income, under section CB 24 How election made
3: A trustee makes an election under this section by giving the Commissioner notice within 1 of the following times:
a: the time within which the trustee is required to file a return of the person's income for the period to the date of the person's death :
b: a further time allowed by the Commissioner in a case or class of cases. amount Commissioner deposit income notice person return of income tax year trustee 1994 No 164 s EI 6(1), (2) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 22: Income when refund given on death, and election to allocate amount to later year or years
When this section applies
1: This section applies when—
a: the trustee of the person's estate does not make an election under section EH 21
b: the trustee chooses to allocate some or all of the amount that is in the person's main income equalisation account on the date of the person's death to a tax year or years after that date. Tax year or years referred to in subsection (1)(b)
2: The tax year or years referred to in subsection (1)(b) must be within the earlier of—
a: the 3 years after the date of the person's death; and
b: the 5 years after the end of the tax year for which a deposit or a part of a deposit was made, if the amount that the trustee allocates to a later tax year or years includes the deposit or part of it. Allocated amount remains in account
3: An amount allocated by the trustee to a later tax year remains in the person's main income equalisation account until—
a: it is refunded to the trustee in the tax year to which it is allocated; or
b: it is not refunded because of the application of section EH 28 Different year of income
4: An amount allocated by the trustee to a later tax year is income, under section CB 24 How election made
5: A trustee makes an election under this section by a notice that—
a: specifies—
i: each amount allocated to a later tax year; and
ii: the tax year to which each amount is allocated; and
b: is given to the Commissioner within 1 of the following times:
i: the time within which the trustee is required to file a return of the person's income for the period to the date of the person's death :
ii: a further time allowed by the Commissioner in a case or class of cases. amount Commissioner deposit income main income equalisation account notice person return of income tax year trustee year 1994 No 164 s EI 6(1), (2) Subsection (5)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 23: Refund on bankruptcy
When this section applies
1: This section applies when a person—
a: has a main income equalisation account; and
b: is bankrupt. Refund
2: The Commissioner must refund to the Official Assignee having charge of the person's estate the amount that, on the date the deposit ends, is in the person's main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 amount Commissioner date the deposit ends main income equalisation account person 1994 No 164 s EI 7(1)
EH 24: Income when refund given on bankruptcy
A refund under section EH 23 section CB 24 income person 1994 No 164 s EI 7(2)
EH 25: Refund on liquidation
When this section applies
1: This section applies when a person—
a: has a main income equalisation account; and
b: is put into liquidation. Refund
2: The Commissioner must refund to the liquidator appointed for the person the amount that, on the date the deposit ends, is in the person's main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 amount Commissioner date the deposit ends liquidation main income equalisation account person 1994 No 164 s EI 8(1)
EH 26: Income when refund given on liquidation
A refund under section EH 25 section CB 24 income liquidation person 1994 No 164 s EI 8(2) Refunds: general provisions
EH 27: Amendment of assessment
Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to section EH 18 EH 21 EH 22 assessment Commissioner time bar 1994 No 164 ss EI 5(3), EI 6(3)
EH 28: Minimum refund
The Commissioner must not give a refund under any of sections EH 10 EH 13 EH 15 EH 17 EH 19 EH 22(3) EH 23 EH 25
a: $200; and
b: the balance in the person's main income equalisation account on the date the deposit ends. Commissioner date the deposit ends main income equalisation account person 1994 No 164 s EI 10(2)
EH 29: Deposits from which refunds come
Each refund a person is given is treated as coming from the total amount of their deposits in the order in which the person made the deposits. amount deposit person 1994 No 164 s EI 10(1) Rebate of income tax
EH 30: When person entitled to rebate of income tax
A person who is given a refund is entitled to a rebate of income tax if—
a: the refund is of the kind and amount described in section EH 31
b: the person is of the kind described in section EH 32 amount income tax person 1994 No 164 s EI 10(3)
EH 31: Kind and amount of refund that entitles person to rebate of income tax
Kind
1: A refund that entitles a person to a rebate of income tax is one to which both the following apply:
a: the refund is given under any of sections EH 10 EH 13 EH 15 EH 17 EH 19 EH 22(3) EH 23 EH 25
b: the refund does not come from a deposit made for the tax year in which the refund is given; if the refund comes in part from a deposit made for the tax year in which the refund is given and in part from a deposit made for some other tax year, the refund that entitles the person to a rebate of income tax is the part coming from the deposit for some other tax year. Amount
2: Once a refund qualifies under subsection (1) as a refund that entitles a person to a rebate of income tax, the amount of the refund is the lesser of the following:
a: the amount of the refund given to the person under any of sections EH 10 EH 13 EH 15 EH 17 EH 19 EH 22(3) EH 23 EH 25
b: the total of the amounts by which the person's income was reduced in 1 or more previous tax years by subtracting the deposit or deposits or parts of deposits from which the refund comes. amount deposit income income tax person tax year 1994 No 164 s EI 10(3), (5)
EH 32: Kind of person entitled to rebate of income tax
A person in the following circumstances is entitled to a rebate of income tax:
a: the person's income in the tax year in question includes a refund of the kind described in section EH 31(1) section EH 31(2)
b: because of the refund, the person's income tax liability for the tax year is increased; and
c: the amount by which the person's income tax liability for the tax year is increased because of the refund ( extra tax tax saving amount deposit income income tax income tax liability person tax year 1994 No 164 s EI 10(3), (4)
EH 33: Amount of rebate of income tax
The amount of a rebate of income tax to which a person is entitled under section EH 30 section EH 32(c) section EH 32(c) amount income tax 1994 No 164 s EI 10(3) Definitions
EH 34: Meaning of income from forestry
Income
1: Income from forestry subsection (2) Sales
2: The sales are—
a: the sale of timber :
b: the sale of a right to cut or remove timber. Circumstances
3: The circumstances are—
a: the income is derived by a person who is the owner of land in New Zealand on which timber is grown, not including a person whose interest in the land is that of a licensee; and
b: the timber the subject of the sale is standing or cut or fallen timber in its natural state grown on the land. income income from forestry New Zealand own person timber 1994 No 164 s OB 1 gross income from forestry Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 35: Meaning of main maximum deposit
Meaning
1: Main maximum deposit Meaning of amount
2: In subsections (3) to (5), amount
a: any provision allocating income derived or expenditure incurred to a tax year other than the tax year in which the income was in fact derived or the expenditure was in fact incurred; or
b: any provision of any of the income equalisation schemes referred to in section EH 1(2) Maximum deposit of farmer
3: The maximum deposit that a farmer may make is—
a: the amount determined by an Order in Council made under subsection (6); or
b: if no order is in force, an amount equal to the net income that the farmer would have in the tax year if—
i: the farmer derived income only from the farming or agricultural business in the tax year; and
ii: the farmer did not make a payment under section EH 39 Maximum deposit of fisher
4: The maximum deposit that a fisher may make is an amount equal to the net income that the fisher would have in the tax year if the fisher derived income only from the fishing business in the tax year. Maximum deposit of forester
5: The maximum deposit that a forester may make is an amount equal to the net income that the forester would have in the tax year if the forester derived only income from forestry in the tax year. Order in Council relating to farmers
6: The Governor-General may make an Order in Council declaring that the maximum deposit a farmer may make for a tax year or for every tax year is—
a: an amount calculated in the manner specified in the order; or
b: an unlimited amount. amount business deposit farmer fisher fishing business forester income main income equalisation account main maximum deposit net income person tax year 1994 No 164 s OB 1 maximum deposit
EH 36: Meaning of self-assessed adverse event
Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EH 36 repealed 3 April 2006 section 78(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EH 37: Other definitions
In the main income equalisation scheme,— date the deposit ends
a: the date on which the refund is calculated, when section EH 8 :
b: the date that is 5 years after the end of the tax year for which the deposit was made, when section EH 10 :
c: the date on which the Commissioner receives the application for the refund, when section EH 13 EH 15 :
d: the date of the person's retirement, when section EH 17 :
e: the date of the person's death, when section EH 19 :
f: the date on which the Commissioner receives notice of the adjudication, when section EH 23 :
g: the date on which the Commissioner receives notice of the liquidation, when section EH 25 date the deposit ends: paragraphs (a) to (f) of this definition were amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and deposit
a: means a main deposit; and
b: includes, for the purposes of sections EH 6(2) to (4) EH 10 to EH 33 section EH 6(5) fishing business
a: fish farming under a licence issued under the Freshwater Fish Farming Regulations 1983 :
b: mussel farming :
c: rock oyster farming fishing business: paragraphs (a) and (b) of this definition were amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and main deposit section EH 4(1) main income equalisation account section EH 5 specified period
a: the period of 6 months after the end of the accounting year that corresponds to the tax year
b: the period from the end of the accounting year that corresponds to the tax year section 37 accounting year that corresponds to the tax year specified period: this definition was amended 1 April 2005 section 38 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting accounting year that corresponds to the tax year tax year business Commissioner date the deposit ends deposit fishing business interest liquidation main deposit main income equalisation account main income equalisation scheme person return of income specified period tax year year 1994 No 164 s OB 1 fishing specified period Adverse event income equalisation scheme Application
EH 38: Persons to whom adverse event income equalisation scheme applies
Person described
1: The adverse event income equalisation scheme applies to a person who, in a tax year,—
a: carries on a farming or agricultural business on land in New Zealand; and
b: sells livestock and does not replace it because of a self-assessed adverse event. Meaning of person for adverse event income equalisation scheme
2: In the adverse event income equalisation scheme, person adverse event income equalisation scheme business New Zealand person self-assessed adverse event tax year 1994 No 164 s EI 11(1) Deposits and accounts
EH 39: Adverse event deposit
Deposit for adverse event
1: A person may make a payment to the Commissioner for entry in their adverse event income equalisation account for a tax year in which, because of a self-assessed adverse event, they sell and do not replace livestock. Upper limit of deposit
2: A person must not make, for a tax year, deposits that in total are more than their adverse event maximum deposit for the tax year. Lower limit of deposit
3: A person must not make, for a tax year, a deposit less than the lesser of—
a: $200; and
b: the difference between the total of all the deposits they have previously made for the tax year and their adverse event maximum deposit for the tax year. Time of making deposit
4: A person makes a deposit for a tax year by—
a: making the deposit during the tax year; or
b: making the deposit during the month after the end of the tax year. adverse event deposit adverse event income equalisation account adverse event maximum deposit Commissioner deposit person self-assessed adverse event tax year 1994 No 164 s EI 11(1), (3)
EH 40: Adverse event income equalisation account
Person's account
1: The Commissioner must keep an adverse event income equalisation account in the name of every person who makes a deposit with the Commissioner. Deposits in accounts
2: Every deposit a person makes with the Commissioner must be entered in their adverse event income equalisation account. Amounts in accounts
3: The only amounts that may be entered in a person's adverse event income equalisation account are—
a: deposits made by the person with the Commissioner; and
b: interest paid under section EH 41 Amounts not available to others
4: Amounts entered in a person's adverse event income equalisation account must not, while they are in the account,—
a: be assigned or charged in any way; or
b: pass by operation of law to, or into the custody or control of, someone else, except when the person is bankrupt or has been put into liquidation; or
c: be assets for the payment of the person's debts or liabilities, except when the person is bankrupt or has been put into liquidation; or
d: be assets for the payment of the debts or liabilities of a dead person's estate. Amounts available only for refunds
5: The only payments that may be made from a person's adverse event income equalisation account are refunds under any of sections EH 43 EH 46 EH 48 EH 50 EH 54 EH 56 adverse event income equalisation account amount Commissioner deposit interest liquidation pay person 1994 No 164 s EI 11(2), (5) Interest
EH 41: Interest on deposits in adverse event income equalisation account
Interest payable
1: Interest is payable on every deposit in an adverse event income equalisation account. Period
2: Interest is computed with daily rests from the date of acknowledgment of the receipt of the deposit until the date the deposit is refunded. Date to which accrues
3: Interest on a deposit accrues until the earlier of—
a: 31 March in each year; and
b: the date the deposit is refunded. Added to deposit
4: Accrued interest on a deposit is added to the deposit. Rate
5: The interest rate is the rate set in regulations made by the Governor-General from time to time. adverse event income equalisation account deposit interest pay year 1994 No 164 s EI 12 Deduction
EH 42: Deduction of deposit
When this section applies
1: This section applies when a person is allowed a deduction under section DQ 2 Amount of deduction
2: The amount of the deduction is the lesser of—
a: the total of their deposits for the tax year; and
b: their adverse event maximum deposit for the tax year. Timing of deduction
3: The person is allowed the deduction in the tax year. adverse event maximum deposit amount deduction deposit person tax year 1994 No 164 s EI 13 Refunds: automatic
EH 43: Refund of excess deposit
When this section applies
1: This section applies when a person's deposits for a tax year are more than their adverse event maximum deposit for the tax year. Refund
2: The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends. adverse event maximum deposit Commissioner date the deposit ends deposit person tax year 1994 No 164 s EI 11(4)
EH 44: Income does not include excess deposit
A refund under section EH 43 section CX 43 excluded income Refunds: on application
EH 45: Application for refund by person, trustee of estate, Official Assignee, or liquidator
Who may apply
1: The following may apply to the Commissioner for a refund of some or all of the amount in a person's adverse event income equalisation account:
a: the person may apply under section EH 46 EH 48 :
b: the trustee of the person's estate may apply under section EH 50 :
c: the Official Assignee having charge of the person's estate may apply under section EH 54 :
d: the liquidator appointed for the person may apply under section EH 56 Application
2: An application for a refund must—
a: be in writing; and
b: state the grounds on which it is made; and
c: state the amount applied for. adverse event income equalisation account amount Commissioner liquidation person trustee 1994 No 164 s EI 14(1) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EH 46: Refund on request
When this section applies
1: This section applies when a person wants a refund of some or all of the amount in the person's adverse event income equalisation account, and none of sections EH 48 EH 50 EH 54 EH 56 Refund
2: The Commissioner must refund to the person the amount applied for. adverse event income equalisation account amount Commissioner person 1994 No 164 s EI 14(1)
EH 47: Income when refund given on request
A refund under section EH 46 section CB 24 Commissioner income person tax year 1994 No 164 s EI 14(2)
EH 48: Refund on retirement
When this section applies
1: This section applies when a person—
a: has an adverse event income equalisation account; and
b: is neither a company nor a trustee; and
c: retires from the farming or agricultural business. Refund
2: The Commissioner must refund to the person the amount that, on the date the deposit ends, is in their adverse event income equalisation account. adverse event income equalisation account amount business Commissioner company date the deposit ends person trustee 1994 No 164 ss EI 5(1), EI 15
EH 49: Income when refund given on retirement, and election to allocate amount to earlier year
Year of income
1: A refund under section EH 48 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the refund includes a deposit made for a tax year earlier than the tax year in which the person retires; and
b: the person chooses to allocate some or all of the deposit to the earlier tax year. Different year of income
3: The amount allocated by the person to the earlier tax year is income, under section CB 24 How election made
4: A person makes an election under this section by giving the Commissioner notice within 1 of the following times:
a: the time within which the person is required to file a return of income for the tax year in which they retire :
b: a further time allowed by the Commissioner in a case or class of cases. amount Commissioner deposit income notice person return of income tax year 1994 No 164 ss EI 5(1), (2), EI 15 Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 50: Refund on death
When this section applies
1: This section applies when a person—
a: has an adverse event income equalisation account; and
b: dies. Refund
2: Despite section FI 3 adverse event income equalisation account amount Commissioner date the deposit ends person trustee 1994 No 164 ss EI 6(1), EI 15 Subsection (2) amended 1 October 2005 section 39 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting Despite section FI 3 The Commissioner
EH 51: Income when refund given on death
Year of income
1: A refund under section EH 50 section CB 24 When year of income may be different
2: However, section EH 52 EH 53 section EH 52(1) EH 53(1) income person 1994 No 164 ss EI 6(1), EI 15
EH 52: Income when refund given on death, and election to allocate amount to earlier year
When this section applies
1: This section applies when—
a: a refund under section EH 50
b: the trustee of the person's estate chooses to allocate some or all of the deposit to the earlier tax year. Different year of income
2: The amount allocated by the trustee to the earlier tax year is income, under section CB 24 How election made
3: A trustee makes an election under this section by giving the Commissioner notice within 1 of the following times:
a: the time within which the trustee is required to file a return of the person's income for the period to the date of the person's death :
b: a further time allowed by the Commissioner in a case or class of cases. amount Commissioner deposit income notice person return tax year trustee 1994 No 164 ss EI 6, EI 15 Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 53: Income when refund given on death, and election to allocate amount to later year or years
When this section applies
1: This section applies when—
a: the trustee does not make an election under section EH 52
b: the trustee chooses to allocate some or all of the amount that is in the person's adverse event income equalisation account on the date of the person's death to a tax year or years after that date. Tax year or years for purposes of subsection (1)(b)
2: For the purposes of subsection (1)(b), the tax year or years must be within the earlier of—
a: the 3 years after the date of the person's death; and
b: the 5 years after the end of the tax year for which a deposit or a part of a deposit was made, if the amount that the trustee allocates to a later year or years includes the deposit or part of it. Amount allocated remains in account
3: An amount allocated by the trustee to a later tax year remains in the person's adverse event income equalisation account until it is refunded to the trustee in the tax year to which it is allocated. Different year of income
4: An amount allocated by the trustee to a later tax year is income, under section CB 24 How election made
5: A trustee makes an election under this section by a notice that—
a: specifies—
i: each amount allocated to a later tax year; and
ii: the tax year to which each amount is allocated; and
b: is given to the Commissioner within 1 of the following times:
i: the time within which the trustee is required to file a return of the person's income for the period to the date of the person's death :
ii: a further time allowed by the Commissioner in a case or class of cases. adverse event income equalisation account amount Commissioner deposit income notice person return tax year trustee year 1994 No 164 ss EI 6, EI 15 Subsection (5)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EH 54: Refund on bankruptcy
When this section applies
1: This section applies when a person—
a: has an adverse event income equalisation account; and
b: is bankrupt. Refund
2: The Commissioner must refund to the Official Assignee having charge of the person's estate the amount that, on the date the deposit ends, is in the person's adverse event income equalisation account. adverse event income equalisation account amount Commissioner date the deposit ends person 1994 No 164 ss EI 7, EI 15
EH 55: Income when refund given on bankruptcy
A refund under section EH 54 section CB 24 income person 1994 No 164 ss EI 7, EI 15
EH 56: Refund on liquidation
When this section applies
1: This section applies when a person—
a: has an adverse event income equalisation account; and
b: is put into liquidation. Refund
2: The Commissioner must refund to the liquidator appointed for the person the amount that, on the date the deposit ends, is in the person's adverse event income equalisation account. adverse event income equalisation account amount Commissioner date the deposit ends liquidation person 1994 No 164 ss EI 8, EI 15
EH 57: Income when refund given on liquidation
A refund under section EH 56 section CB 24 income liquidation person 1994 No 164 ss EI 8, EI 15 Refunds: general provisions
EH 58: Amendment of assessment
Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to any of sections EH 49 EH 52 EH 53 assessment Commissioner time bar 1994 No 164 ss EI 5(3), EI 6(3), EI 15
EH 59: Minimum refund
The Commissioner must not give a refund under any of sections EH 46 EH 48 EH 50 EH 54 EH 56
a: $200; and
b: the balance in the person's adverse event income equalisation account on the date the deposit ends. adverse event income equalisation account Commissioner date the deposit ends person 1994 No 164 s EI 16(2)
EH 60: Deposits from which refunds come
Each refund a person is given is treated as coming from the total amount of their deposits in the order in which they made the deposits. amount deposit person 1994 No 164 ss EI 10(1), EI 15, EI 16(1) Transfers
EH 61: Transfer of deposit
Transfer from adverse event to main income equalisation account
1: A deposit that is in a person's adverse event income equalisation account on the day 1 year after the date on which the deposit was made must be transferred to their main income equalisation account as soon as practicable. Date of deposit in main income equalisation account
2: The date on which a transferred deposit is treated as having been deposited in the person's main income equalisation account is as follows:
a: the date on which it was transferred, for the purpose of computing interest payable under section EH 6 :
b: the date on which it was deposited in the adverse event income equalisation account, for any other purpose. No deduction
3: A transferred deposit is not an amount for which a deduction is allowed under section DQ 1 Ceasing of deposit in adverse event income equalisation account
4: A transferred deposit ceases to be a deposit in the person's adverse event income equalisation account. adverse event income equalisation account amount deduction deposit interest main income equalisation account pay person year 1994 No 164 s EI 14(3), (4) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Definitions
EH 62: Meaning of adverse event maximum deposit
Meaning
1: Adverse event maximum deposit means the maximum deposit that this section says a person may make to their adverse event income equalisation account for a tax year. Maximum deposit
2: The maximum deposit a person may make is an amount equal to the net income that the person would have in the tax year if, because of the self-assessed adverse event,—
a: the only income derived by the person in the tax year were income from their selling the livestock; and
b: the only amount for which the person was allowed a deduction in the tax year were the cost of the livestock sold. Cost of livestock sold: matters excluded
3: The cost of the livestock sold is an amount determined under subsection (4) or (5)—
a: without applying any provision allocating income derived or expenditure incurred to a tax year other than the tax year in which the income was in fact derived or the expenditure was in fact incurred; and
b: applying sections DQ 1 EH 7 to EH 33 FF 9 to FF 11 Cost of livestock sold: person having livestock of class sold at end of previous tax year
4: This subsection applies when, at the end of the tax year before the tax year in which the livestock is sold, the person had livestock of the class that is sold in which the livestock would, if unsold, have been included at the end of the tax year in which it is sold. Under this subsection, the cost of livestock sold is determined using the previous tax year's closing value for the class of livestock in which the livestock sold would have been included. Cost of livestock sold: other cases
5: This subsection applies when subsection (4) does not. Under this subsection, the cost of livestock sold is calculated using the formula— Definition of items in formula
6: In the formula,—
a: number at start
b: number bought
c: price
d: value section EC 16(2) adverse event income equalisation account adverse event maximum deposit amount deduction deposit income net income person self-assessed adverse event tax year 1994 No 164 s OB 1 maximum deposit
EH 63: Meaning of self-assessed adverse event
Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EH 63 repealed 3 April 2006 section 79(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EH 64: Other definitions
In the adverse event income equalisation scheme,— adverse event deposit section EH 39(1) adverse event income equalisation account section EH 40 date the deposit ends
a: the date on which the refund is calculated, when section EH 43 :
b: the date on which the Commissioner receives the applications for the refund, when section EH 46 :
c: the date of the person's retirement, when section EH 48 :
d: the date of the person's death, when section EH 50 :
e: the date on which the Commissioner receives notice of the adjudication, when section EH 54 :
f: the date on which the Commissioner receives notice of the liquidation, when section EH 56 :
g: the date on which the Commissioner transfers the deposit, when section EH 61(1) date the deposit ends: paragraphs (a) to (f) of this definition were amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and deposit
a: means an adverse event deposit; and
b: includes, for the purposes of sections EH 41(2) EH 45 to EH 61 section EH 41(4) specified period
a: the period of 6 months after the end of the tax year; and
b: the period from the end of the tax year to the date 1 month after the date by which the person must, under section 37 Tax Administration Act 1994 adverse event deposit adverse event income equalisation account adverse event income equalisation scheme Commissioner date the deposit ends deposit interest liquidation person return of income specified period tax year 1994 No 164 s OB 1 adverse event income equalisation account Thinning operations income equalisation scheme Application
EH 65: Persons to whom thinning operations income equalisation scheme applies
Person described
1: The thinning operations income equalisation scheme applies to a company that, in a tax year,—
a: carries on a forestry business on land in New Zealand; and
b: derives income from carrying out thinning operations on the land. Meaning of person for thinning operations income equalisation scheme
2: In the thinning operations income equalisation scheme, person means a person described in subsection (1) business company forestry business income New Zealand person tax year thinning operations thinning operations income equalisation scheme 1994 No 164 s EI 17(1) Section EH 65 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Deposits and accounts
EH 66: Thinning operations deposit
Deposit for thinning operations
1: A person may make a payment to the Commissioner for entry in their thinning operations income equalisation account for a tax year in which they derive income from carrying out thinning operations. Upper limit of deposit
2: A person must not make, for a tax year, deposits that in total are more than their thinning operations maximum deposit for the tax year. Lower limit of deposit
3: A person must not make, for a tax year, a deposit that is less than the lesser of—
a: $200; and
b: the difference between the total of all the deposits the person has previously made for the tax year and their thinning operations maximum deposit for the tax year. Time of making deposit
4: A person makes a deposit for a tax year by—
a: making the deposit during the tax year; or
b: doing both the following:
i: making the deposit during the specified period for the tax year; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the tax year; or
c: doing both the following:
i: making the deposit within a time that is after the end of the specified period for the tax year but that is allowed by the Commissioner in a case or class of cases; and
ii: at the time of making it, giving the Commissioner notice that the deposit is for the tax year. Limit on making deposit
5: If a refund has been made to a person for a tax year under section EH 73 EH 75 business Commissioner deposit income notice person specified period tax year thinning operations thinning operations deposit thinning operations income equalisation account thinning operations maximum deposit 1994 No 164 ss EI 1(1), (3), EI 17(1), (2)
EH 67: Thinning operations income equalisation account
Person's account
1: The Commissioner must keep a thinning operations income equalisation account in the name of every person that makes a deposit with the Commissioner. Deposits in accounts
2: Every deposit a person makes with the Commissioner must be entered in their thinning operations income equalisation account. Amounts in accounts
3: The only amounts that may be entered in a person's thinning operations income equalisation account are—
a: deposits made by the person with the Commissioner; and
b: interest paid under section EH 68 Amounts not available to others
4: Despite section FI 3
a: be assigned or charged in any way; or
b: pass by operation of law to, or into the custody or control of, someone else, except when the person has been put into liquidation; or
c: be assets for the payment of the person's debts or liabilities, except when the person has been put into liquidation. Amounts available only for refunds
5: The only payments that may be made from a person's thinning operations income equalisation account are refunds under any of sections EH 70 EH 73 EH 75 EH 77 amount Commissioner deposit interest liquidation pay person thinning operations income equalisation account 1994 No 164 ss EI 1(2), (5), EI 17(2), (3) Subsection (4) amended 1 October 2005 section 40 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting Despite section FI 3 Amounts Interest
EH 68: Interest on deposits in thinning operations income equalisation account
No interest payable
1: No interest is payable on a deposit in a thinning operations income equalisation account that is refunded within 1 year of the date of deposit. Interest payable
2: Interest is payable on every other deposit in a thinning operations income equalisation account. Period
3: Interest is computed with daily rests from the date of acknowledgment of the receipt of the deposit until the date the deposit is refunded. Date to which interest accrues
4: Interest on a deposit accrues until the earlier of—
a: 31 March in each year; and
b: the date the deposit is refunded. Added to deposit
5: Accrued interest on a deposit is added to the deposit. Rate
6: The interest rate is 3% a year. deposit interest pay thinning operations income equalisation account year 1994 No 164 ss EI 2, EI 17(2) Deductions
EH 69: Deduction of deposit
When this section applies
1: This section applies when a person is allowed a deduction under section DQ 3 Amount of deduction
2: The amount of the deduction is the lesser of—
a: the total of the person's deposits for the tax year; and
b: their thinning operations maximum deposit for the tax year. Timing of deduction
3: The person is allowed the deduction in the tax year. amount deduction deposit person tax year thinning operations maximum deposit 1994 No 164 ss EI 3, EI 17(2) Refunds: automatic
EH 70: Refund of excess deposit
When this section applies
1: This section applies when a person's deposits for a tax year are more than their thinning operations maximum deposit for the tax year. Refund
2: The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends. Commissioner date the deposit ends deposit person tax year thinning operations maximum deposit 1994 No 164 ss EI 1(4), EI 17(2)
EH 71: Income does not include excess deposit
A refund under section EH 70 section CX 43 excluded income 1994 No 164 ss EI 1(4), EI 17(2) Refunds: on application
EH 72: Application for refund by person or liquidator
Who may apply
1: The following may apply to the Commissioner for a refund of some or all of the amount in a person's thinning operations income equalisation account:
a: the person may apply under section EH 73 EH 75 :
b: the liquidator appointed for the person may apply under section EH 77 Application
2: An application for a refund must—
a: be in writing; and
b: state the grounds on which it is made; and
c: state the amount applied for. amount Commissioner liquidation person thinning operations income equalisation account 1994 No 164 ss EI 4(1), (2), EI 17(2) Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EH 73: Refund on request
When this section applies
1: This section applies when a person wants a refund of some or all of the amount in the person's thinning operations income equalisation account, and neither section EH 75 EH 77 Refund
2: The Commissioner must refund to the person the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person's thinning operations income equalisation account for at least 1 year before the date the deposit ends. amount Commissioner date the deposit ends deposit person thinning operations income equalisation account year 1994 No 164 ss EI 4(1), (2), EI 17(2)
EH 74: Income when refund given on request
Year of income
1: A refund under section EH 73 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the Commissioner receives the application for a refund in the specified period for a tax year or, if the Commissioner allows in a case or class of cases, within a longer period; and
b: the person chooses in the application that the refund is to be income in the tax year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 24 Commissioner income person specified period tax year 1994 No 164 ss EI 4(5), EI 17(2)
EH 75: Refund for development or recovery
Refund for development: application of subsection (2)
1: Subsection (2) applies when a person wants a refund of some or all of the amount in their thinning operations income equalisation account for the purpose of enabling them to undertake, immediately after the refund is given, planned development or maintenance work for their forestry business. Refund
2: If the Commissioner is satisfied that the person will use the refund for the purpose, the Commissioner must refund to them the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person's thinning operations income equalisation account for at least 6 months before the date the deposit ends. Refund for recovery: application of subsection (4)
3: Subsection (4) applies when a person wants a refund of some or all of the amount in their thinning operations income equalisation account for either or both of the following purposes:
a: to avoid them suffering serious hardship :
b: to do anything else that the Commissioner determines, in a case or class of cases, is a purpose for which a refund should be given. Refund
4: If the Commissioner is satisfied that the person will use the refund for either or both of the purposes, the Commissioner must refund to them the amount applied for, regardless of the length of time it has been in the account. amount business Commissioner date the deposit ends deposit forestry business person thinning operations income equalisation account 1994 No 164 ss EI 4(3), (4), EI 17(2) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EH 75 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
EH 76: Income when refund given for development or recovery
Year of income
1: A refund under section EH 75 section CB 24 When year of income may be different
2: However, subsection (3) applies instead of subsection (1) if—
a: the Commissioner receives the application for a refund in the specified period for a tax year or, if the Commissioner allows in a case or class of cases, within a longer period; and
b: the person chooses in the application that the refund is to be income in the tax year to which the specified period or the longer period relates. Different year of income
3: The refund is income, under section CB 24 Commissioner income person specified period tax year 1994 No 164 ss EI 4(5), EI 17(2)
EH 77: Refund on liquidation
When this section applies
1: This section applies when a person—
a: has a thinning operations income equalisation account; and
b: is put into liquidation. Refund
2: The Commissioner must refund to the liquidator appointed for the person the amount that, on the date the deposit ends, is in the person's thinning operations income equalisation account on the date, regardless of the length of time it has been in the account. amount Commissioner date the deposit ends liquidation person thinning operations income equalisation account 1994 No 164 ss EI 8(1), EI 17(2)
EH 78: Income when refund given on liquidation
A refund under section EH 77 section CB 24 income liquidation person 1994 No 164 ss EI 8(2), EI 17(2) Refunds: general provisions, and rebate of income tax
EH 79: Sections of main income equalisation scheme that apply to thinning operations income equalisation scheme
Sections EH 28 to EH 33 main income equalisation scheme thinning operations income equalisation scheme 1994 No 164 s EI 17(2) Definitions
EH 80: Meaning of thinning operations maximum deposit
Meaning
1: Thinning operations maximum deposit Maximum deposit
2: The maximum deposit that a person may make is an amount equal to the income derived by them during the tax year from carrying out thinning operations on the land on which they carry on their forestry business. Meaning of amount
3: In subsection (2), amount
a: any provision allocating income derived or expenditure incurred to a tax year other than the tax year in which the income was in fact derived or the expenditure was in fact incurred :
b: any provision of any of the income equalisation schemes referred to in section EH 1(2) amount business deposit forestry business income person tax year thinning operations thinning operations income equalisation account thinning operations maximum deposit 1994 No 164 s OB 1 maximum deposit Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EH 80 list of defined terms forestry business inserted 7 December 2009 section 163 Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009
EH 81: Other definitions
In the thinning operations income equalisation scheme,— date the deposit ends
a: the date on which the refund is calculated, when section EH 70 :
b: the date on which the Commissioner receives the application for the refund, when section EH 73 EH 75 :
c: the date on which the Commissioner receives notice of the liquidation, when section EH 77 date the deposit ends: paragraphs (a) and (b) of this definition were amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and deposit
a: means a thinning operations deposit; and
b: includes, for the purposes of sections EH 68(2) to (4) EH 72 to EH 79 section EH 68(5) specified period
a: the period of 6 months after the end of the accounting year that corresponds to the tax year
b: the period from the end of the accounting year that corresponds to the tax year section 37 accounting year that corresponds to the tax year specified period: this definition was amended 1 April 2005 section 41 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting accounting year that corresponds to the tax year tax year thinning operations thinning operations deposit section EH 66(1) thinning operations income equalisation account section EH 67 Commissioner date the deposit ends interest liquidation person return of income specified period tax year thinning operations thinning operations deposit thinning operations income equalisation account thinning operations income equalisation scheme 1994 No 164 ss EI 17(4), OB 1 specified period
EI: Spreading of specific income
Contents
Farming and forestry
EI 1: Spreading backward of income from timber
When this section applies
1: This section applies when a person derives income under section CB 22 Timing of income
2: The person may allocate the income between the income year in which they derive it and any 1 or more of the previous 3 income years. Application
3: A person who wants to make an allocation under subsection (2) must apply in writing to the Commissioner no later than 1 year after the end of the income year in which they derive the income. Commissioner income income year timber year 1994 No 164 s EJ 1(1) Inflation-indexed instruments
EI 2: Interest from inflation-indexed instruments
When this section applies
1: This section applies when—
a: an amount of money lent is outstanding at the end of the lender's current income year; and
b: an amount is payable to the lender for the money lent, in a future income year of the lender; and
c: the amount payable is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
d: the amount payable that has accrued at the end of the lender's current income year differs from any amount payable that had accrued—
i: at the time the money was lent, if it was lent during the lender's current income year; or
ii: at the end of the lender's previous income year, if it was lent before the lender's current income year. Increase treated as credited
2: If the difference is an increase, the increase is treated as having been credited in account and capitalised by the borrower for the benefit of the lender on—
a: the day following the day on which the level of the relevant index at the end of the lender's current income year becomes public knowledge; or
b: if the level of the relevant index is not calculated for the end of the lender's current income year, the last date before the end of the income year for which the level is calculated. This subsection is overridden by subsection (3). Increase not treated as credited
3: An increase is not treated as having been credited to the extent to which—
a: the money lent has been repaid :
b: an amount on account of the increase has already been paid to the lender :
c: the increase represents a recovery of a decrease in the amount payable over a previous income year of the lender. amount income year interest money lent New Zealand pay 1994 No 164 s EB 4 Subsection (3)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Intellectual property
EI 3: Assigning or granting copyright
When this section applies
1: This section applies when a person—
a: is the author of a literary, dramatic, musical, or artistic work; and
b: made the work over a period of more than 1 year; and
c: receives consideration from—
i: assigning some or all of the copyright in the work; or
ii: granting an interest in the copyright by licence. Timing of income: lump sum payment
2: If some or all of the consideration is a lump sum payment that would be income in 1 tax year, the person may allocate the income equally between the income year in which they receive it and—
a: the income year before that income year, if they made the work over a period of 2 years or less; or
b: the 2 income years before that income year, if they made the work over a period of more than 2 years. Timing of income: other payments
3: If some or all of the consideration is not a lump sum payment, would be income in 1 tax year, and is received by the person within 2 years after the first publication of the work, the person may allocate the income equally between the income year in which they receive it and the previous income year. Self-publication
4: Subsection (3) applies to income that the person derives from being the publisher of their work. Application
5: The following provisions apply to an allocation for the purposes of subsections (2) and (3):
a: for an allocation under subsection (2), the person must apply in writing to the Commissioner no later than 6 years after the end of the income year in which they receive the payment; and
b: for an allocation under subsection (3), the person must apply in writing to the Commissioner no later than 8 years after the first publication of the work. Some definitions
6: In this section,— author author Commissioner first publication income income year lump sum payment royalty tax year year 1994 No 164 s EN 3(1)-(3), (5), (6)
EI 3B: Spreading income from patent rights
When this section applies
1: This section applies when a person derives income under section CB 26 Timing of income
2: The person may allocate the income equally between the income year in which they derive it and the following 2 income years. Commissioner income income year patent rights Section EI 3B inserted 18 December 2006 section 52(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Land
EI 4: Amount paid to lessor for non-compliance with covenant for repair
When this section applies
1: This section applies when a lessor receives an amount of income under section CC 2 Timing of income: if election made
2: The lessor may choose to allocate the income between the income year in which they receive the amount and any 1 or more of the following 4 income years. Timing of income: if election not made
3: Any part of the amount that the lessor does not allocate as described in subsection (2) is allocated to the fourth income year following the income year in which they receive the amount. Notice
4: The following provisions apply to an allocation for the purposes of subsection (2):
a: the lessor must give a notice to the Commissioner that specifies how the income has been allocated; and
b: the lessor must give the notice within the time required to file a return of income for the income year to which the income is allocated or within a longer time if the Commissioner agrees; and
c: the lessor must not revoke the election. Relationship with sections CC 2 and EI 5
6: This section overrides section CC 2(2) section EI 5 amount Commissioner income income year notice return of income 1994 No 164 s EN 1(2)-(4), (8)
EI 5: Amount paid for non-compliance: when lessor ceases to own land
When this section applies
1: This section applies when a lessor—
a: allocates income under section EI 4
b: ceases to own the land to which the income relates before the end of the third tax year following the tax year in which they receive the income. Timing of income
2: If the lessor has not allocated a part of the income, the part is allocated to the income year in which the lessor ceases to own the land. Ownership of part of land ceasing
3: If the lessor ceases to own part of the land to which the income relates,—
a: this section applies to the part of the land that the lessor ceases to own; and
b: section EI 4 amount income income year own tax year 1994 No 164 s EN 1(5), (7), (8)
EI 6: Leases: income derived in anticipation
When this section applies
1: This section applies when a person derives, in a tax year, income in anticipation from fines, premiums, a payment of goodwill on the grant of a lease, or in another similar way. Timing of income
2: The Commissioner may allocate the income between the income year in which the person derives it and any 5 later income years. Notice
3: The following provisions apply to an allocation for the purposes of subsection (2):
a: the person must give a notice to the Commissioner requesting the Commissioner to make the allocation :
b: the person must give the notice in the tax year following the tax year to which the income year of derivation corresponds:
c: the Commissioner may cancel the allocation at any time. Cancellation of allocation
4: If the Commissioner cancels the allocation, the income allocated to the income year in which the cancellation occurs and to future income years is allocated to the income year before the income year in which the cancellation occurs. Commissioner income income year lease notice tax year 1994 No 164 s EB 2 Subsection (3)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(b) substituted 1 April 2005 section 80(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EI 7: Disposal of land to Crown
When this section applies
1: This section applies when a person derives income from disposing of any of their land to the Crown. Timing of income
2: The person may choose to allocate the income between the income year in which they derive it and any 3 later income years. Timing of deduction
3: If the person allocates income to 2 or more income years, they must allocate part of any deduction allowed for the cost of the land to the same income years. The part must bear the same proportion to the total deduction as the allocated income bears to the total amount of income. Application
4: The following provisions apply to an allocation for the purposes of subsection (2):
a: the person, or another person for them, must make a written application to the Commissioner :
b: the application must be made within 1 year after the end of the tax year in which the person derives the income or within a longer time if the Commissioner agrees :
c: the person must arrange to meet all income tax liabilities relating to the income :
d: the Commissioner may cancel the allocation at any time. Cancellation of allocation
5: If the Commissioner cancels the allocation,—
a: the whole of the income or deduction, as applicable, is allocated to the income year before the income year in which the cancellation occurs :
b: the cancellation does not affect income or a deduction that has been allocated to a previous income year. amount Commissioner deduction income income tax liability income year tax year year 1994 No 164 s EN 4 Subsection (4)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (5)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Shareholder-employees
EI 8: Matching rule for employment income of shareholderemployee
Matching if company allowed deduction
1: If a company is allowed a deduction for expenditure on employment income that is paid or is payable to a shareholder- employee under section CE 1 Allocation to deduction year unless unexpired
2: The income is allocated to the income year to which the deduction allowed to the company is allocated, except for an amount equal to any unexpired portion for the income year of the company's expenditure under section EA 4 Allocation otherwise when ceases being unexpired
3: The remaining income is allocated to the income year or years in which the corresponding amount of the company's expenditure on the income is no longer treated as an unexpired portion. amount company deduction employment income income year pay shareholder-employee 1994 No 164 s EB 1(3), (4)
EJ: Spreading of specific expenditure
Contents
Farming and forestry
EJ 1: Spreading backward of deductions for costs of timber
When this section applies
1: This section applies when a person derives income under section CB 22 Timing of deduction
2: The person must allocate every amount allowed as a deduction for a cost of timber to the income years to which the income is allocated under section EI 1 amount deduction income income year 1994 No 164 s EJ 1(2)
EJ 2: Spreading forward of deductions for repairs to fishing boats
When this section applies: generally
1: This section applies when a person who carries on a fishing business in New Zealand is allowed a deduction for expenditure incurred in making repairs or alterations required by Part 21 When subsection (3) applies
2: Subsection (3) applies when the person does not cease to carry on the business before the end of the fourth tax year following the tax year in which the expenditure is incurred. Business not ceasing within 4 years
3: The person may do 1 of the following to the total amount of expenditure allowed as a deduction:
a: deduct it in the income year in which the expenditure is incurred; or
b: allocate it to any 1 of the 4 income years following the income year in which the expenditure is incurred, and deduct it in that income year; or
c: allocate parts of it over some or all of the 4 income years following the income year in which the expenditure is incurred, and deduct each part allocated in the income year to which it is allocated; or
d: deduct it, or any part of it that has not already been deducted, in the fourth income year following the income year in which the expenditure is incurred. When subsection (5) applies
4: Subsection (5) applies when the person ceases to carry on the business before the end of the fourth tax year following the tax year in which the expenditure is incurred. Business ceasing within 4 years
5: The person may do 1 of the following to the total amount of expenditure allowed as a deduction:
a: deduct it, or any part of it that has not already been deducted, in the income year in which the person ceases to carry on the business; or
b: allocate it, or any part of it that has not already been deducted, equally to the income year in which it is incurred and the following income years in which the person continues to carry on the business. Some definitions
6: In this section,— fishing boat
a: means a boat registered as a fishing vessel under section 103
b: includes a small boat belonging to any boat that is so registered fishing business means a business of catching or taking fish, including crustaceans and shellfish, for the purposes of sale. amount business deduction fishing boat fishing business income year New Zealand tax year 1994 No 164 s DO 2 Section EJ 2(1) amended 2 November 2012 section 247(1) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 Section EJ 2(6) fishing boat amended 2 November 2012 section 247(2) Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012
EJ 3: Spreading forward of fertiliser expenditure
When this section applies
1: This section applies when—
a: a person carries on a farming or agricultural business on land in New Zealand; and
b: the person incurs expenditure in buying fertiliser or lime or applying fertiliser or lime to some or all of the land; and
c: the expenditure is expenditure for which the person is allowed a deduction. Timing of deduction: if election made
2: The person may choose to allocate the expenditure by allocating some or all of it, in the proportions they choose, to any 1 or more of the 4 income years following the income year in which they incur the expenditure. Timing of deduction: if election not made
3: The person is allowed a deduction in the fourth income year following the income year in which they incur the expenditure for any part of the expenditure—
a: for which they do not claim a deduction in the income year in which they incur the expenditure; or
b: that they do not allocate under subsection (2). Timing of deduction: business ceasing within 4 years
4: If the person ceases to carry on the business before the end of the fourth income year following the income year in which they incurred the expenditure, they must choose 1 of the following ways to deal with any part of the expenditure that has not so far been deducted:
a: the part is to be deducted in the income year in which the person ceases to carry on the business; or
b: the part is to be allocated equally to the income year in which they incurred the expenditure and the following income years in which the person carried on the business. Notice
5: The following provisions apply to an allocation for the purposes of subsections (2) and (4):
a: for subsection (2), the person must give the Commissioner notice of the allocation within the time within which the person is required to file a return of income for the income year to which they allocated the expenditure :
b: for subsection (4), the person must give the Commissioner notice of the allocation within the time within which the person is required to file a return of income for the income year in which the person ceases to carry on the business :
c: for subsection (2) or (4), the Commissioner may allow a longer time in any case or class of cases :
d: for subsection (2), the person must not revoke the allocation. Personal representative
6: An election under subsection (4) may be made by a deceased's personal representative. business Commissioner deduction income year New Zealand notice return of income 1994 No 164 s EK 1 Subsection (5)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Films
EJ 4: Expenditure incurred in acquiring film rights in feature films
Feature films
1: A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is a feature film and—
a: the deduction is under section DS 1
b: the deduction is under section DS 2 Timing of deduction: retention of film right
2: If the person has the film right at the end of an income year, the deduction that is allocated to the income year is the lesser of—
a: the greater of—
i: an apportioned amount of the deduction, calculated for the income year under subsection (3); and
ii: the amount of film income derived in the income year; and
b: the remaining deduction. Calculation of apportioned amount
3: The apportioned amount is calculated for the income year using the formula— Definition of items in formula
4: In the formula,—
a: completed months is the number of months in the income year (including a part of a month) for which the film is completed:
b: non-completed months is 24, reduced by the number of complete months in the period that—
i: starts on the first day of the month in which the film is completed; and
ii: ends on the last day of the income year before the income year referred to in subsection (2):
c: deduction is the remaining deduction. Timing of deduction: disposal of film right
5: If the person disposes of the film right during an income year, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year. Meaning of remaining deduction
6: In this section, remaining deduction means, for an income year, the amount of the deduction for expenditure incurred before the end of the income year that has not been allocated to a previous income year. amount completed deduction feature film film film right income year remaining deduction 1994 No 164 ss EO 3(4), (6), (9), OB 1 residual value Section EJ 4(1) heading substituted 19 December 2007 section 54(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 4(1) substituted 19 December 2007 section 54(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EJ 5: Expenditure incurred in acquiring film rights in films other than feature films
Films other than feature films
1: A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is not a feature film and—
a: the deduction is under section DS 1
b: the deduction is under section DS 2 Timing of deduction: retention of film right
2: If the person has the film right at the end of an income year,—
a: the deduction that is allocated to the income year in which the film right is acquired or the film is completed (whichever is later) is—
i: 50% of the deduction; or
ii: if the film income derived in the income year is more than 50% of the deduction, the lesser of the amount of film income and the total amount of the deduction; and
b: the deduction that is allocated to the next income year is the remaining deduction. Timing of deduction: disposal of film right
3: If the person disposes of the film right during an income year, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year. Meaning of remaining deduction
4: In this section, remaining deduction means, for an income year, the amount of the deduction that has not been allocated to a previous income year. amount completed deduction feature film film film right income year remaining deduction 1994 No 164 s EO 3(5), (6) Section EJ 5(1) heading substituted 19 December 2007 section 55(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 5(1) substituted 19 December 2007 section 55(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EJ 6: Certification of New Zealand films
Certification of New Zealand films
1: The New Zealand Film Commission may certify that a film is a New Zealand film, if the Commission is satisfied that the film has, or will on completion have, a significant New Zealand content, as determined under section 18 Final and provisional certificates
2: The certificate issued by the New Zealand Film Commission must be—
a: a provisional certificate, if the film is not completed :
b: a final certificate, if the film is completed. Applications for certification of New Zealand films
3: An application to the New Zealand Film Commission for a certificate that a film is a New Zealand film must be in writing and must provide the information that the Commission requires. Notice of certificate to Commissioner
4: The New Zealand Film Commission must send a copy of the provisional certificate or the final certificate to the Commissioner immediately after issuing it. Revocation of certificate
5: The New Zealand Film Commission may revoke a provisional certificate or a final certificate if the Commission is satisfied that the certificate should not remain in force, whether because an incorrect statement was made in the provision of information for the purpose of obtaining a certificate or for any other reason. Effect of revocation
6: A revoked certificate is void from the time the certificate was issued. Notice of revocation to Commissioner
7: The New Zealand Film Commission must give notice to the Commissioner immediately after revoking a provisional certificate or a final certificate. Commissioner completed film New Zealand notice 1994 No 164 s EO 4(9)-(11), (13) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EJ 7: Film production expenditure for New Zealand films having no large budget screen production grant
New Zealand films
1: A deduction under section DS 2
a: the film is not one for which a large budget screen production grant is made; and
b: the film has a final certificate under section EJ 6 Timing of deduction: up to completion of film
2: A deduction for film production expenditure incurred in or before the income year in which the film is completed is allocated to the income year in which the film is completed. Timing of deduction: after completion of film
3: A deduction for film production expenditure incurred after the film is completed is allocated to the income year in which it is incurred. completed deduction film film production expenditure income year New Zealand 1994 No 164 s EO 4(4), (6) Section EJ 7 heading substituted 19 December 2007 section 56(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 7(1) heading substituted 19 December 2007 section 56(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 7(1) substituted 19 December 2007 section 56(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EJ 8: Film production expenditure for other films having no large budget screen production grant
Films other than New Zealand films
1: A deduction under section DS 2
a: the film is not one for which a large budget screen production grant is made; and
b: the film does not have a final certificate under section EJ 6 Timing of deduction: up to completion of film
2: If the person has a film right at the end of the income year in which the film is completed, the deduction for film production expenditure incurred in or before the income year is allocated as follows:
a: to the income year in which the film is completed,—
i: 50% of the deduction; or
ii: if the film income derived in the income year is more than 50% of the deduction, the lesser of the amount of film income and the total amount of the deduction; and
b: to the next income year, the remaining deduction. Timing of deduction: after completion of film
3: If the person has a film right in an income year after the film is completed, a deduction for film production expenditure incurred after the film is completed is allocated to the income year in which it is incurred. Timing of deduction: disposal of film right
4: If the person disposes of a film right in the income year in which the film is completed, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year. Meaning of remaining deduction
5: In this section, remaining deduction means, for an income year, the amount of the deduction for film production expenditure that has not been allocated to a previous income year. amount completed deduction film film production expenditure film right income year New Zealand remaining deduction 1994 No 164 s EO 4(5)-(7) Section EJ 8 heading substituted 19 December 2007 section 57(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 8(1) heading substituted 19 December 2007 section 57(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EJ 8(1) substituted 19 December 2007 section 57(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Leases
EJ 9: Personal property lease payments
What this section applies to
1: This section applies to a lease that—
a: is of a personal property lease asset; and
b: is not a finance lease; and
c: is not a specified lease. Payments
2: Personal property lease payments are treated as being paid for the term of the lease. Formula
3: The expenditure that the lessee incurs is allocated to income years using the formula— Definition of items in formula
4: In the formula,—
a: part of term means the part of the term of the lease that falls within the income year:
b: term of the lease is defined in section OB 1
c: total of payments means the total amount of the personal property lease payments. finance lease income year lease lessee personal property lease asset personal property lease payment specified lease term of the lease 1994, No 164 ss EO 2, EO 2A
EJ 10: Amount paid by lessee for non-compliance with covenant for repair
When this section applies
1: This section applies when a lessee of land is allowed a deduction under section DB 15 Timing of deduction
2: The lessee may choose to allocate some or all of the amount of the deduction to any 1 or more of the 3 income years before the income year in which the amount is paid or recovered. The lessee may make an allocation only to an income year in which they used the land for deriving income. Effect of allocation
3: If the lessee makes an allocation,—
a: they are denied a deduction for the allocated amount in the income year in which the amount of the deduction is paid or recovered; and
b: they are allowed a deduction for the allocated amount in the income year to which it is allocated. Notice
4: The following provisions apply to an allocation for the purposes of subsection (2):
a: the lessee makes the election by giving a notice to the Commissioner that specifies how the amount of the deduction has been allocated; and
b: the lessee must give the notice within the time required to file a return of income for the tax year in which the amount was paid or recovered or within a longer time if the Commissioner agrees; and
c: the lessee must not revoke the allocation. amount Commissioner deduction income income year lessee notice return of income tax year 1994 No 164 s EO 5(2), (3) Petroleum mining
EJ 11: Petroleum development expenditure: default allocation rule
When this section applies
1: This section applies when a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area is incurred on or after 1 April 2008, if section EJ 11B Default allocation rule
2: For the purposes of section DT 5(2)(a) Relationship with other petroleum mining provisions
3: Sections EJ 12 to EJ 14 Sections DT 7 DT 8 DT 10 DT 11 DT 16 IH 3 amount deduction income year permit petroleum development expenditure petroleum miner petroleum mining development Section EJ 11 substituted 6 October 2009 section 774(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 11B: Petroleum development expenditure: reserve depletion method
When this section applies
1: This section applies when a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area, if the expenditure is incurred—
a: on or after 1 April 2008; and
b: an election to apply this section, described in subsection (2), is made for the permit area. Choice: first year of commercial production and later years
2: An election to apply this section may be made by a petroleum miner for a permit area, in a return of income for an income year, only if that income year is the first one in which petroleum is produced in commercial quantities in the permit area. The election is irrevocable, and applies this section to petroleum development expenditure that relates to petroleum mining developments in the relevant permit area for the income year and later income years. Reserve depletion method expense allocation rule
3: For the purposes of section DT 5(2)(b) The following table is small in size and contains a formula. (reserve expenditure − previous expenditure) × reserve depletion for probable reserves. Definition of items in formula
4: The items in the formula are defined in subsections (5) to (8). Reserve expenditure
5: Reserve expenditure Previous expenditure
6: Previous expenditure Reserve depletion for the year
7: Reserve depletion for the year Probable reserves
8: Probable reserves Relationship with other petroleum mining provisions
9: Sections EJ 12 to EJ 14 Sections DT 7 DT 8 DT 10 DT 11 DT 16 IH 3 amount deduction income year permit area petroleum development expenditure petroleum miner petroleum mining development Section EJ 11B inserted 6 October 2009 section 774(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 12: Relinquishing petroleum permit
When this section applies
1: This section applies when a petroleum miner relinquishes a petroleum permit. Amount of deduction
2: The amount of the deduction that the miner is allowed on relinquishing the permit is the difference between—
a: the amount of the deduction allowed under section DT 5
i: the permit; or
ii: an asset of the kind described in section CT 7(1)(b)
b: any part of the deduction allocated to earlier income years under section EJ 11(2) EJ 11B(3) Timing of deduction
3: The deduction is allocated to the income year in which the miner relinquishes the permit. amount deduction income year petroleum miner petroleum permit 1994 No 164 s DM 1(5)(a) Section EJ 12(2)(b) substituted 6 October 2009 section 775(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 12B: Dry well drilled
When this section applies
1: This section applies when—
a: the petroleum miner has petroleum development expenditure for a well, the drilling of which stops in an income year, and, from the time of stopping, the well—
i: will never produce petroleum in commercial quantities; and
ii: is abandoned; and
b: part of a deduction under section DT 5 section EJ 11 EJ 11B Allocation
2: The part of the deduction described in subsection (1) is allocated to the income year. amount deduction income year petroleum development expenditure Section EJ 12B inserted 6 October 2009 section 776(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 12C: Well not producing
When this section applies
1: This section applies when—
a: the petroleum miner has petroleum development expenditure for a well that, in an income year—
i: stops producing petroleum in commercial quantities; and
ii: is abandoned; and
b: the petroleum miner has elected to apply EJ 11B
c: part of a deduction under section DT 5 EJ 11B Allocation
2: The part of the deduction described in subsection (1) is allocated to the income year. amount deduction income year petroleum development expenditure Section EJ 12C inserted 6 October 2009 section 776(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 13: Disposal of petroleum mining asset
When this section applies
1: This section applies when a petroleum miner disposes of a petroleum mining asset. Amount, and timing, of deduction
2: Part of a deduction under section DT 5
a: it is attributable to the asset; and
b: it has not been allocated under section EJ 11 EJ 11B Allocation to more than 1 year
3: If the petroleum miner's income from disposing of the asset is derived in 2 or more income years,—
a: the amount of the deduction is allocated among the income years in which the miner derives the income; and
b: the amount allocated to each income year bears the same relation to the total amount of the deduction as the income that the miner derives in that income year bears to the total amount of income that the miner derives from the disposal. Relationship with section EJ 14
4: This section is overridden by section EJ 14 amount deduction dispose income income year petroleum miner petroleum mining asset 1994 No 164 s DM 1(5)(b) Section EJ 13(2)(b) substituted 6 October 2009 section 777(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EJ 14: Disposal of petroleum mining asset to associate
When this section applies
1: This section applies when, in an income year, a petroleum miner disposes of a petroleum mining asset to—
a: a person associated with the miner :
b: a person who holds the asset for the miner :
c: a person who holds the asset for a person associated with the miner. Amount of deduction
2: The maximum amount that may be allocated under section EJ 13 amount associated person dispose income income year net income petroleum miner petroleum mining asset 1994 No 164 s DM 1(6) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EJ 15: Partnership interests and disposal of part of asset
In sections EJ 11 to EJ 14
a: a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership :
b: references to the disposal of an asset apply equally to the disposal of part of an asset. dispose income petroleum permit 1994 No 164 ss DM 9, DM 10 Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EJ 16: Petroleum mining operations outside New Zealand
Sections EJ 11 to EJ 18
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by sections EJ 11 to EJ 18 controlled foreign company New Zealand petroleum miner petroleum mining operations 1994 No 164 s DM 7(1) Definitions
EJ 17: Meaning of offshore development
Section EJ 17 repealed 6 October 2009 section 778(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EJ 18: Meaning of petroleum mining development
Meaning
1: In sections EJ 11 EJ 11B petroleum mining development Activities: inclusions
2: The activities are those carried out in connection with—
a: developing a permit area for producing petroleum:
b: producing petroleum:
c: processing, storing, or transmitting petroleum before its dispatch to a buyer, consumer, processor, refinery, or user:
d: removal or restoration operations. Activities: exclusions
3: The activities do not include further treatment to which all the following apply:
a: it occurs after the well stream has been separated and stabilized into crude oil, condensate, or natural gas; and
b: it is done—
i: by liquefaction or compression; or
ii: for the extraction of constituent products; or
iii: for the production of derivative products; and
c: it is not treatment at the production facilities. permit area petroleum removal or restoration operations Section EJ 18 substituted 6 October 2009 section 778(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Superannuation contributions
EJ 19: Contributions to employees' superannuation schemes
When this section applies
1: This section applies when an employer is allowed a deduction for a superannuation contribution to an employee's superannuation scheme under section DC 6 Timing of deduction
2: The employer may choose to allocate the deduction to the income year for which the contribution was required by the superannuation scheme to be made, or for which the amount of the contribution was calculated taking into account the earnings paid to employees who were members of the scheme during the income year, if the employer makes the contribution within 63 days after the end of the income year. Election
3: The employer must make the election before filing a return of income for the income year or within a longer time if the Commissioner agrees. amount Commissioner deduction employee employer income year return of income superannuation contribution superannuation scheme 1994 No 164 ss DF 3(1), EO 1 Research, development, and resulting market development This heading was inserted 1 October 2005 section 81(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EJ 20: Deductions for market development—product of research, development
When this section applies
1: This section applies if a person is allowed a deduction for expenditure that is not interest and is incurred—
a: on market development for a product that has resulted from expenditure incurred by the person on research or development; and
b: before the person begins commercial production or commercial use of the product. Choice for allocation of deduction
2: The person may choose to allocate all or part of the deduction to an income year—
a: after the income year in which the person incurs the expenditure; and
b: in the way required by section EJ 21 assessable income deduction income year research Sections EJ 20 EJ 21 inserted 1 October 2005 section 81(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EJ 21: Allocation of deductions for research, development, and resulting market development
When this section applies
1: This section applies if a person has—
a: a deduction, for expenditure incurred on research or development, that the person chooses to allocate under section DB 26(6B)
b: a deduction, for depreciation losses for an item used for research or development, that the person chooses to allocate under section EE 1(4B)
c: a deduction, for expenditure incurred on market development for a product that has resulted from expenditure incurred on research or development, that the person chooses to allocate under section EJ 20(2) Timing of deduction
2: The person must allocate the deduction to an income year—
a: in which the person derives assessable income that the person would not have derived but for—
i: expenditure that gives rise to a deduction that may be allocated under this section:
ii: the use or disposal of an item for which the person has a depreciation loss that may be allocated under this section:
b: to which the person would be permitted by Part I Minimum amount of deduction allocated to income year
3: The person must not allocate to an income year (the current year
a: the amount of assessable income referred to in subsection (2)(a) that the person derives in the current year:
b: the amount of the deductions that have not been allocated to income years before the current year. Maximum amount of deduction allocated to income year
4: The person must not allocate to an income year (the current year
a: the amount of assessable income referred to in subsection (2)(a) that the person derives in the current year:
b: the amount of the deductions that—
i: arise in other income years from which a net loss may be carried forward under Part 1 to the current year; and
ii: have not been allocated to income years before the current year. assessable income deduction depreciation losses income year research Sections EJ 20 EJ 21 inserted 1 October 2005 section 81(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (3) substituted 18 December 2006 section 53(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (4) inserted 18 December 2006 section 53(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EK: Environmental restoration accounts
Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Contents
EK 1: Environmental Restoration Funds Account
Account
1: There is a Crown Bank Account called the Environmental Restoration Funds Account that is operated under the Public Finance Act 1989 Payments from person paid into account
2: Every payment a person makes to the Commissioner under section EK 2
a: is public money; and
b: must be paid into the Environmental Restoration Funds Account. Commissioner Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 2: Persons who may make payment to environmental restoration account
Business required to restore environment A person may make a payment to the Commissioner for entry in the person's environmental restoration account for an income year if the person—
a: carries on a business in New Zealand; and
b: expects to incur, for a later income year, expenditure that—
i: is not on revenue account property, other than land to which section CB 6B
ii: is of a type listed in schedule 6B
iii: is of a type not listed in schedule 6B
c: makes a provision for such expenditure in financial statements that are—
i: prepared for external reporting purposes; and
ii: audited by an accountant who is a chartered accountant or has equivalent professional qualifications; and
iii: given by the accountant a standard audit opinion, without qualifications on matters relating to the effect of this subpart. business Commissioner environmental restoration account income year revenue account property Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 3: Payments to environmental restoration account
Upper limit of payment
1: A person must not make a payment for an income year of more than the person's maximum payment for the income year. Lower limit of payment
2: A person must not make a payment for an income year of less than $1,000. Time for making payment
3: A payment made after the day that is 6 months after the end of an income year is not made for the income year unless—
a: the Commissioner has allowed a longer period for the payment; and
b: the payment is made within the period allowed by the Commissioner. Commissioner income year maximum payment Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 4: Environmental restoration account
Person's account
1: The Commissioner must keep an environmental restoration account in the name of every person who makes a payment to the Commissioner under section EK 2 Payments in account
2: Every payment under section EK 2 Amounts in account
3: The only amounts that may be entered in a person's environmental restoration account are—
a: payments made by the person to the Commissioner under section EK 2
b: transfers made to the account under subsection (6):
c: interest paid under section EK 6 Amounts not available to others
4: Amounts entered in a person's environmental restoration account may not, while they are in the account,—
a: be assigned or charged in any way:
b: pass by operation of law to, or into the custody or control of, someone else, except when the person is bankrupt or has been put into liquidation:
c: be assets for the payment of the person's debts or liabilities, except when the person is bankrupt or has been put into liquidation:
d: be assets for the payment of the debts or liabilities of a dead person's estate. Amounts not available except for refunds or transfers
5: An amount entered in a person's environmental restoration account may not be removed from the environmental restoration account except by a refund under section EK 9 EK 12 subsection (6) Transfers of amounts
6: An amount may be transferred from the environmental restoration account of a person—
a: to an environmental restoration account of a person to whom the amount has been transferred under section EK 15 EK 16(3)(b)
b: to the department that is at the time responsible for the administration of the Environment Act 1986 section EK 16(3)(a)
c: to an environmental restoration account of an amalgamated company to which the amount has been transferred under section EK 19 Commissioner may close empty account
7: The Commissioner may close an environmental restoration account of a person if the amount in the environmental restoration account is zero. amalgamating company amount Commissioner environmental restoration account interest liquidation Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 5: Details to be provided with payment to environmental restoration account
1: A person making a payment to an environmental restoration account must provide the Commissioner with a notice, in a form prescribed by the Commissioner, giving—
a: the name of the person; and
b: the income year for which the payment is made; and
c: a calculation of the maximum payment for the person and the income year; and
d: any additional information that the Commissioner requires.
2: The person must provide the information required by subsection (1) within 2 working days from the day of the payment. Commissioner environmental restoration account income year maximum payment Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 6: Interest on payments to environmental restoration account
Interest payable
1: Interest is payable by the Commissioner on—
a: a payment under section EK 2
b: an amount that is treated under section EK 15 EK 16 EK 19 Period
2: Interest is computed with daily rests from the day after the date of the payment until the day before the date on which the payment is included in a refund under section EK 12 section EK 15 EK 16 EK 19 Date to which interest accrues
3: Interest that has accrued on a payment is payable to the person who has the environmental restoration account on the earlier of—
a: 31 March in each year:
b: the day on which the payment is included in a refund under section EK 12 section EK 15 EK 16 EK 19 Rate
4: The interest rate is 3% per year. Commissioner environmental restoration account interest year Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1)(b) amended 1 October 2005 section 54(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting section EK 15, EK 16, or EK 19 section EK 15 or EK 19
EK 7: Deduction for payment
When this section applies
1: This section applies if a person is allowed a deduction under section DQ 4 section EK 2 Amount of deduction
2: The amount of the deduction is calculated using the formula— Definitions of items in formula
3: The items in the formula are defined in subsections (4) and (5). Payment
4: Payment
a: the person's payment to the Commissioner under section EK 2
b: the person's maximum payment for the income year. Tax rate
5: Tax rate
a: is stated in schedule 1
b: would apply to the person for the tax year if the person had sufficient taxable income. Timing of deduction
6: The person is allowed the deduction for the income year for which the payment is made. Commissioner deduction environmental restoration account income tax income year maximum payment tax year taxable income Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 8: Deduction for transfer
When this section applies
1: This section applies if a person is allowed a deduction under section DQ 4 section EK 15 EK 16 EK 19 Amount of deduction
2: The amount of the deduction is calculated using the formula— Definitions of items in formula
3: The items in the formula are defined in subsections (4) and (5) Transfer
4: Transfer section EK 15(3) EK 16 EK 19 Tax rate
5: Tax rate
a: is stated in schedule 1
b: would apply to the person for the tax year if the person had sufficient taxable income. Timing of deduction
6: The person is allowed the deduction for the income year for which the transfer is made. deduction environmental restoration account income tax income year maximum payment tax year taxable income Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 9: Refund of payment if excess, lacking details
When this section applies
1: This section applies if a person's payment under section EK 2
a: more than the person's maximum payment for the income year:
b: made without providing the details required by section EK 5 Refund
2: As soon as practicable after the date on which the payment is received, the Commissioner must refund to the person—
a: the excess, if the payment is more than the person's maximum payment for the income year:
b: the payment, if the payment is described by subsection (1)(b). No interest payable by Commissioner
3: No interest is payable by the Commissioner under section EK 6 Commissioner income year interest maximum payment Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 10: Certain refunds not income
A refund under section EK 9 section CX 43B excluded income Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 11: Application for refund
Who may apply
1: A person may apply to the Commissioner for a refund under section EK 12
a: corresponds to expenditure incurred by the person of a type that is listed in schedule 6B schedule 6B
b: represents an excess in the person's environmental restoration account over the maximum account balance for the person's environmental restoration account for the income year. Application
2: An application for a refund must—
a: be in writing; and
b: state the grounds on which the application is made; and
c: provide evidence satisfactory to the Commissioner verifying the existence of the grounds; and
d: state the amount of the refund that the applicant wants. Commissioner environmental restoration account income year Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 12: Refund
if request or excess balance When this section applies
1: This section applies when—
a: a person wants a refund of some or all of the amount in the person's environmental restoration account and none of sections EK 9 EK 15 EK 16 EK 19
b: the amount in the person's environmental restoration account exceeds the maximum account balance for an income year. Refund if request made
2: The Commissioner must make a refund under this section to a person if—
a: the person applies for a refund and has incurred expenditure—
i: of a type that is listed in schedule 6B schedule 6B
ii: of an amount equal to or greater than the amount given by subsection (3) for the amount of the refund; and
iii: after the first date on which the person made to the Commissioner a payment under section EK 2 section EK 15 EK 16 EK 19
b: the maximum account balance for the latest complete income year for the person's environmental restoration account is less than the amount in the environmental restoration account at the end of that income year. Minimum amount of expenditure incurred
3: The amount of expenditure incurred that corresponds to the amount of a refund is calculated using the formula— Definitions of items in formula
4: The items in the formula are defined in subsections (5) and (6). Amount
5: Amount Tax rate
6: Tax rate
a: is stated in schedule 1
b: would apply to the person for the tax year if the person had sufficient taxable income. Amount of refund if expenditure incurred
7: If a person is entitled to a refund under subsection (2)(a), the amount that the Commissioner must refund to the person is the smallest of—
a: the refund for which the person applies:
b: the contents of the person's environmental restoration account at the time of the refund:
c: the refund corresponding to the person's expenditure that satisfies subsection (2)(a)(i) to (iii). Amount of refund if maximum account balance decreases
8: If a person is entitled to a refund under subsection (2)(b), the amount that the Commissioner must refund is the difference at the end of the latest complete income year between—
a: the amount in the person's environmental restoration account, after any transfer under section EK 15 EK 16 EK 19
b: the person's maximum account balance for the income year. Section EK 17 overrides subsections (7) and (8)
9: Section EK 17 amount Commissioner environmental restoration account income tax income year maximum account balance tax year taxable income Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section EK 12 amended 3 April 2006 section 82 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by adding if request or excess balance Refund Subsection (8) substituted 1 October 2005 section 55(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EK 13: Income when refund given on request
A refund under section EK 12 section CB 24B Commissioner income income year Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 14: Application for transfer
Who may apply
1: A person may apply to the Commissioner for a transfer under section EK 15 Application
2: An application for a transfer must—
a: be in writing; and
b: state the grounds on which the application is made; and
c: state the amount of the transfer that the applicant wants. Commissioner environmental restoration account Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 15: Transfer on request
When this section applies
1: This section applies if—
a: a person applies under section EK 14
b: the person has transferred to the nominated person the obligations to which the amount relates; and
c: none of sections EK 9 EK 12 EK 16 EK 19 Transfer if request made
2: The Commissioner must make a transfer under this section to an environmental restoration account of the person nominated in the application. Transfer treated as payment by nominated person if transfer of obligations verified
3: A transfer under subsection (2) is treated as being a payment by the nominated person to the nominated person's environmental restoration account if the nominated person satisfies the Commissioner that—
a: the obligations to which the transferred amount relates have been transferred to the nominated person; and
b: in the absence of the transfer, the nominated person would be entitled to make a payment, of the amount of the transfer, to the nominated person's environmental restoration account. Commissioner to reverse transfer if not satisfied under subsection (3)
4: If the nominated person does not satisfy the requirements of subsection (3) in relation to an amount, the Commissioner must transfer the amount to the environmental restoration account of the person who made the application under subsection (1)(a). Timing of reversal
5: The transfer under subsection (4) is treated as taking place at the time of the original transfer under subsection (2). Commissioner environmental restoration account Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 16: Transfer on death, bankruptcy, or liquidation
When this section applies
1: This section applies if a person—
a: has an environmental restoration account; and
b: does one of the following:
i: dies:
ii: becomes bankrupt:
iii: is put into liquidation. Transfer to other person
2: Subsection (3) applies if the Commissioner is informed, by the administrator of the person's estate, the Official Assignee, or the person's liquidator, that the obligation to which the balance in the person's environmental restoration account relates has been transferred to another person. Commissioner to make transfer
3: The Commissioner must transfer the amount referred to in subsection (4) to an environmental restoration account of the person to whom the obligation has been transferred. Amount of transfer
4: The Commissioner must transfer under subsection (3) the amount that is in the person's environmental restoration account—
a: on the date on which the person dies, if subsection (1)(b)(i) applies:
b: on the date on which the person becomes bankrupt, if subsection (1)(b)(ii) applies:
c: on the date on which the person is put into liquidation, if subsection (1)(b)(iii) applies. Section EK 17 overrides subsection (4)
5: Section EK 17 Transfer to person treated as payment to account by person
5B: A transfer to the environmental account of a person under subsection (3) is treated as being a payment by that person to their environmental account. Year of income
6: The amount of a transfer under this section is income, under section CB 24B amount Commissioner environmental restoration account income liquidation Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (3) substituted 1 October 2005 section 56(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (5B) inserted 1 October 2005 section 56(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EK 17: Minimum refund or transfer
The Commissioner must not give a refund or make a transfer under any of sections EK 9 EK 12 EK 15 EK 16 EK 19
a: $1,000; and
b: the balance in the person's environmental restoration account on the date on which the refund or transfer is made. Commissioner environmental restoration account Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 18: Payments from which refunds come
Each refund to a person is treated as coming from the total amount in the person's environmental restoration account in the order in which the person made the payments into the account. amount environmental restoration account Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 19: Environmental restoration account of amalgamating company
If an amalgamating company with an environmental restoration account ceases to exist because of an amalgamation during an income year,—
a: the contents of the environmental restoration account of the amalgamating company are transferred to an environmental restoration account of the amalgamated company on the date of the amalgamation:
b: the amalgamated company is treated as having—
i: made to the amalgamated company's environmental restoration account the payments that the amalgamating company made before the amalgamation to the amalgamating company's environmental restoration account; and
ii: made from the amalgamated company's environmental restoration account the transfers that the amalgamating company made before the amalgamation from the amalgamating company's environmental restoration account; and
iii: received from the amalgamated company's environmental restoration account the refunds that the amalgamating company received before the amalgamation from the amalgamating company's environmental restoration account. amalgamated company amalgamating company amalgamation environmental restoration account income year Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 20: Environmental restoration account of member of consolidated group
Member may have environmental restoration account
1: A member of a consolidated group may have an environmental restoration account. Nominated company for group may act on behalf of member
2: The nominated company for the consolidated group may act on behalf of the member under this subpart to—
a: make payments, applications, and transfers:
b: receive refunds and transfers. Use of consolidated financial statements for group
3: In making payments and applications under this subpart, the nominated company may rely on the audited consolidated financial statements for the consolidated group. Use of consolidated figures for liabilities anticipated and expenditure incurred
4: If the nominated company relies on the audited consolidated financial statements for the consolidated group, the consolidated figures for the anticipated liabilities and incurred expenditure of the consolidated group are attributed to the members on the basis of the individual obligations of the members to incur expenditure of a type listed in schedule 6B schedule 6B consolidated group environmental restoration account nominated company Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (2) substituted 18 December 2006 section 57(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EK 21: Commissioner may require notice in electronic format
The Commissioner may require a person to provide a notice under this subpart in an electronic format that the Commissioner prescribes under section 36BC Commissioner Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 22: Meaning of maximum payment
Meaning of maximum payment
1: In this subpart, maximum payment Amount of maximum payment
2: The maximum payment that a person may make for an income year is the lesser of—
a: the amount by which the maximum account balance for the income year for the environmental restoration account exceeds the amount in the environmental restoration account at the end of the income year:
b: the amount, if any, given for the person and the income year by subsection (3). Maximum payment for first 5 years of environmental restoration funds scheme
3: If a person has a maximum account balance for the 2005-06 income year that is more than zero, the amount given by this subsection for the person and for that income year, and for each of the later income years before the 2010-11 income year, is the amount given by the formula— level increase + (year x 0.2 x initial level) – contents. Definitions of items in formula
4: In the formula,—
a: level increase
b: year
c: initial level
d: contents amount business environmental restoration account income year maximum payment Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EK 23: Other definitions
Meaning of maximum account balance
1: In this subpart, maximum account balance
a: if the person does not satisfy section EK 2
b: if the person satisfies section EK 2 provision x tax rate. Definitions of items in formula
2: In the formula in subsection (1)(b)—
a: provision
i: is of a type listed in schedule 6B
ii: is not of a type listed in schedule 6B
b: tax rate
i: is stated in schedule 1
ii: would apply to the person for the tax year if the person had sufficient taxable income. Meaning of environmental restoration account
3: In this subpart, environmental restoration account section EK 4 business Commissioner environmental restoration account income tax income year taxable income Subpart EK inserted 1 October 2005 section 42(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EW: Financial arrangements rules
Contents
Introductory provisions
EW 1: What this subpart does
Financial arrangements rules
1: This subpart contains most of the financial arrangements rules. Meaning of financial arrangements rules
2: Financial arrangements rules means—
a: the sections in this subpart; and
b: sections CC 3 DB 9 to DB 12 EZ 48 FF 2 GD 11 NG 16A
c: sections 90AA to 90AD Purposes of financial arrangements rules
3: The purposes of the financial arrangements rules are—
a: to require the parties to a financial arrangement to accrue over the term of the arrangement a fair and reasonable amount of income derived or expenditure incurred under the arrangement, and so to prevent the deferral of income or the advancement of expenditure; and
b: to require the parties to a financial arrangement to disregard any distinction between capital and revenue amounts; and
c: to require a party to a financial arrangement to calculate a base price adjustment when the rights and obligations of the party under the arrangement cease. amount financial arrangement financial arrangements rules income 1994 No 164 ss EH 20, OB 1 accrual rules
EW 2: Relationship of financial arrangements rules with other provisions
Financial arrangements rules override other provisions
1: The financial arrangements rules prevail over any other provision in relation to the timing and quantifying of income and expenditure under a financial arrangement to which the financial arrangements rules apply, unless the other provision expressly or by necessary implication requires otherwise. Interest excluded from certain valuations
2: Expenditure under a financial arrangement to which the financial arrangements rules apply is not included in—
a: the cost of trading stock for low-turnover traders under subpart EB :
b: the cost of livestock under subpart EC :
c: the cost of bloodstock under subpart EC :
d: the cost of revenue account property :
e: the cost of timber :
f: the cost of acquiring a film or a film right :
g: film production expenditure :
h: petroleum development expenditure :
i: petroleum exploration expenditure. bloodstock film film production expenditure film right financial arrangement financial arrangements rules income low-turnover trader petroleum development expenditure petroleum exploration expenditure revenue account property trading stock 1994 No 164 s EH 26 Subsection (2)(a) (h) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Meaning of financial arrangement and excepted financial arrangement
EW 3: What is a financial arrangement?
Meaning
1: Financial arrangement means an arrangement described in any of subsections (2) to (4). Money received for money provided
2: A financial arrangement is an arrangement under which a person receives money in consideration for that person, or another person, providing money to any person—
a: at a future time; or
b: on the occurrence or non-occurrence of a future event, whether or not the event occurs because notice is given or not given. Examples of money received for money provided
3: Without limiting subsection (2), each of the following is a financial arrangement:
a: a debt, including a debt that arises by law :
b: a debt instrument :
c: the deferral of the payment of some or all of the consideration for an absolute assignment of some or all of a person's rights under another financial arrangement or under an excepted financial arrangement :
d: the deferral of the payment of some or all of the consideration for a legal defeasance releasing a person from some or all of their obligations under another financial arrangement or under an excepted financial arrangement. Excepted financial arrangement ceasing to be excepted
4: For sections EW 7 EW 8
a: an excepted financial arrangement that ceases to be an excepted financial arrangement through the operation of section EW 7 :
b: an excepted financial arrangement that ceases to be an excepted financial arrangement for a party through the operation of section EW 8 consideration excepted financial arrangement financial arrangement legal defeasance money 1994 No 164 ss EH 22, EH 24(2) Subsection (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EW 4: What is not a financial arrangement?
Absolute assignment
1: An absolute assignment of some or all of a person's rights under another financial arrangement or under an excepted financial arrangement is not a financial arrangement, except to the extent described in section EW 3(3)(c) Legal defeasance
2: A legal defeasance releasing a person from some or all of their obligations under another financial arrangement or under an excepted financial arrangement is not a financial arrangement, except to the extent described in section EW 3(3)(d) Excepted financial arrangement
3: An excepted financial arrangement is not a financial arrangement. The relationship between financial arrangements and excepted financial arrangements is dealt with in section EW 6 excepted financial arrangement financial arrangement legal defeasance 1994 No 164 s EH 22(2)-(4)
EW 5: What is an excepted financial arrangement?
Meaning
1: Excepted financial arrangement means an arrangement described in any of subsections (2) to (23). However,—
a: an arrangement described in any of subsections (16) to (18) may cease to be an excepted financial arrangement through the operation of section EW 7 :
b: an arrangement described in any of subsections (19) to (23) may cease to be an excepted financial arrangement for a party who makes an election under section EW 8 Annuity
2: Each of the following is an excepted financial arrangement:
a: an annuity for a term contingent on human life :
b: an annuity for a term not contingent on human life to which section EY 8(2)(c) Bet
3: A bet on any of the following is an excepted financial arrangement:
a: a race, as defined in section 5 :
b: a sporting event under a sports betting system administered under Part 6 :
c: gambling, including a New Zealand lottery, as those terms are defined in section 4(1) Emissions unit
3B: An ETS unit is an excepted financial arrangement. Employment contract
4: An employment contract is an excepted financial arrangement. Farm-out arrangement
5: A farm-out arrangement is an excepted financial arrangement. Group investment fund
6: An interest in a group investment fund is an excepted financial arrangement. Hire purchase: livestock or bloodstock
7: A hire purchase agreement for livestock or bloodstock is an excepted financial arrangement. Insurance contract
8: An insurance contract is an excepted financial arrangement. Lease not finance lease
9: A lease that is not a finance lease is an excepted financial arrangement. Loan in New Zealand currency
10: A loan to which all the following apply is an excepted financial arrangement for the lender:
a: the loan is in New Zealand currency; and
b: the loan is interest-free; and
c: the loan is repayable on demand. Partnership or joint venture
11: An interest in a partnership or a joint venture is an excepted financial arrangement. Share-lending arrangement
11B: A share-lending arrangement is an excepted financial arrangement. Share or option
12: A share, or an option to acquire or to dispose of shares, is an excepted financial arrangement, if the share is acquired, or the person becomes a party to the option, on or after 20 May 1999. This subsection does not apply to a withdrawable share or to an option to acquire or to dispose of withdrawable shares. Specified preference share
13: A specified preference share to which section FZ 1 Superannuation
14: A membership of a superannuation scheme is an excepted financial arrangement. Warranty
15: A warranty for goods or services is an excepted financial arrangement. Certain arrangements to which transitional resident is party
15B: An arrangement to which a transitional resident is a party is an excepted financial arrangement for the transitional resident if—
a: no other party to the arrangement is a New Zealand resident; and
b: the arrangement is not for a purpose of a business carried on in New Zealand by a party to the arrangement. Loan in foreign currency: private or domestic purpose
16: A loan to which all the following apply is an excepted financial arrangement for the borrower:
a: the loan is in foreign currency; and
b: the borrower is a cash basis person; and
c: the borrower uses the loan for a private or a domestic purpose. Option: private or domestic purpose
17: An option to acquire or dispose of property, other than an interest in a financial arrangement, is an excepted financial arrangement for a person who becomes a party to the option for a private or a domestic purpose. Private or domestic agreement for the sale and purchase of property or services
18: An agreement for the sale and purchase of property or services entered into by a person, or a specified option granted to or by a person, is an excepted financial arrangement for the person if,—
a: first,—
i: the agreement is entered into by the person for a private or a domestic purpose; or
ii: the option is granted to or by the person for a private or a domestic purpose; and
b: second, the subject matter of the agreement or option is—
i: real property whose purchase price is less than $1,000,000; or
ii: any other property whose purchase price is less than $400,000; or
iii: services whose purchase price is less than $400,000; and
c: third,—
i: the agreement requires settlement of the property, or performance of the services, to take place on or before the 365th day after the date on which the agreement is entered into; or
ii: the option requires settlement of the property, or performance of the services, if an agreement is entered into as a result of the exercise of the option, to take place on or before the 365th day after the date on which the option is granted. Agreement for the sale and purchase of property or services
19: An agreement for the sale and purchase of property or services is an excepted financial arrangement, except for a party who makes an election under section EW 8
a: all a party's sales or purchases under the agreement are prepaid; and
b: for all the party's agreements under which all sales and purchases are prepaid, the total value of prepayments, on every day in an income year, is $50,000 or less. Short-term agreement for the sale and purchase of property or services
20: A short-term agreement for the sale and purchase of property or services is an excepted financial arrangement, except for a party who makes an election under section EW 8 Short-term option
21: A short-term option is an excepted financial arrangement, except for a party who makes an election under section EW 8 Travellers' cheques
22: Travellers' cheques are excepted financial arrangements, except for a party who makes an election under section EW 8 Variable principal debt instrument
23: A variable principal debt instrument is an excepted financial arrangement, except for a party who makes an election under section EW 8 agreement for the sale and purchase of property or services arrangement bloodstock cash basis person ETS unit excepted financial arrangement farmout arrangement finance lease group investment fund hire purchase agreement income year insurance contract lease New Zealand New Zealand resident non-resident property share share-lending arrangement short-term agreement for the sale and purchase of property or services short-term option specified preference shares superannuation scheme transitional resident variable principal debt instrument withdrawable share 1994 No 164 s EH 24 Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (3)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EW 5(3B) heading inserted 26 September 2008 section 64(1) Climate Change Response (Emissions Trading) Amendment Act 2008 Section EW 5(3B) inserted 26 September 2008 section 64(1) Climate Change Response (Emissions Trading) Amendment Act 2008 Subsection (11B) inserted 1 July 2006 section 83(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (15B) inserted 1 October 2005 section 83(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 83(4) Section EW 5 list of defined terms ETS unit inserted 26 September 2008 section 64(2) Climate Change Response (Emissions Trading) Amendment Act 2008 The list of defined terms was amended 3 April 2006 section 83(3)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting New Zealand resident The list of defined terms was amended 3 April 2006 section 83(3)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting non-resident The list of defined terms was amended 3 April 2006 section 83(3)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting share-lending arrangement The list of defined terms was amended 3 April 2006 section 83(3)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident
EW 6: Relationship between financial arrangements and excepted financial arrangements
Part of financial arrangement
1: An excepted financial arrangement may be part of a financial arrangement. Income or expenditure under specific excepted financial arrangements
2: If an excepted financial arrangement described in any of section EW 5(2) to (15) Income or expenditure under remaining excepted financial arrangements
3: If an excepted financial arrangement described in any of section EW 5(16) to (23) amount excepted financial arrangement financial arrangement financial arrangements rules income 1994 No 164 ss EH 22(4), EH 23
EW 7: Change from private or domestic purpose
When this section applies
1: This section applies when a person who is a party to an excepted financial arrangement described in any of section EW 5(16) to (18) Excepted financial arrangement becomes financial arrangement
2: On and after the date on which the person stops using the excepted financial arrangement for a private or a domestic purpose,—
a: it ceases to be an excepted financial arrangement for the person; and
b: the person becomes a party to a financial arrangement. excepted financial arrangement financial arrangement 1994 No 164 s EH 24(3)
EW 8: Election to treat certain excepted financial arrangements as financial arrangements
Election
1: A person may choose to treat as financial arrangements all the excepted financial arrangements to which the person is a party that are described in any of section EW 5(19) to (23) Election for class of short-term agreements
2: A person may choose to treat a class of short-term agreements for the sale and purchase of property or services as financial arrangements. The person must identify the class by—
a: the currency that applies to the agreements; or
b: the term of the agreements; or
c: both the currency and the term. How election made
3: The person makes an election by returning income derived or expenditure incurred under the chosen arrangements under the financial arrangements rules in their return of income. How election revoked
4: The person revokes the election by giving notice to the Commissioner with their return of income and within the time that the return must be filed under section 37 Effect of revocation
5: The revocation applies to financial arrangements the person enters into after the income year in which the notice is given. Commissioner excepted financial arrangement financial arrangement financial arrangements rules income income year notice return of income short-term agreement for the sale and purchase of property or services 1994 No 164 s EH 25 Application of financial arrangements rules
EW 9: Persons to whom financial arrangements rules apply
Residents
1: A person who is a party to a financial arrangement must calculate and allocate income or expenditure under the arrangement for an income year under the financial arrangements rules, if the arrangement is one to which the rules apply under section EW 10 subsection (2) Non-residents
2: Subsection (1) applies to a person who is not resident in New Zealand only if subsection (3) or (4) applies. Non-resident with New Zealand fixed establishment
3: Subsection (1) applies to a person who is not resident in New Zealand to the extent to which the person is a party to a financial arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand. Non-resident trustee for New Zealand settlor
4: Subsection (1) applies to a person who is not resident in New Zealand if—
a: the person is a trustee for a settlor who is resident in New Zealand; and
b: the trustee is not a person to whom section HH 4(3) financial arrangement financial arrangements rules fixed establishment income New Zealand resident in New Zealand trustee 1994 No 164 s EH 21(1), (3)-(5)
EW 10: Financial arrangements to which financial arrangements rules apply
Entered into on or after 20 May 1999
1: The financial arrangements rules apply to a financial arrangement that all its parties enter into on or after 20 May 1999. Existing immediately before 20 May 1999
2: The financial arrangements rules apply to a financial arrangement existing immediately before 20 May 1999 to the extent to which a person becomes a party to the arrangement on or after 20 May 1999. Rollover, extension, or advance on or after 20 May 1999
3: The financial arrangements rules apply to a financial arrangement that is rolled over or extended, or under which an advance is made, on or after 20 May 1999, under a binding contract entered into before 20 May 1999. Binding contract before 20 May 1999
4: However, the financial arrangements rules do not apply to a financial arrangement if—
a: all its parties enter into it on or after 20 May 1999; and
b: they enter into it under a binding contract entered into before 20 May 1999. Transferred under relationship agreement
5: The financial arrangements rules apply to a financial arrangement to which all the following apply, to the extent to which the transferee becomes a party to it:
a: the transferor is a party to it before 20 May 1999; and
b: it is rolled over or extended, or an advance is made under it, on or after 20 May 1999, under a binding contract entered into before 20 May 1999; and
c: it is transferred under a relationship agreement Binding contract before 20 May 1999 and transfer under relationship agreement
6: However, the financial arrangements rules do not apply to a financial arrangement if—
a: all its parties enter into it on or after 20 May 1999; and
b: they enter into it under a binding contract entered into before 20 May 1999; and
c: it is transferred under a relationship agreement financial arrangement financial arrangements rules matrimonial agreement 1994 No 164 s EH 19 The heading to subsection (5) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (5)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement The heading to subsection (6) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (6)(c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
EW 11: What financial arrangements rules do not apply to
The financial arrangements rules do not apply to—
a: the calculation of resident withholding income :
b: the calculation of non-resident withholding income :
c: interest paid by the Commissioner under Part 7 :
d: interest payable to the Commissioner under Part 7 Commissioner financial arrangements rules income tax interest non-resident withholding income pay resident withholding income 1994 No 164 s EH 21(2) Paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Calculation and allocation of income and expenditure over financial arrangement's term
EW 12: When use of spreading method required
A party to a financial arrangement must use 1 of the spreading methods to calculate an amount of income or expenditure under the arrangement for each income year over the arrangement's term, and to allocate it to the income year, unless section EW 13 amount financial arrangement income income year spreading method 1994 No 164 s EH 33(1)
EW 13: When use of spreading method not required
Base price adjustment year
1: A person does not use any of the spreading methods for a financial arrangement in the income year in which section EW 29 Trustee of personal injury compensation trust
2: A trustee who holds a financial arrangement in trust to manage compensation paid for personal injury under the Accident Insurance Act 1998 section 13 of the Accident Insurance Act 1998 Workers Compensation Act 1956
a: the trustee is a cash basis person; or
b: the trustee would be a cash basis person if the trustee were a natural person. Cash basis person
3: A cash basis person is not required to use any of the spreading methods, but may choose to do so under section EW 61 cash basis person financial arrangement income year spreading method trustee 1994 No 164 s EH 33(1), (4)
EW 14: What spreading methods do
Description
1: The spreading methods are methods of calculating and allocating income and expenditure under a financial arrangement over the arrangement's term. Methods
2: A spreading method is 1 of the following:
aa: the IFRS taxpayer method, to which sections EW 15B to EW 15E
a: the yield to maturity method or an alternative, to which sections EW 16 EW 19 EW 23
b: the straight-line method, to which sections EW 17 EW 19
c: a market valuation method, to which sections EW 18 EW 19 EW 23
d: a determination method or an alternative, to which sections EW 20 EW 23
e: a financial reporting method, to which sections EW 21 EW 23
f: a default method, to which section EW 22 Result
3: The amount calculated for and allocated to the income year under a spreading method is—
a: income, under section CC 3
b: expenditure incurred by the person in the income year. amount financial arrangement IFRS taxpayer method income income year spreading method 1994 No 164 s EH 33 Section EW 14(2)(aa) inserted 19 December 2007 section 58(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 14(2)(e) substituted 6 October 2009 section 779(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 14(2)(e) repealed 19 December 2007 section 58(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 14 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 58(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 15: What is included when spreading methods used
Consideration and amounts
1: A person using a spreading method must include, for the purpose of calculating and allocating income and expenditure under the financial arrangement,—
a: all consideration that has been paid, and all consideration that is or will be payable, to the person for or under the financial arrangement, ignoring—
i: non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C
ii: non-integral fees, if the relevant method is the IFRS method described in section EW 15C or the equity-free fair value method in section EW 15E
b: all consideration that has been paid, and all consideration that is or will be payable, by the person for or under the financial arrangement, ignoring—
i: non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C
ii: non-integral fees, if the relevant method is the IFRS method described in section EW 15C or the equity-free fair value method in section EW 15E
c: all amounts that have been remitted, and all amounts that are to be remitted, by the person under the financial arrangement; and
d: all amounts that would have been payable to the person under the financial arrangement if the amounts had not been remitted by law. Consideration in particular cases
2: If any of sections EW 32 to EW 49 amount consideration financial arrangement income non-contingent fee non-integral fee spreading method 1994 No 164 ss EH 33(2), EH 48(1) Section EW 15(1)(a) amended 19 December 2007 section 59(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(a)(i) added 19 December 2007 section 59(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(a)(ii) added 19 December 2007 section 59(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(a)(ii) amended 29 August 2011 section 199(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 15(1)(b) amended 19 December 2007 section 59(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(b)(i) added 19 December 2007 section 59(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(b)(ii) added 19 December 2007 section 59(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15(1)(b)(ii) amended 29 August 2011 section 199(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 15 list of defined terms non-integral fee inserted 19 December 2007 section 59(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 15B: IFRS taxpayer method
Who this section applies to
1: This section applies to a person who is a party to a financial arrangement if the person uses IFRSs to prepare financial statements and to report for financial arrangements. IFRS taxpayer method
2: The person must use the IFRS taxpayer method, described in this section and in sections EW 15C to EW 15E Functional currency
2B: The IFRS taxpayer method must be applied using New Zealand dollars, even if another currency may be used as the functional currency under IFRSs. Financial statements
2C: Unless the context otherwise requires, references to IFRSs in the IFRS taxpayer method are references to the IFRS rules used to prepare the person's financial statements. Compulsory use of some determinations
3: The person must use 1 of the following methods for the financial arrangement, if the terms of the relevant method allow,—
a: Determination G5C: Mandatory conversion convertible notes
b: Determination G22: Optional conversion convertible notes denominated in New Zealand dollars convertible at the option of the holder
c: Determination G22A: Optional convertible notes denominated in New Zealand dollars
d: Determination G29: Agreements for sale and purchase of property denominated in foreign currency: exchange rate to determine the acquisition price and method for spreading income and expenditure
e: an alternative method to 1 of those methods described in paragraphs (a) to (d), if that alternative—
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (d) may apply; and
iii: results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those methods described in paragraphs (a) to (d). Compulsory use of other methods for certain arrangements
4: The person must use 1 of the methods in subsection (5) to allocate an amount to an income year for the financial arrangement if—
a: the person is not required under subsection (3) to use a method for the financial arrangement; and
b: the financial arrangement—
i: includes an excepted financial arrangement:
ii: is treated by the person or the issuer of the financial arrangement as an equity instrument in whole or in part under IFRSs:
iib: is, under NZIAS 17 and in the person's financial statements, classified as an operating lease:
iii: is an agreement for the sale and purchase of property or services; and
c: the terms of the relevant method allow. Methods for arrangements under subsection (4)
5: The methods referred to in subsection (4) are—
a: the yield to maturity method:
b: Determination G26: Variable rate financial arrangements
c: a determination made by the Commissioner under section 90AC(1)(bb)
d: an alternative method to 1 of those methods described in paragraphs (a) to (c), if that alternative—
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (c) may apply; and
iii: results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those methods described in paragraphs (a) to (c) IFRS method and 3 alternatives
6: If the person is not required under subsection (3) or (4) to use a method for the financial arrangement, the person must use 1 of the following methods for the financial arrangement:
a: the IFRS method described in section EW 15C
b: a determination alternative to IFRS described in section EW 15D
c: the expected value method described in section EW 15E
d: the equity-free fair value method described in section EW 15E Equity instrument
7: In this section, equity instrument equity instrument financial arrangement financial arrangements rules financial statements IFRS IFRS taxpayer method income year NZIAS 17 NZIAS 32 Section EW 15B inserted 19 December 2007 section 60(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15B(2B) heading inserted 6 October 2009 section 780(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(2B) inserted 6 October 2009 section 780(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(2C) heading inserted 6 October 2009 section 780(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(2C) inserted 6 October 2009 section 780(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B(4)(b)(iib) inserted 6 October 2009 section 780(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15B list of defined terms NZIAS 17 inserted 6 October 2009 section 780(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 15C: IFRS method
Who this section applies to
1: This section applies to a person and a financial arrangement if—
a: section EW 15B(6)
b: the person does not use section EW 15D EW 15E IFRS method
2: The person must allocate an amount to an income year for the financial arrangement in accordance with IFRSs, as modified by subsection (3). Fair value method not used for certain financial arrangements
2B: A person must not use the fair value method for a financial arrangement if—
a: the financial arrangement is treated under IFRSs by the person as a hedge of another financial arrangement; and
b: the person uses for the other financial arrangement a method that is neither of the following:
i: the IFRS method:
ii: the method required under Determination G29: Agreements for sale and purchase of property denominated in foreign currency: exchange rate to determine the acquisition price and method for spreading income and expenditure Modification of IFRS method
3: When a person applies the IFRS method, the following modifications are made to the method, if relevant:
a: if the financial arrangement is a financial asset, an amount arising from an impaired credit adjustment under IFRSs is not allocated to an income year. However, when the fair value method is used, adjustments for financial arrangements held by the person are excluded from this paragraph, if the financial arrangements are not derivative instruments and the person's business includes dealing in those financial arrangements:
ab: borrowing costs are not capitalised under NZIAS 23:
b: an amount arising from the fair value method under IFRSs is allocated to an income year, even though the amount is allocated to equity reserves under IFRSs. Impaired credit adjustment
4: In this section, impaired credit adjustment
a: for a financial arrangement accounted for under the fair value method, a movement in fair value—
i: through a decline in the credit quality of the arrangement; or
ii: through an improvement in the credit quality of the arrangement to the extent to which it offsets earlier movements in fair value described in subparagraph (i):
b: for a financial arrangement not accounted for using the fair value method, credit impairment adjustments made under IFRSs. amount Commissioner derivative instrument fair value method financial arrangement IFRS impaired credit adjustment income year NZIAS 23 Section EW 15C inserted 19 December 2007 section 60(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15C(2B) heading inserted 6 October 2009 section 781(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15C(2B) inserted 6 October 2009 section 781(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15C(2B)(b) substituted 29 August 2011 section 200(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 15C(3)(a) substituted 6 October 2009 section 781(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15C(3)(ab) inserted 6 October 2009 section 781(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15C(4)(a) replaced 31 March 2023 section 221(2) Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 Section EW 15C list of defined terms derivative instrument inserted 6 October 2009 section 781(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15C list of defined terms NZIAS 23 inserted 6 October 2009 section 781(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 15D: Determination alternatives to IFRS
Who this section applies to
1: This section applies to a person and a financial arrangement if—
a: section EW 15B(6)
b: the person chooses in a return of income to use a determination alternative to IFRS for the financial arrangement; and
c: the terms of the relevant method, as modified by subsection (3), allow the person to use it for the financial arrangement; and
d: the financial arrangement—
i: is not treated under IFRSs by the person as a hedge; or
ii: is treated under IFRSs by the person as a hedge of other financial arrangements, for each of which the person does not use the fair value method; or
iii: is treated under IFRSs by the person as a hedge of something that is not a financial arrangement. Determination alternatives to IFRS
2: The person must use 1 of the following methods for the financial arrangement, as modified by subsection (3) or (4):
a: Determination G9C: Financial arrangements that are denominated in a currency other than New Zealand dollars: an expected value approach
b: Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach
c: Determination G27: Swaps
d: a determination made by the Commissioner under section 90AC(1)(bb)
e: an alternative method to 1 of those described in paragraphs (a) to (d), if that alternative—
i: has regard to the purposes of the financial arrangements rules under section EW 1(3)
ii: is for financial arrangements similar to those arrangements to which the methods described in paragraphs (a) to (d) may apply; and
iii: results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using 1 of those described in paragraphs (a) to (d) Determination alternatives to IFRS: G9C and G14B modified
3: When a person applies a determination alternative to IFRS that is Determination G9C Determination G14B
a: the term forward contract
b: a requirement that all members of a group of companies to which the person belongs make an election to use the determination alternative is treated as met if—
i: all members of the group of companies make an election on or before the 63rd day after the person enters into the relevant financial arrangement, or they make the election within such further time as the Commissioner may allow; and
ii: the financial arrangement is the first financial arrangement of the group of companies for which Determination G9C Determination G14B
iii: the election is in writing; and
iv: the election is for Determination G9C Determination G14B amount Commissioner fair value method financial arrangement financial arrangements rules forward contract group of companies IFRS Section EW 15D inserted 19 December 2007 section 60(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15D(1)(d) substituted 6 October 2009 section 782(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15D(1)(d)(ii) amended 7 September 2010 section 200(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15D(1)(d)(iii) added 7 September 2010 section 200(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15D(2) amended 6 October 2009 section 782(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 15E: Expected value method and equity-free fair value method
Who this section applies to
1: This section applies to a person and a financial arrangement if—
a: section EW 15B(6)
b: the financial arrangement is denominated in a currency other than New Zealand dollars or is a derivative instrument; and
c: the financial arrangement—
i: is not treated under IFRSs by the person as a hedge; or
ii: is treated under IFRSs by the person as a hedge of other financial arrangements, for each of which the person does not use the fair value method; or
iii: is treated under IFRSs by the person as a hedge of something that is not a financial arrangement; and
d: the person is not in the business of dealing in the financial arrangement; and
e: the person has entered into the financial arrangement in the ordinary course of their business; and
f: the person and all companies in a group of companies to which the person belongs have chosen to use the modified fair value method described in subsection (2) or the equity-free fair value method described in subsection (3), and have notified the Commissioner at the time of filing a return of income. This paragraph may be ignored in whole or in part if the person carries on a business that is not of a substantially similar nature to other companies in the group, and—
i: the person and the other parties to the financial arrangement are not associated; or
ii: the person and the other parties to the financial arrangement are associated and use the same method for the arrangement. Expected value method
2: A person who has chosen under subsection (1)(f) to use the expected value method for the financial arrangement must use a method that—
a: has the features of an expected value approach described in Determination G9C Determination Gl4B
b: allocates a reasonable amount, having regard to the purposes of the financial arrangements rules under section EW 1(3) Equity-free fair value method
3: If the person chooses under subsection (1)(f) to use the equity-free IFRS method for the financial arrangement, the person must use a method that is the fair value method under section EW 15C Derivative instrument
4: amount associated person Commissioner derivative instrument fair value method financial arrangement financial arrangements rules IFRS IFRS taxpayer method income year NZIAS 39 tax year Section EW 15E inserted 19 December 2007 section 60(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 15E(1)(c) substituted 6 October 2009 section 783(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(1)(c)(ii) amended 7 September 2010 section 201(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15E(1)(c)(iii) added 7 September 2010 section 201(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EW 15E(1)(f) substituted 6 October 2009 section 783(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(3) amended 6 October 2009 section 783(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(4) heading repealed 6 October 2009 section 783(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E(4) repealed 6 October 2009 section 783(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 15E list of defined terms associated person inserted 6 October 2009 section 783(5) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EW 16: Yield to maturity method or alternative
Who may use yield to maturity method
1: A person who is a party to a financial arrangement may use the yield to maturity method, if the person is not required to use the IFRS taxpayer method by section EW 15B Who may use alternative
2: A person who is a party to a financial arrangement may use an alternative to the yield to maturity method if the person is not required to use the IFRS taxpayer method by section EW 15B
a: has regard to the principles of accrual accounting; and
b: conforms with commercially acceptable practice; and
c: results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using the yield to maturity method; and
d: is also used by the person for financial reporting purposes for financial arrangements that are the same as, or similar to, the arrangements (although section EW 23 amount financial arrangement IFRS taxpayer method income year 1994 No 164 s EH 34 Section EW 16(1) amended 19 December 2007 section 61(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 16(2) amended 19 December 2007 section 61(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 16 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 61(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 17: Straight-line method
Who may use straight-line method
1: A person who is a party to a financial arrangement may use the straight-line method if—
a: the total value of all the financial arrangements to which the person is a party in an income year has been $1,500,000 or less on every day in the income year; and
b: the person complies with section EW 25(1)
c: the person is not required to use the IFRS taxpayer method by section EW 15B Calculation of total value of financial arrangements
2: When calculating total value, the person must—
a: include every one of their financial arrangements, whether the financial arrangements rules or the old financial arrangements rules apply to it; and
b: use the following values:
i: for a fixed principal financial arrangement, its face value :
ii: for a variable principal debt instrument, the amount owing by or to the person under the financial arrangement on the relevant day :
iii: for a financial arrangement to which the old financial arrangements rules apply, the value determined under those rules. Increase in specified sum
3: The Governor-General may make an Order in Council increasing the sum specified in subsection (1). amount financial arrangement financial arrangements rules fixed principal financial arrangement IFRS taxpayer method income year old financial arrangements rules variable principal debt instrument 1994 No 164 ss EH 35(1), (5), (6), EH 58 Section EW 17(1)(b) amended 19 December 2007 section 62(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 17(1)(c) added 19 December 2007 section 62(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (2)(b)(i) (ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EW 17 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 62(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 18: Market valuation method
Who may use market valuation method
1: A person who is a party to a financial arrangement may use, for the arrangement, a market valuation method if—
a: either—
i: the person's business includes dealing in financial arrangements of the class to which the arrangement belongs; or
ii: the financial arrangement is an exchange-traded option, a forward contract for foreign exchange, or a futures contract; and
b: the parties to the financial arrangement are not associated persons; and
c: either—
i: the Commissioner has approved the market, the method, and the source of information used to determine market values by a determination under section 90AC(1)(c)
ii: the person can demonstrate market prices that are reliable; and
d: the method conforms with commercially acceptable practice; and
e: the person complies with section EW 25(4)
f: the method is also used by the person for financial reporting purposes for financial arrangements that are the same as, or similar to, the arrangements (although section EW 23 way); and
g: the person is not required to use the IFRS taxpayer method by section EW 15B Application of Tax Administration Act 1994
2: Section 22A(1) associated person business Commissioner financial arrangement forward contract futures contract IFRS taxpayer method 1994 No 164 s EH 36(1)-(3) Section EW 18(1)(f) amended 19 December 2007 section 63(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 18(1)(g) added 19 December 2007 section 63(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 18 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 63(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 19: Choice among
YTM or alternative, SL, and MV A person who is not required to use the IFRS taxpayer method and who financial arrangement IFRS taxpayer method spreading method 1994 No 164 ss EH 34(1), EH 35(1), (2), EH 36(3) Section EW 19 heading amended 19 December 2007 section 64(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 19 amended 19 December 2007 section 64(2)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 19 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 64(2)(b) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 20: Determination method or alternative
Who may use determination method
1: A person who is a party to a financial arrangement may use a determination method, that is, a method in a determination made by the Commissioner under section 90AC(1)(d)
a: the person cannot use the yield to maturity method or an alternative; and
b: the person—
i: may not use the straight-line method or a market valuation method; or
ii: may use the straight-line method or a market valuation method but chooses not to do so; and
c: the person is not required to use the IFRS taxpayer method by section EW 15B Who may use alternative
2: A person who is a party to a financial arrangement may use an alternative to a determination method, but may do so only if—
a: the person cannot use the yield to maturity method or an alternative; and
b: the person—
i: may not use the straight-line method or a market valuation method; or
ii: may use the straight-line method or a market valuation method but chooses not to do so; and
bb: the person is not required to use the IFRS taxpayer method by section EW 15B
c: the alternative has regard to the principles of accrual accounting; and
d: the alternative conforms with commercially acceptable practice; and
e: the alternative results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using the determination method; and
f: the alternative is also used by the person for financial reporting purposes for financial arrangements that are the same as, or similar to, the arrangements (although section EW 23 amount Commissioner financial arrangement IFRS taxpayer method 1994 No 164 ss EH 37, EH 38 Section EW 20(1)(b)(ii) amended 19 December 2007 section 65(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20(1)(c) added 19 December 2007 section 65(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20(2)(bb) inserted 19 December 2007 section 65(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 20 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 65(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 21: Financial reporting method
A person who is a party to a financial arrangement may use a financial reporting method if—
a: the person cannot use the yield to maturity method or an alternative; and
b: the person—
i: may not use the straight-line method or a market valuation method; or
ii: may use the straight-line method or a market valuation method but chooses not to do so; and
c: the person is not required to use the IFRS taxpayer method by section EW 15B
d: the Commissioner has not made a determination for the financial arrangement under section 90AC(1)(d)
e: the method conforms with commercially acceptable practice; and
f: the method is also used by the person for financial reporting purposes for financial arrangements that are the same as, or similar to, the arrangement (although section EW 23
g: the method allocates a reasonable amount to each income year over the financial arrangement's term. amount Commissioner financial arrangement IFRS taxpayer method income year Section EW 21 substituted 6 October 2009 section 784(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 21 repealed 19 December 2007 section 66(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 22: Default method
A person who is a party to a financial arrangement may use a default method if—
a: the person cannot use the yield to maturity method or an alternative; and
b: the person—
i: may not use the straight-line method or a market valuation method; or
ii: may use the straight-line method or a market valuation method but chooses not to do so; and
c: the person may not use a determination method or an alternative, or a financial reporting method
d:
e: the method conforms with commercially acceptable practice; and
f: the method allocates a reasonable amount to each income year over the financial arrangement's term. amount financial arrangement income income year 1994 No 164 s EH 40 Section EW 22(c) amended 6 October 2009 section 785(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 22(c) amended 19 December 2007 section 67(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 22(d) repealed 19 December 2007 section 67(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 23: Failure to use method for financial reporting purposes
When this section applies
1: This section applies when a person would be allowed to use a method but for the fact that the person does not comply with whichever is relevant of sections EW 16(2)(d) EW 18(1)(f) EW 20(2)(f) EW 21(f) Person treated as complying
2: The person is treated as complying with whichever is relevant of sections EW 16(2)(d) EW 18(1)(f) EW 20(2)(f) EW 21(f)
a: is used for the financial arrangement, and each financial arrangement that are the same as, or similar to, the arrangements, for every income year over its term for the purposes of the financial arrangements rules; and
b: appropriately reflects the dominant purpose for which the person entered into the financial arrangement; and
c: is not used for the purpose of tax avoidance; and
d: has been approved for use in circumstances applying to the person by the Commissioner, either by giving notice to the person or by making a determination under section 90AC(1)(f) Qualification on subsection (2)(a)
3: A method complies with subsection (2)(a), even if it is a change from a previous method, as long as the Commissioner approves the change in method under the circumstances or conditions specified in a determination under section 90AC(1)(g) Relationship with subject matter: transitional rule for IFRS financial reporting
4: This section is modified by section EZ 50 Commissioner financial arrangement financial arrangements rules income year notice tax avoidance 1994 No 164 s EH 42 Section EW 23(1) amended 6 October 2009 section 786(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 23(1) amended 19 December 2007 section 68(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(2) amended 6 October 2009 section 786(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 23(2) amended 19 December 2007 section 68(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(4) heading added 19 December 2007 section 68(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 23(4) added 19 December 2007 section 68(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 24: Consistency of use of spreading method
Consistency required
1: A person must use the same spreading method for financial arrangements that are the same as, or similar to, the arrangements for every income year. This subsection is overridden by subsection (3). Straight-line method and market valuation method
2: Section EW 25 IFRS taxpayer method
2B: Section EW 25B Change of spreading method
3: Section EW 26 financial arrangement IFRS taxpayer method income year spreading method 1994 No 164 s EH 41 Section EW 24(2B) heading inserted 19 December 2007 section 69(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 24(2B) inserted 19 December 2007 section 69(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 24 list of defined terms IFRS taxpayer method inserted 19 December 2007 section 69(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 25: Consistency of use of straight-line method and market valuation method
Straight-line method for all financial arrangements
1: A person using the straight-line method in an income year for a financial arrangement must use it for all financial arrangements—
a: to which the person is a party at the end of the income year; and
b: for which the person can use it. Straight-line method for every income year of term
2: A person who starts to use the straight-line method for a financial arrangement must use it over the arrangement's remaining term until section EW 29 section EW 26(1) Total value may be over $1,500,000
3: Subsection (2) applies even if the total value of all the financial arrangements to which the person is a party is over $1,500,000 at any time in the arrangement's remaining term. Market valuation method
4: A person who starts to use a market valuation method for a financial arrangement must use it over the arrangement's remaining term until section EW 29 section EW 26(1) Increase in specified sum
5: The Governor-General may make an Order in Council under section EW 17(3) financial arrangement income year 1994 No 164 ss EH 35(3), (4), EH 36(4), EH 58
EW 25B: Consistency of use of specific individual methods under IFRS taxpayer method
Consistency for financial arrangement
1: A person using a specific individual method under 1 of the 4 methods described in section EW 15B(6)
a: the remaining term of the financial arrangement, until section EW 29
b: other financial arrangements that are the same as, or similar to, the financial arrangement, unless different accounting treatments under IFRSs are used for those financial arrangements. Exception: change allowed
2: Subsection (1)(a) does not apply, and a change in specific individual method under the IFRS taxpayer method is allowed, if—
a: the person may use the new specific individual method under the IFRS taxpayer method; and
b: the accounting treatment for the relevant financial arrangement under IFRSs is changed for the purposes of financial reporting in the same income year as the change in specific individual method. Change allowed: spreading method adjustment
3: When a person changes their specific individual method under subsection (2), sections EW 26(3) EW 27 Exception: no spreading method adjustment for change from fair value method
4: Despite subsection (3) of this section, sections EW 26(3) EW 27 section EW 15C section EW 29(13) fair value method financial arrangement IFRS IFRS taxpayer method income year Section EW 25B inserted 19 December 2007 section 70(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 26: Change of spreading method
Requirements for change from straight-line and market value method
1: A person may change from the straight-line method or the market value method if they change to a method that is not the IFRS taxpayer method, and the Commissioner has given written authorisation for the change. Change of other method
2: A person may change from any spreading method to any other method if the Commissioner's written authorisation under subsection (1) is not required for the change, and they have a sound commercial reason for the change. Spreading method adjustment
3: When a person changes their spreading method under subsection (2),—
a: they must use the formula in section EW 27
b: their only income or expenditure under the financial arrangement for the income year to which the formula is applied is the spreading method adjustment. Positive or negative spreading method adjustment
4: A spreading method adjustment calculated under section EW 27
a: if positive, income, under section CC 3 :
b: if negative, expenditure incurred by the person in the income year for which the calculation is made. Application of Tax Administration Act 1994
5: Section 22A(2) Exception: fair value method
6: Despite subsection (3), that subsection, subsection (4), and section EW 27 section EW 15C section EW 29(13) Sound commercial reason
7: In this section, sound commercial reason
a: starting to use or ceasing to use IFRSs to prepare financial statements at the same time as starting to use or ceasing to use the IFRS taxpayer method:
b: starting to use, for the first time, the IFRS taxpayer method for a financial arrangement. Commissioner fair value method financial arrangement financial statements IFRS income income tax liability income year sound commercial reason spreading method 1994 No 164 ss EH 35(3)(b), EH 36(4), EH 43(1), (2), EH 44(3), (4) Section EW 26(1) heading substituted 6 October 2009 section 787(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(1) substituted 6 October 2009 section 787(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(2) amended 6 October 2009 section 787(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EW 26(6) heading added 19 December 2007 section 71(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(6) added 19 December 2007 section 71(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(6) amended 6 October 2009 section 787(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26(7) heading added 19 December 2007 section 71(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(7) added 19 December 2007 section 71(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26(7)(a) substituted 6 October 2009 section 787(4) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 26 list of defined terms fair value method inserted 19 December 2007 section 71(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms financial statements inserted 19 December 2007 section 71(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms IFRS inserted 19 December 2007 section 71(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 26 list of defined terms sound commercial reason inserted 19 December 2007 section 71(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 27: Spreading method adjustment formula
Calculation of spreading method adjustment
1: A person calculates a spreading method adjustment using the formula in subsection (3). What formula applies to
2: The person must apply the formula to each financial arrangement to which they—
a: are a party at the end of the income year in which they change their spreading method; and
b: were a party at the end of the previous income year. Formula
3: The formula is— income (new method) – expenditure (new method) – income (old method) + expenditure (old method). Definition of items in formula
4: The items in the formula are defined in subsections (5) to (8). Income (new method)
5: Income (new method) is the amount that would have been income derived by the person under the financial arrangement if the new method had been used for the arrangement in the period starting on the date on which the person became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Expenditure (new method)
6: Expenditure (new method) is the amount that would have been expenditure incurred by the person under the financial arrangement if the new method had been used for the arrangement in the period starting on the date on which the person became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Income (old method)
7: Income (old method) is income, under section CC 3 Expenditure (old method)
8: Expenditure (old method) is expenditure incurred by the person under the financial arrangement in previous income years. amount financial arrangement income income year spreading method 1994 No 164 s EH 44(1)-(3) Calculation and allocation of income and expenditure when rights and obligations under financial arrangement cease
EW 28: How base price adjustment calculated
A party to a financial arrangement who must calculate a base price adjustment, as described in sections EW 29 EW 30 section EW 31 financial arrangement
EW 29: When calculation of base price adjustment required
Ceasing to be New Zealand resident
1: A party to a financial arrangement who ceases to be a New Zealand resident must calculate a base price adjustment as at the date of the party's ceasing to be a New Zealand resident. This subsection is overridden by section EW 30(1) Ceasing to be party for purpose of New Zealand business
2: A person who is not a New Zealand resident and who is a party to a financial arrangement for the purpose of a business the party carries on through a fixed establishment in New Zealand must calculate a base price adjustment as at the date of the party's ceasing to be a party to the arrangement for that purpose. Maturity
3: A party to a financial arrangement must calculate a base price adjustment as at the date on which the arrangement matures. Treated as maturity
4: A financial arrangement that has not matured because an amount has not been paid is treated as if it had matured if—
a: the amount not paid is immaterial; and
b: the arrangement has been structured to avoid the application of section EW 31 Disposal
5: A party to a financial arrangement who disposes of the arrangement must calculate a base price adjustment as at the date of the disposal. Absolute assignment
6: A party to a financial arrangement who makes an absolute assignment of all the party's rights under the arrangement must calculate a base price adjustment as at the date of the absolute assignment. Defeasance
7: A party to a financial arrangement who makes a legal defeasance of all the party's obligations under the arrangement must calculate a base price adjustment as at the date of the legal defeasance. Sale at discount to associated person
8: A party to a financial arrangement that is a debt must calculate a base price adjustment as at the date on which the creditor sells the debt to a person associated with the debtor and at a discount in the circumstances described in section EW 45(1) to (4) Discharge without consideration
9: A party to a financial arrangement must calculate a base price adjustment as at the date on which a party to the arrangement is discharged from making all remaining payments under the arrangement without fully adequate consideration. Operation of law
10: A party to a financial arrangement must calculate a base price adjustment as at the date on which a party to the arrangement is released from making all remaining payments under the arrangement under the Insolvency Act 2006 Companies Act 1993 Composition with creditors
11: A party to a financial arrangement must calculate a base price adjustment as at the date on which a party to the arrangement is released from making all remaining payments under the arrangement by a deed or agreement of composition with the party's creditors. Lapse of time
12: A party to a financial arrangement must calculate a base price adjustment as at the date on which all remaining payments under the arrangement become irrecoverable or unenforceable through the lapse of time. Change from fair value method under IFRS method
13: A party to a financial arrangement who, for the financial arrangement, changes from the fair value method under the IFRS method described in section EW 15C
13: amount associated person business consideration fair value method financial arrangement fixed establishment legal defeasance maturity New Zealand New Zealand resident 1994 No 164 s EH 45 Section EW 29(10) amended 3 December 2007 section 445 Insolvency Act 2006 First section EW 29(13) heading added 19 December 2007 section 72(1) Taxation (Business Taxation and Remedial Matters) Act 2007 First section EW 29(13) substituted 6 October 2009 section 788(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 First section EW 29(13) added 19 December 2007 section 72(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Second subsection (13) repealed 1 October 2005 section 43(a) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section EW 29 list of defined terms fair value method inserted 19 December 2007 section 72(2) Taxation (Business Taxation and Remedial Matters) Act 2007 The list of defined terms was amended 1 October 2005 section 43(b) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting New Zealand resident New Zealand resident, trustee
EW 30: When calculation of base price adjustment not required
Cash basis person who ceases to be temporary New Zealand resident
1: A cash basis person who ceases to be a New Zealand resident before the first day of the fourth income year following the income year in which they first became a New Zealand resident does not calculate a base price adjustment for a financial arrangement to which they—
a: were a party before first becoming a New Zealand resident; and
b: are a party on the date on which they cease to be a New Zealand resident. Other party who ceases to be New Zealand resident
2: A party to a financial arrangement who ceases to be a New Zealand resident does not calculate a base price adjustment to the extent to which the arrangement relates to a business the party carries on through a fixed establishment in New Zealand. Creditor when legal defeasance occurs
3: A party who has a right to receive money under a financial arrangement the obligations of which are the subject of a legal defeasance does not calculate a base price adjustment on the date of the defeasance if the defeasance requires another person to meet the remaining obligations of the arrangement. Debtor when legal defeasance occurs
4: A party to a financial arrangement does not calculate a base price adjustment if—
a: their obligations under the arrangement are the subject of an absolute legal defeasance; and
b: some or all of the consideration for the defeasance is deferred. Creditor when assignment occurs
5: A party to a financial arrangement does not calculate a base price adjustment if—
a: their rights under the arrangement are the subject of an absolute assignment; and
b: some or all of the consideration for the assignment is deferred. business cash basis person consideration financial arrangement fixed establishment income year legal defeasance money New Zealand New Zealand resident 1994 No 164 s EH 46
EW 31: Base price adjustment formula
Calculation of base price adjustment
1: A person calculates a base price adjustment using the formula in subsection (5). When formula applies
2: The person calculates the base price adjustment for the income year in which section EW 29 Positive base price adjustment
3: A base price adjustment, if positive, is income, under section CC 3 Negative base price adjustment
4: A base price adjustment, if negative, is expenditure incurred by the person in the income year for which the calculation is made. The person is allowed a deduction for the expenditure under sections DB 6 to DB 8 section DB 9 Formula
5: The formula is— consideration – income + expenditure + amount remitted. Definition of items in formula
6: The items in the formula are defined in subsections (7) to (11). Consideration
7: Consideration is all consideration that has been paid, and all consideration that is or will be payable, to the person for or under the financial arrangement, . For the purposes of this subsection, the following are ignored:
i: non-contingent fees, if the relevant method is not the IFRS method described in section EW 15C
ii: non-integral fees, if the relevant method is the IFRS method described in section EW 15C Consideration in particular cases
8: If any of sections EW 32 to EW 49 Income
9: Income is—
a: income
b: dividends derived by the person from the release of the obligation to repay the amount lent; and
c: income derived under section CF 2(2) Expenditure
10: Expenditure is expenditure incurred by the person under the financial arrangement in previous income years. Amount remitted
11: Amount remitted is an amount that is not included in the consideration paid or payable to the person because it has been remitted—
a: by the person; or
b: by law. amount consideration deduction dividend financial arrangement income income year non-contingent fee non-integral fee 1994 No 164 ss EH 47, EH 48(1) Section EW 31(4) amended 29 August 2011 section 201(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 31(7) amended 6 October 2009 section 789(1)(a) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31(7) amended 6 October 2009 section 789(1)(b) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31(7) amended 19 December 2007 section 73(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31(7)(i) added 19 December 2007 section 73(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31(7)(ii) added 19 December 2007 section 73(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 31(9)(a) amended 6 October 2009 section 789(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EW 31 list of defined terms non-integral fee inserted 19 December 2007 section 73(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Consideration Consideration when financial arrangement involves property or services
EW 32: Consideration for agreement for sale and purchase of property or services, hire purchase agreement, specified lease, or finance lease
When this section applies
1: This section applies when an original party to an agreement for the sale and purchase of property or services Value of property or services
2: The value of the property or services is determined by applying subsections (3) to (6) in numerical order until a subsection applies. Lowest price
3: The value of the property or services is the lowest price the parties would have agreed on for the property or services, on the date the agreement, option, or lease was entered into, if payment had been required in full at the time the first right in the property was transferred or the services provided. Two qualifications are—
a: this subsection does not apply to an agreement for the sale and purchase of property or services that is part of another financial arrangement :
b: section EW 34 Cash price
4: The value of the property or services is the cash price of the property or services to which the agreement, option, or lease relates, as determined by section 5 Credit Contracts and Consumer Finance Act 2003 Future or discounted value
5: The value of the property or services is the future value, or the discounted value, or a combination of both the future and discounted values, of the amounts paid or payable on the date on which the first right in the property is transferred or the services are provided, as determined by the Commissioner under a determination under section 90AC(1)(i) Determined by Commissioner
6: The value of the property or services is the amount determined by the Commissioner when either party to the arrangement applies to the Commissioner for a specific determination. Both parties must use this amount. Exclusion
7: This section does not apply if the agreement, option, or lease has lapsed or does not proceed. agreement for the sale and purchase of property or services amount Commissioner consideration finance lease financial arrangement hire purchase agreement property right specified option 1994 No 164 s EH 48(2)-(4) Subsection (1) amended 1 April 2005 section 58 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting property or services property and services Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EW 33: Consideration for hire purchase agreement or finance lease
When this section applies
1: This section applies when a party to a hire purchase agreement or a finance lease pays or is paid consideration for the agreement or lease. Consideration
2: The consideration for a hire purchase agreement or a finance lease includes expenditure or loss incurred by the lessor in preparing and installing the hire purchase asset or personal property lease asset for use to the extent to which it is not taken into account under section EW 32 consideration finance lease hire purchase agreement hire purchase asset lessor personal property lease asset 1994 No 164 s EH 48(5)
EW 34: Consideration in foreign currency
When this section applies
1: This section applies when the consideration payable under a financial arrangement to which section EW 32(3) Lowest price
2: The lowest price referred to in section EW 32(3) section EW 32(3) Consistent application of rate
3: The party must apply the selected rate to the financial arrangement for every income year over its term. Rates
4: The rates are—
a: the rate, on the date on which the parties enter into the financial arrangement, available to the party from a New Zealand registered bank for the exchange of New Zealand dollars for the foreign currency for 1 of the following dates:
i: the date on which the first right in the property is to be transferred; or
ii: if that date is uncertain on the date on which the parties enter into the financial arrangement, the date on which the parties reasonably expect, when entering into the arrangement, that the first right in the property will be transferred; or
b: the rate, on the date on which the parties enter into the financial arrangement, available to the party from a New Zealand registered bank for the exchange of New Zealand dollars for the foreign currency for 1 of the following dates:
i: the date on which final payment is to be made; or
ii: if that date is uncertain on the date on which the parties enter into the financial arrangement, the date on which the parties reasonably expect, when entering into the arrangement, that final payment will be made; or
c: an exchange rate approved by the Commissioner for this subsection in the circumstances applicable to the party in a determination under section 90AC(1)(k) Commissioner consideration financial arrangement income year New Zealand property right year 1994 No 164 s OB 7
EW 35: Value relevant for non-financial arrangements rule
When this section applies
1: This section applies when the value of property acquired or disposed of under a financial arrangement, or the consideration for it, is relevant in determining a person's income or deductions under any provision of this Act that is not a financial arrangements rule. Value
2: The person is treated as having acquired or disposed of the property for a value determined by applying section EW 32(2) consideration deduction financial arrangement financial arrangements rules income property 1994 No 164 s EH 26(2), (3) Consideration treated as paid to person
EW 36: Consideration when person exits from rules: accrued entitlement
When this section applies
1: This section applies when—
a: a person is a party to a financial arrangement; and
b: 1 of the following situations arises:
i:
ii: the person ceases to be resident in New Zealand and is not a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
iii: the person, not resident in New Zealand, ceases to be a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
iv: the person starts using the arrangement for a private or domestic purpose and so it becomes an excepted financial arrangement described in any of section EW 5(16) to (18)
c: at the time the situation arises, the person has an accrued entitlement to be paid consideration under the arrangement. Disposal and consideration
2: The person is treated as having disposed of their accrued entitlement immediately before the situation arose and as having been paid the market value that the accrued entitlement had at that time. accrued entitlement business consideration excepted financial arrangement financial arrangement fixed establishment New Zealand resident in New Zealand 1994 No 164 ss EH 45(5)(a), EH 50(1), (2) Subsection (1)(b)(i) repealed 1 October 2005 section 44 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EW 37: Consideration when person enters rules: accrued obligation
When this section applies
1: This section applies to a person who is a party to a financial arrangement if, when the person has an accrued obligation to pay consideration under the arrangement, 1 or more of the following situations arise:
a: the person is a non-resident who becomes a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
b: the person is a non-resident who—
i: becomes a New Zealand resident who is not a transitional resident; and
ii: is not, immediately before becoming a New Zealand resident, a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
c: the person is a transitional resident for whom the arrangement ceases to be an excepted financial arrangement described in section EW 5(15B)
d: the person is a transitional resident who becomes a New Zealand resident who is not a transitional resident, resulting in the arrangement ceasing to be an excepted financial arrangement described in section EW 5(15B)
e: the person stops using the arrangement for a private or domestic purpose, resulting in the arrangement ceasing to be an excepted financial arrangement described in any of section EW 5(16) to (18) Assumption and consideration
2: The person is treated as having assumed the accrued obligation immediately after the situation arose and as having been paid the market value that a contract to assume the obligation had at that time. accrued obligation business consideration excepted financial arrangement financial arrangement fixed establishment New Zealand New Zealand resident non-resident transitional resident 1994 No 164 ss EH 24(3), EH 50(1A), (2) Subsection (1) substituted 1 October 2005 section 84(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 84(3) The list of defined terms was amended 1 October 2005 section 84(2)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting New Zealand resident See section 84(3) The list of defined terms was amended 1 October 2005 section 84(2)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting non-resident See section 84(3) The list of defined terms was amended 1 October 2005 section 84(2)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting resident in New Zealand See section 84(3) The list of defined terms was amended 1 October 2005 section 84(2)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 84(3)
EW 38: Consideration when disposal for no, or inadequate, consideration
When this section applies
1: This section applies when—
a: a person is a party to a financial arrangement; and
b: the person has an accrued entitlement under the arrangement; and
c: the person disposes of the arrangement; and
d: the disposal of the accrued entitlement—
i: is not for monetary consideration; or
ii: is for a consideration that is less than the market value of the entitlement on the date of the disposal. Consideration is market value
2: The person is treated as having been paid the market value that the accrued entitlement had on the date of the disposal. accrued entitlement consideration financial arrangement 1994 No 164 s EH 49(1)
EW 39: Consideration treated as paid to person on distribution in kind
Section EW 39 repealed 1 October 2005 section 45 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EW 40: Consideration affected by unfavourable factors
When this section applies
1: This section applies when—
a: a person is a party to a financial arrangement; and
b: the person has an accrued entitlement under the arrangement; and
c: the person disposes of the arrangement; and
d: the consideration for the disposal is affected by any of the following factors:
i: a decline in the other party's creditworthiness between the date on which the arrangement was entered into and the date of the disposal; or
ii: an increase, between the date on which the arrangement was entered into and the date of the disposal, in the possibility that the other party will not meet an obligation under the arrangement; or
iii: the occurrence of an event reducing or cancelling the other party's obligations under the arrangement. Exclusion
2: This section does not apply when—
a: the person's business includes holding or dealing in financial arrangements of the class disposed of; and
b: the parties to the arrangement disposed of are not associated persons. Consideration is market value
3: The person is treated as having been paid the market value that the accrued entitlement had on the date of the disposal, as if the consideration had not been affected by a factor described in subsection (1)(d). accrued entitlement associated person business consideration financial arrangement 1994 No 164 s EH 49(3)-(5) Consideration treated as paid by person
EW 41: Consideration when person exits from rules: accrued obligation
When this section applies
1: This section applies when—
a: a person is a party to a financial arrangement; and
b: 1 of the following situations arises:
i:
ii: the person ceases to be resident in New Zealand and is not a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
iii: the person, not resident in New Zealand, ceases to be a party to the arrangement for the purpose of a business carried on by them through a fixed establishment in New Zealand; or
iv: the person starts using the arrangement for a private or domestic purpose and so it becomes an excepted financial arrangement described in any of section EW 5(16) to (18)
c: at the time the situation arises, the person has an accrued obligation to pay consideration under the arrangement. Relief and consideration
2: The person is treated as having been relieved of the accrued obligation immediately before the situation arose and as having paid the market value that a contract to assume the obligation had at that time. accrued obligation business consideration excepted financial arrangement financial arrangement fixed establishment New Zealand resident in New Zealand 1994 No 164 ss EH 45(5)(a), EH 50(1), (2) Subsection (1)(b)(i) repealed 1 October 2005 section 46 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EW 42: Consideration when person enters rules: accrued entitlement
When this section applies
1: This section applies to a person who is a party to a financial arrangement if, when the person has an accrued entitlement to receive consideration under the arrangement, 1 or more of the following situations arise:
a: the person is a non-resident who becomes a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
b: the person is a non-resident who—
i: becomes a New Zealand resident who is not a transitional resident; and
ii: is not, immediately before becoming a New Zealand resident, a party to the arrangement for the purpose of a business carried on by the person through a fixed establishment in New Zealand:
c: the person is a transitional resident for whom the arrangement ceases to be an excepted financial arrangement described in section EW 5(15B)
d: the person is a transitional resident who becomes a New Zealand resident who is not a transitional resident, resulting in the arrangement ceasing to be an excepted financial arrangement described in section EW 5(15B)
e: the person stops using the arrangement for a private or domestic purpose, resulting in the arrangement ceasing to be an excepted financial arrangement described in any of section EW 5(16) to (18) Acquisition and consideration
2: The person is treated as having acquired the accrued entitlement immediately after the situation arose and as having paid the market value that the accrued entitlement had at that time. accrued entitlement business consideration excepted financial arrangement financial arrangement fixed establishment New Zealand New Zealand resident non-resident transitional resident 1994 No 164 ss EH 24(3)(c) EH 50(1A) (2) Section EW 42 substituted 1 April 2005 section 47 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1) substituted 1 October 2005 section 85(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 85(3) The list of defined terms was amended 1 October 2005 section 85(2)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting New Zealand resident See section 85(3) The list of defined terms was amended 1 October 2005 section 85(2)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting non-resident See section 85(3) The list of defined terms was amended 1 October 2005 section 85(2)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting resident in New Zealand See section 85(3) The list of defined terms was amended 1 October 2005 section 85(2)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 85(3)
EW 43: Consideration when acquisition for no, or inadequate, consideration
When this section applies
1: This section applies when—
a: a person becomes a party to a financial arrangement; and
b: the person acquires an entitlement under the arrangement—
i: not for monetary consideration; or
ii: for a consideration that is less than the market value of the entitlement on the date of the acquisition. Consideration is market value
2: The person is treated as having paid the market value that the entitlement had on the date of the acquisition. consideration financial arrangement 1994 No 164 s EH 49(1)
EW 44: Consideration treated as paid by person on distribution in kind
Section EW 44 repealed 1 October 2005 section 48 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
EW 45: Consideration when debt sold at discount to associate of debtor
When this section applies
1: This section applies when a creditor sells a debt on or after 20 May 1999 to a person associated with the debtor and at a discount. Person associated
2: A person is associated with the debtor if the relationship between the person and the debtor is described in section OD 8(3) At a discount
3: A creditor sells a debt at a discount if the creditor sells it for 80% or less of the market value of the debt. Market value
4: The market value of a debt affected by any of the following factors is determined as if its market value were not affected by the factor. The factors are—
a: the occurrence of an event reducing or cancelling the debtor's obligations under the debt; or
b: the occurrence of 1 of the following between the date on which the debt was entered into and the date of the disposal:
i: a decline in the debtor's creditworthiness; or
ii: an increase in the possibility that the debtor will not meet an obligation under the debt. Consideration
5: The debtor is treated as having paid the creditor the amount that the person associated with the debtor pays the creditor. amount associated person consideration 1994 No 164 ss EH 48(6), EH 53
EW 46: Consideration when debt forgiven for natural love and affection
When this section applies: first case
1: This section applies when—
a: a person is a debtor; and
b: the creditor is a natural person; and
c: the creditor forgives the debtor's debt because of the natural love and affection the creditor has for the debtor. When this section applies: second case
2: This section also applies when—
a: a trust is a debtor; and
b: the trust was established mainly to benefit 1 or both of the following:
i: a natural person for whom the creditor has natural love and affection :
ii: an organisation or a trust whose income is exempt under section CW 34 CW 35
c: the creditor is a natural person; and
d: the creditor forgives the debtor's debt. Two points about subsections (1) and (2)
3: For the purposes of subsections (1) and (2),—
a: the debtor's debt includes an amount accrued and unpaid at the time of the forgiveness; and
b: the means by which the debt is forgiven, whether in a will or otherwise, is immaterial. Consideration
4: The debtor is treated as having paid the debt on the date on which the creditor forgives it. amount consideration income 1994 No 164 s EH 52(1) Subsection (2)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EW 46B: Consideration when debt forgiven within economic group
When this section applies
1: This section applies to the extent to which an amount of debt is forgiven and—
a: the creditor is a member of the same wholly-owned group of companies as the debtor and the debtor is a New Zealand resident company:
b: the creditor is a member of the same wholly-owned group of companies as the debtor and, for the debtor, a group of persons who are New Zealand resident companies (the NZ group section OD 3 OD 4
i: common voting interests that add up to 100%; and
ii: if a market value circumstance exists for a company that is part of a group of companies to which the debtor belongs, common market value interests that add up to 100%:
c: if the debtor is a company, the creditor is not a member of the same wholly-owned group of companies as the debtor and the creditor has ownership interests or, as applicable, market value interests in the debtor:
d: if the debtor is a partnership, the creditor has a partner’s interest in the income of the debtor:
e: if the debtor is a look-through company, the creditor has an effective look-through interest in the debtor. Some points about this section
2: For the purposes of this section,—
a: the means by which an amount of debt is forgiven is immaterial:
b: a group of natural persons (the single creditor group
i: the trust was established mainly to benefit a natural person for whom each person of the single creditor group has natural love and affection; and
ii: the amount given by dividing the amount that the trust forgives the debtor by the trust’s proportional ownership ratio is less than the amount given by dividing the amount that the single creditor group forgives the debtor by the group’s proportional ownership ratio ( for example
c: a group of persons (the single corporate creditor group
i: each person is a member of the same wholly-owned group of companies; and
ii: the debtor is not a member of the wholly-owned group of companies. When this section does not apply
3: This section does not apply if—
a: the creditor and debtor are members of the same wholly-owned group of companies; and
b: the creditor is a non-resident; and
c: the debt has been held by a person that is not a member of the wholly-owned group of companies. Consideration: debtor
4: The debtor is treated as having paid the amount of debt on the date on which the creditor forgives it, if—
a: the relevant debt, creditor, and debtor are described in subsection (1)(a) or (b):
b: the proportional debt ratio for the amount equals the proportional ownership ratio. Consideration: creditor
5: The creditor is treated as having been paid the amount of debt on the date on which the creditor forgives it, if—
a: the relevant debt, creditor, and debtor are described in subsection (1)(a) or (b):
b: the proportional debt ratio for the amount equals the proportional ownership ratio. Some definitions
6: For the purposes of this section,— nominal shares proportional debt ratio proportional ownership ratio amount consideration employee group of persons income market value interest New Zealand resident nominal share non-resident partnership pay proportional debt ratio proportional ownership ratio share trustee voting interest wholly-owned group of companies Section EW 46B inserted 30 March 2017 section 391(1) section 391(2) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
EW 47: Consideration when debtor released from obligation
When this section applies
1: This section applies when—
a: a person is released from the obligation to pay an amount owing under a financial arrangement; and
b: the release occurs under—
i: section 304
ii: any of the Inland Revenue Acts; or
iii: a loan described in subsection (2). Social assistance suspensory loan
2: A loan referred to in subsection (1)(b)(iii) is a loan that—
a: is made by a department or instrument of the executive government of New Zealand; and
b: provides for the person's liability to pay to be wholly or partly remitted if they meet conditions intended to promote a social policy objective of the government of New Zealand; and
c: is of a class declared by the Governor-General by Order in Council to be a social assistance suspensory loan. Declaration as social assistance suspensory loan
3: The Governor-General may make an Order in Council declaring a class of loan that meets the criteria in subsection (2) to be a social assistance suspensory loan. Consideration
4: The person is treated as having paid the amount owing on the date on which they are released from the obligation to pay it. amount consideration financial arrangement Inland Revenue Acts New Zealand 1994 No 164 ss EH 51, EH 59 Section EW 47(1)(b)(i) amended 3 December 2007 section 445 Insolvency Act 2006
EW 47B: Consideration when debtor released as condition of new start grant
When this section applies
1: This section applies if, in an income year of a person,—
a: the person carries on a business of—
i: animal husbandry:
ii: poultry-keeping:
iii: beekeeping:
iv: breeding horses other than bloodstock:
v: horticulture:
vi: cropping; and
b: the person is paid a new start grant for the business for an event that is a qualifying event; and
c: the person incurs a liability to make a payment under a financial arrangement—
i: in carrying on the business; and
ii: before the declaration of the state of emergency that relates to the qualifying event; and
d: the liability referred to in paragraph (c)(i) is forgiven or otherwise remitted—
i: as a prerequisite for the payment of the new start grant; and
ii: before the date that is 18 months after the end of the state of emergency; and
e: in the absence of this section, the amount of the remitted liability would be income of the person. Consideration
2: The person is treated as having paid, on the date on which the liability is forgiven or remitted, the part of the amount owing that is the greater of zero and the amount calculated under the formula— remitted amount - current loss - available loss - other loss. Definition of items in formula
3: In the formula—
a: remitted amount
b: current loss
c: available loss
d: other loss
i: is incurred by a person associated with the person who receives the new start grant; and
ii: satisfies subsection (4). Loss incurred by associated person from business or land
4: The loss referred to in subsection (3)(d)—
a: is incurred by a person who—
i: carries on or has carried on the business in respect of which the new start grant is paid or owns or has owned an estate in fee simple or leasehold estate in land used in the business; and
ii: in the opinion of the Commissioner, is under a substantial degree of control by the person; and
iii: in the opinion of the Commissioner, has a substantial identity of interests with the person; and
b: is incurred in respect of—
i: the business referred to in paragraph (a)(i):
ii: land that is used in the business; and
c: is, for the income year in which the liability is remitted,—
i: a net loss of the associated person:
ii: an available net loss for the associated person; and
d: is included in the calculation in subsection (3) to an extent that the Commissioner determines, having regard to the interests of the associated person that are separate from those of the person. Notice to associated person
5: The Commissioner must give to the associated person a written notice of a determination under subsection (4)(d). business deduction diminished value income income year qualifying event Section EW 47B inserted 1 October 2005 section 194 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Consideration when legal defeasance has occurred
EW 48: Legal defeasance
When this section applies
1: This section applies when—
a: the obligations of a financial arrangement were the subject of a legal defeasance that required another person to meet the remaining obligations of the arrangement; and
b: the person who has a right to receive money under the arrangement is now required by section EW 29 Consideration
2: The consideration received by the person who has a right to receive money under the arrangement is the total of—
a: the amounts received from the original debtor; and
b: the amounts received from the person required to meet the remaining obligations. amount consideration financial arrangement legal defeasance money 1994 No 164 s EH 48(1), (7) Consideration when change from fair value method under IFRS method Heading inserted 19 December 2007 section 74(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EW 48B: Consideration when change from fair value method under IFRS method
Who this section applies to
1: This section applies to a party to a financial arrangement who, for the financial arrangement,—
a: changes from the fair value method under the IFRS method described in section EW 15C
b: must calculate a base price adjustment as at the end of the first income year for which the replacement method is used for the financial arrangement section EW 29(13)
2: A person is treated as having been paid, at the end of the first income year for which the replacement method is used for the financial arrangement amount consideration fair value method financial arrangement Section EW 48B inserted 19 December 2007 section 74(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EW 48B(1)(b) amended 29 August 2011 section 202(1) Taxation (Tax Administration and Remedial Matters) Act 2011 Section EW 48B(2) amended 29 August 2011 section 202(2) Taxation (Tax Administration and Remedial Matters) Act 2011 Consideration when anti-avoidance provision applies
EW 49: Anti-avoidance provisions
When this section applies
1: This section applies when it is necessary to determine the consideration that is paid to or by a person in a case to which any of the following provisions applies:
a: section GD 11
b: section GD 13(3)
c: section GD 13(4) Consideration
2: The consideration is the amount determined under the relevant provision. amount consideration 1994 No 164 s EH 48(1) Income and deduction provisions specifically related to financial arrangements
EW 50: Income and deduction when debt sold at discount to associate of debtor
When this section applies
1: This section applies when a creditor sells a debt on or after 20 May 1999 to a person associated with the debtor and at a discount. Person associated
2: A person is associated with the debtor if the relationship between the person and the debtor is described in section OD 8(3) At a discount
3: A creditor sells a debt at a discount if the creditor sells it for 80% or less of the market value of the debt. Market value
4: The market value of a debt affected by any of the following factors is determined as if its market value were not affected by the factor. The factors are—
a: the occurrence of an event reducing or cancelling the debtor's obligations under the debt; or
b: the occurrence of 1 of the following between the date on which the debt was entered into and the date of the disposal:
i: a decline in the debtor's creditworthiness; or
ii: an increase in the possibility that the debtor will not meet an obligation under the debt. Original debt replaced with interest-free loan
5: The associated person is treated as having provided the debtor with an interest-free loan for the amount paid for the debt. Repayment: income and deduction
6: If the debtor later repays the person associated with the debtor more than the amount the associated person paid for the debt, the excess amount paid by the debtor is—
a: income, under section CC 3(1)
b: a deduction that the debtor is allowed under section DB 10(1) amount associated person deduction income 1994 No 164 s EH 53
EW 51: Income when debt forgiven to trustee
When this section applies
1: This section applies when—
a: a trust is a debtor; and
b: the trust was established mainly to benefit 1 or both of the following:
i: a natural person for whom the creditor has natural love and affection; or
ii: an organisation or a trust whose income is exempt under section CW 34
c: the creditor is a natural person; and
d: the creditor forgives the debtor's debt; and
e: a trustee of the trust makes a distribution, including a distribution of beneficiary income, to a beneficiary; and
f: the beneficiary is—
i: not a natural person for whom the creditor has natural love and affection; and
ii: not an organisation or a trust whose income is exempt under section CW 34
g: the distribution is made on or after 20 May 1999. Exclusion
2: This section does not apply when—
a: a trust (trust A) is a debtor; and
b: trust A was established mainly to benefit 1 or both of the following:
i: a natural person for whom the creditor has natural love and affection; or
ii: an organisation or a trust whose income is exempt under section CW 34
c: the creditor is a natural person; and
d: the creditor forgives the debtor's debt; and
e: a trustee of the trust makes a distribution to another trust (trust B); and
f: at the time the distribution is made, trust B is also established mainly to benefit 1 or both of the following:
i: a natural person for whom the creditor has natural love and affection; or
ii: an organisation or a trust whose income is exempt under section CW 34 Two points about subsections (1) and (2)
3: For the purposes of subsections (1) and (2),—
a: the debtor's debt includes an amount accrued and unpaid at the time of the forgiveness; and
b: the means by which the debt is forgiven, whether in a will or otherwise, is immaterial. Distribution is income of trustee
4: The distribution is income of the trustee, under section CC 3(2) Distribution subtracted from total amount forgiven
5: The distribution is subtracted from the total amount of the debts of the trust forgiven to it by the creditor as the total amount stands at the time of the distribution. Timing
6: The income is derived by the trustee in the income year in which the distribution is made. Application of Tax Administration Act 1994
7: Section 22B amount beneficiary income distribution income income year trustee 1994 No 164 s EH 52
EW 52: Deduction for security payment
When subsection (2) applies: loss generally
1: Subsection (2) applies when a person is allowed a deduction under section DB 11(2) Amount of deduction
2: The person is allowed a deduction no greater than the amount of the security payment. When subsection (4) applies: share loss
3: Subsection (4) applies when a person is allowed a deduction under section DB 11(4) Amount of deduction
4: The person is allowed a deduction no greater than the amount of the security payment. amount deduction security payment 1994 No 164 s EH 55 Treatment of original share acquired under financial arrangement This heading was inserted 1 July 2006 section 86 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EW 52B: Share supplier under share-lending arrangement
When this section applies
1: This section applies to a person who—
a: acquires a share under a financial arrangement ( original financial arrangement
b: is the share supplier for a share-lending arrangement; and
c: disposes of the share to the share user as an original share under the share-lending arrangement. Treatment of reacquisition of original share
2: If the person reacquires the original share under the share-lending arrangement, for the purposes of applying the financial arrangements rules to the original financial arrangement—
a: the person did not dispose of the original share to the share user; and
b: the person continued to own the original share until the time that the person reacquired the original share. Treatment of acquisition of replacement share
3: If the person acquires an identical share under the share-lending arrangement, for the purposes of the financial arrangements rules in relation to the original financial arrangement—
a: the identical share is the share that the person acquired under the original financial arrangement; and
b: the person continued to own the identical share until the time that the person acquired the replacement share. financial arrangement financial arrangements rules identical share original share share share-lending arrangement share supplier share user Section EW 52B inserted 1 July 2006 section 86 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 One kind of avoidance
EW 53: Adjustment required
When this section applies
1: This section applies when—
a: the terms of a financial arrangement give either party, both parties, or an associated person the discretion to decide on an amount payable under the arrangement; and
b: it is not generally accepted commercial practice to make financial arrangements containing such terms; and
c: a change in the amount brought about by the exercise of the discretion does not reflect changes in commodity, economic, financial, or industrial indices, or in banking or general commercial rates; and
d: the effect of the financial arrangement is to defeat the intention of the financial arrangements rules. Parties to calculate adjustment
2: Each person who is a party to the financial arrangement must calculate an adjustment for the income years specified in subsection (3) by following the steps in subsections (4) to (6). Income years
3: The adjustment must be calculated for the following income years:
a: until the person ceases to be a party, the fifth income year after the income year in which the parties entered into the financial arrangement and every fifth income year after that; and
b: the income year in which the person ceases to be a party. First step
4: The first step the person takes is to calculate income or expenditure under the financial arrangement for each income year using the yield to maturity method in the manner prescribed by the Commissioner in a determination under section 90AC(1)(a) Consideration and amounts to be included at first step
5: The person must include the following amounts in the calculation:
a: for every income year for which the calculation is made, as described in subsection (3), the consideration and amounts described in section EW 15
b: for every fifth income year, as described in subsection (3)(a),—
i: an amount equal to the financial arrangement's market value on the last day of the income year, as if the person had disposed of the arrangement for that amount; or
ii: if the financial arrangement has no market value, the amount that might reasonably be expected to be paid on a disposal at arm's length. Second step
6: The second step the person takes is to calculate the income tax liability for each income year using the income or expenditure calculated under subsections (4) and (5) in substitution for the income or expenditure previously calculated for the financial arrangement for each income year. amount associated person Commissioner consideration financial arrangement financial arrangements rules income income tax liability income year prescribed 1994 No 164 s EH 57 Application of financial arrangements rules to cash basis persons
EW 54: Meaning of cash basis person
Who is cash basis person
1: A cash basis person is—
a: a natural person who meets the criteria in section EW 56 :
b: a trustee of a deceased's estate, whether or not a natural person, in the circumstances described in section EW 60 Natural persons excluded by Commissioner
2: A natural person may be excluded under section EW 59 cash basis person Commissioner financial arrangement trustee 1994 No 164 ss EH 27, EH 29 Subsection (1)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EW 55: Effect of being cash basis person
Use of spreading method
1: A cash basis person is not required to apply any of the spreading methods to any of their financial arrangements, but may choose to do so under section EW 61 Calculation of base price adjustment
2: The fact that a cash basis person does not use any of the spreading methods for the financial arrangement does not excuse them from the requirement to calculate a base price adjustment when any of section EW 29(1) to (13) cash basis person financial arrangement spreading method 1994 No 164 ss EH 33(4)(a), EH 45(1)
EW 56: Natural person
Criteria for natural person as cash basis person
1: A natural person is a cash basis person for an income year if—
a: 1 of the following applies in the person's case for the income year:
i: section EW 57(1)
ii: section EW 57(2)
b: section EW 57(3)
c: the person is not a trustee. Financial arrangements, income, and expenditure relevant to application of criteria
2: The calculations required by section EW 57(1) to (3) section EW 58 Increase in specified sums
3: The Governor-General may make an Order in Council increasing a sum specified in any of section EW 57(1) to (3) cash basis person financial arrangement income income year trustee 1994 No 164 ss EH 27, EH 58
EW 57: Thresholds
Income and expenditure threshold
1: For the purposes of section EW 56(1)(a)(i) Absolute value threshold
2: For the purposes of section EW 56(1)(a)(ii)
a: for a fixed principal financial arrangement, its face value :
b: for a variable principal debt instrument, the amount owing by or to the person under the financial arrangement :
c: for a financial arrangement to which the old financial arrangements rules apply, the value determined under those rules. Deferral threshold
3: For the purposes of section EW 56(1)(b) Formula
4: The formula is— (accrual income – cash basis income) + (cash basis expenditure – accrual expenditure). Definition of items in formula
5: The items in the formula are defined in subsections (6) to (9). Accrual income
6: Accrual income is the amount that would have been income derived by the person under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. It is calculated using 1 of the following methods, as chosen by the person:
a: the yield to maturity method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or
b: the straight-line method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or
c: an alternative method approved by the Commissioner. Cash basis income
7: Cash basis income is the amount that would have been income derived by the person under the financial arrangement if the person had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Cash basis expenditure
8: Cash basis expenditure is the amount that would have been expenditure incurred by the person under the financial arrangement if the person had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Accrual expenditure
9: Accrual expenditure is the amount that would have been expenditure incurred under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. It is calculated using 1 of the following methods, as chosen by the person:
a: the yield to maturity method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or
b: the straight-line method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or
c: an alternative method approved by the Commissioner. absolute value amount cash basis person Commissioner financial arrangement fixed principal financial arrangement income income year old financial arrangements rules spreading method variable principal debt instrument 1994 No 164 s EH 27(1)-(5), (7) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EW 58: Financial arrangements, income, and expenditure relevant to criteria
Inclusions in and exclusions from thresholds
1: The calculations required by section EW 57(1) to (3)
a: the calculations include an arrangement, or income and expenditure, to which subsection (2) or (3) applies only to the extent of the person's interest in it, as described in each subsection; and
b: the calculations exclude the value of an arrangement, and income and expenditure, in which the person has the interest described in subsection (4) or (5). Natural person who is partner
2: This subsection applies when a partnership required to make a joint return of income under section 42(1)
a: is a party to the arrangement to the extent of the partner's share in the arrangement; and
b: derives income or incurs expenditure under the arrangement to the extent of the partner's share in the income or expenditure of the partnership. Natural person who is beneficiary of bare trust
3: This subsection applies when the trustee of a bare trust is a party to a financial arrangement. A natural person who is a beneficiary of the bare trust—
a: is treated as a party to the arrangement to the extent of the beneficiary's share of the beneficial interest in the arrangement; and
b: is treated as deriving income or incurring expenditure under the arrangement to the extent of the beneficiary's share of the beneficial interest in the arrangement. Natural person who is beneficiary of trust other than bare trust
4: This subsection applies when a natural person is a beneficiary of a trust, other than a bare trust, whose trustee is a party to a financial arrangement. The following are excluded from the calculations required by section EW 57(1) to (3)
a: the value of the arrangement, if it produces trustee income or beneficiary income under the trust rules; and
b: income under the arrangement that is trustee income or beneficiary income under the trust rules. Natural person who is trustee
5: This subsection applies when a natural person is a party to a financial arrangement as a trustee. The following are excluded from the calculations required by section EW 57(1) to (3)
a: the value of the arrangement, if it produces trustee income or beneficiary income under the trust rules; and
b: income under the arrangement that is trustee income or beneficiary income under the trust rules; and
c: the value of the arrangement, if expenditure is incurred under it; and
d: expenditure incurred under the arrangement. beneficiary income financial arrangement financial arrangements rules income old financial arrangements rules return of income trust rules trustee trustee income 1994 No 164 ss EH 27(6), EH 28, EH 30
EW 59: Exclusion by Commissioner
The Commissioner may treat a natural person who would otherwise be a cash basis person for a class of financial arrangements as not being a cash basis person for the class if that or any other person has structured and promoted the class to defer an income tax liability. cash basis person Commissioner financial arrangement income tax liability 1994 No 164 s EH 27(8)
EW 60: Trustee of deceased's estate
When trustee of estate is cash basis person
1: A trustee of a deceased's estate is a cash basis person for financial arrangements in the estate in the circumstances described in subsection (2) for the period described in subsection (3). Circumstances
2: The circumstances are that, at the time of the deceased's death,—
a: the deceased is a cash basis person; and
b: the financial arrangements in the deceased's estate meet the requirements of section EW 56(1)(a) Period
3: The period is the income year in which the deceased dies and in each of the 4 following income years. However, if at any time in those 5 income years the financial arrangements in the deceased's estate cease to meet the requirements of section EW 56(1)(a) Modifications to be read in
4: For the purposes of this section, sections EW 54 to EW 56 cash basis person financial arrangement income year trustee 1994 No 164 s EH 29
EW 61: Election to use spreading method
Election of spreading method
1: A cash basis person may choose to use a spreading method, unless subsection (2) applies. Election not allowed
2: A cash basis person may not choose to use a spreading method for a financial arrangement in the income year in which section EW 29 How election made
3: The person makes the election by calculating a cash basis adjustment under section EW 62(1) Effect of election
4: The person must use a spreading method for—
a: all financial arrangements to which the person is a party at the time of making the election; and
b: all financial arrangements the person enters into after the income year in which they make the election. How election revoked
5: The person revokes the election by giving notice to the Commissioner with a return of income and within the time that the return must be filed under section 37 Tax Administration Act 1994 Effect of revocation
6: The revocation applies to all financial arrangements the person enters into after the income year in which the notice is given. cash basis person Commissioner financial arrangement income year notice return of income spreading method 1994 No 164 s EH 31
EW 62: When and how calculation of cash basis adjustment required
Choosing spreading method
1: A cash basis person who chooses to use a spreading method must calculate a cash basis adjustment for the income year in which they choose to use a spreading method as if they had ceased to be a cash basis person. Person becoming cash basis person
2: A person who becomes a cash basis person in an income year must calculate a cash basis adjustment for a financial arrangement to which they—
a: are a party at the end of the income year; and
b: were a party at the end of the previous income year. Exclusions
3: However,—
a: a person who becomes a cash basis person in an income year and who chooses to continue using a spreading method in the income year must not calculate a cash basis adjustment; and
b: a person who becomes a cash basis person in an income year must not calculate a cash basis adjustment for a financial arrangement that is already being accounted for on a cash basis. Person ceasing to be cash basis person
4: A person who ceases to be a cash basis person in an income year must calculate a cash basis adjustment for a financial arrangement to which they—
a: are a party at the end of the income year; and
b: were a party at the end of the previous income year. Exclusion
5: However, a person who ceases to be a cash basis person must not calculate a cash basis adjustment for a financial arrangement that is already subject to a spreading method. Person not cash basis person if adjustment not made
6: A person who would be a cash basis person for a financial arrangement if they calculated a cash basis adjustment for it, and who does not calculate the adjustment, is not a cash basis person for the arrangement. Cash basis adjustment
7: A person calculates a cash basis adjustment using the formula in section EW 63 Adjustment is income or expenditure
8: The only income or expenditure under the financial arrangement for the income year to which the formula is applied is the cash basis adjustment. Positive or negative cash basis adjustment
9: A cash basis adjustment is,—
a: if positive, income, under section CC 3(1) :
b: if negative, expenditure incurred by the person in the income year for which the calculation is made. cash basis person financial arrangement income income year spreading method 1994 No 164 ss EH 31(4), EH 32 Subsection (9)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EW 63: Cash basis adjustment formula
Formula
1: A person calculates a cash basis adjustment using the formula— adjusted income – adjusted expenditure – previous income + previous expenditure. Definition of items in formula
2: The items in the formula are defined in subsections (3) to (6). Adjusted income
3: Adjusted income is,—
a: for a person who becomes a cash basis person, the amount that would have been income derived by the person under the financial arrangement if the person had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made; and
b: for a person who ceases to be a cash basis person, the amount that would have been income derived by the person under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Adjusted expenditure
4: Adjusted expenditure is,—
a: for a person who becomes a cash basis person, the amount that would have been expenditure incurred by the person under the financial arrangement if they had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made; and
b: for a person who ceases to be a cash basis person, the amount that would have been expenditure incurred by the person under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Previous income
5: Previous income is income derived by the person under the financial arrangement in previous income years. Previous expenditure
6: Previous expenditure is expenditure incurred by the person under the financial arrangement in previous income years. amount cash basis person financial arrangement income income year spreading method 1994 No 164 s EH 32(4)
EX: Controlled foreign company and foreign investment fund rules
Contents
Controlled foreign company rules When is a company a controlled foreign company?
EX 1: Meaning of CFC
Tests of control
1: A foreign company is a CFC if any of the following tests is met:
a: there is a group of 5 or fewer New Zealand residents whose total control interests in the company are more than 50% in any one of the control interest categories :
b: a single New Zealand resident holds a control interest of 40% or more unless at the same time—
i: the person's control interest is less than or equal to a control interest in the same category held by another person; and
ii: the other person is not a New Zealand resident; and
iii: the other person is not associated with the New Zealand resident :
c: there is a group of 5 or fewer New Zealand residents who can control the exercise of the shareholder decision- making rights for the company and, as a result, control the company's affairs. Exception
1B: Even if a test
a: the foreign company is a foreign investment vehicle; and
b: one of the New Zealand residents is—
i: a portfolio investment entity:
ii: an entity eligible to be a portfolio investment entity:
iii: a life insurance company. Status applies for whole accounting period
2: If any of the tests in subsection (1) is met at any time in a foreign company's accounting period and the exception in subsection (1B) accounting period associated person CFC company control control interest control interest category foreign company New Zealand resident shareholder decision-making rights 1994 No 164 s CG 4(1) Subsection (1)(a) (b)(iii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EX 1(1)(b)(i) substituted 7 September 2010 section 202(1) Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EX 1(1B) inserted 1 October 2007 section 14(1) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Section EX 1(1B) amended 19 December 2007 section 75 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 1(2) substituted 1 October 2007 section 14(2) Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 Calculation of person's control interest
EX 2: Four categories for calculating control interests
Separate categories
1: Under section EX 5(1) List of categories
2: The 4 categories are—
a: shareholding in the foreign company :
b: shareholder decision-making rights for the foreign company :
c: rights to receive income from the foreign company :
d: rights to receive distributions of the company's net assets. Detailed calculation rules
3: In each category, more detailed calculation rules appear in section EX 5 Four categories of control interests
4: Accordingly, the rules in section EX 3 associated person control interest direct control interest foreign company income shareholder decision-making rights Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EX 3: Control interest: total of direct, indirect, and associated person interests
A New Zealand resident's control interest in a foreign company at any time is the total of the following for the relevant control interest category:
a: any direct control interest that the New Zealand resident holds in the company :
b: any direct control interests in the company held by persons associated with the New Zealand resident :
c: any indirect control interests that the New Zealand resident holds in the company :
d: any indirect control interests in the company held by persons associated with the New Zealand resident. associated person control interest control interest category direct control interest foreign company New Zealand resident 1994 No 164 s CG 4(2) Paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EX 4: Limits to requirement to include associated person interests
Non-resident relatives
1: For the purposes of section EX 3 No double counting
2: Despite section EX 3(b) associated person CFC control interest direct control interest foreign company New Zealand resident non-resident relative 1994 No 164 s CG 4(3), (7)
EX 5: Direct control interests
Categories of direct control interests
1: A person has a direct control interest in a foreign company at any time if they hold—
a: any of the shares in the foreign company :
b: any of the shareholder decision-making rights for the company :
c: a right to—
i: receive any income of the company for the accounting period in which the time falls; or
ii: have the income of the company for the accounting period in which the time falls dealt with in their interest or on their behalf:
d: a right to—
i: receive any of the value of the net assets of the company, if they are distributed; or
ii: have the net value of the assets, if they are distributed, dealt with in their interest or on their behalf. Percentage of total is counted
2: The direct control interest in each control interest category is the percentage of the total that the person holds. Measurement of available subscribed capital
3: When the direct control interest in the category in subsection (1)(a) is calculated, the percentage is the total of the available subscribed capital per share calculated under the slice rule of the shares held as a percentage of the total available subscribed capital per share calculated under the slice rule of all shares in the company. Varying decision-making rights
4: When the direct control interest in the category in subsection (1)(b) is calculated, if the percentage varies between the rights described in the different paragraphs of the definition of shareholder decision-making rights section OB 1 Income distribution rights: assumptions
5: When the direct control interest in the category in subsection (1)(c) is calculated, it is assumed that—
a: the income is distributed on the last day of the accounting period; and
b: the person's entitlement is unchanged during the period; and
c: a payment of interest on a debenture subject to section FC 1 FC 2 FC 2B accounting period available subscribed capital control interest category direct control interest foreign company income interest payment share shareholder decision-making rights slice rule 1994 No 164 ss CG 3(c), CG 4(4) CG 5(2) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EX 5(1)(c) replaced 30 June 2014 section 201(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 5(1)(d) replaced 30 June 2014 section 201(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Subsection (4) amended 1 October 2005 section 195 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting of shareholder decision-making rights definition Section EX 5(5)(c) amended 6 October 2009 section 790 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 6: Direct control interests include options and similar rights
Entitlement to acquire or extinguish
1: For the purposes of section EX 5 Entitlement arises in various ways
2: A person is entitled to acquire or extinguish something if the entitlement is absolute or contingent and whether the entitlement—
a: arises under a company's constitution; or
b: arises under the terms of an option; or
c: arises under the terms of a convertible note; or
d: arises under the terms of any arrangement substantially similar to any of those described in paragraphs (a) to (c); or
e: arises in some other way. Standard security arrangements
3: Despite subsections (1) and (2), a person is not treated as being entitled to acquire something if—
a: the entitlement arises under a security arrangement; and
b: the person acquired the security arrangement in a transaction entered into on an arm's length basis; and
c: the security arrangement's terms conform to generally accepted commercial practice. No double counting
4: Despite subsections (1) and (2), for the purpose of determining whether a foreign company is a CFC, each of the percentage holdings described in section EX 5 arrangement CFC company convertible note direct control interest foreign company security arrangement 1994 No 164 ss CG 3(b), CG 4(8)
EX 7: Indirect control interests
How indirect control interests arise
1: A person has an indirect control interest in a foreign company to the extent to which the rules in this section attribute to them some or all of the direct control interests held by a CFC in the foreign company. Attribution of CFC's direct interests
2: A CFC's direct control interest in another foreign company is attributed under subsections (3) to (11). Associates
3: For the purposes of this section, the CFC is treated as also holding any direct control interests in the foreign company held by persons associated with the CFC. Attribution to smallest controlling group
4: Subsections (6) to (11) apply to attribute the CFC's direct control interests to the smallest controlling group, to ensure that the attribution exercise does not dilute recognition of a factual chain of control. Attribution on basis of respective income interests
5: If the CFC's direct control interests are attributed to more than 1 person, the direct control interests are divided in proportion to each group member's respective income interest in the CFC. One controlling group
6: If there is only 1 group of New Zealand residents whose control interests have caused the CFC to be a CFC under section EX 1 More than 1 group
7: If there is more than 1 group whose control interests have caused the CFC to be a CFC under section EX 1 Equal smallest groups
8: If there are 2 or more groups that are equally the smallest, and 1 group has the greatest total control interests in the CFC, the attribution is to that group. Equal smallest groups with equal greatest control interests
9: If there are 2 or more smallest groups with equal greatest total control interests in the CFC, the attribution is made in full to each group. No double counting
10: Despite subsection (9), for the purpose of determining whether a foreign company is a CFC, a direct control interest may be counted only once. Sequential application
11: If a foreign company becomes a CFC under this section, this section is then applied to attribute its direct control interests. associated person CFC control control interest direct control interest foreign company income interest New Zealand resident 1994 No 164 s CG 4(5), (6) Calculation of person's income interest
EX 8: Income interests: total of direct and indirect interests
A person's income interest in a CFC at any time is the total of the following:
a: any direct income interest that the person holds in the CFC :
b: any indirect income interest that the person holds in the CFC. CFC direct income interest income interest indirect income interest 1994 No 164 s CG 5(1) Paragraph (a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EX 9: Direct income interests
Categories of direct income interest
1: A person has a direct income interest in a CFC at any time if they hold—
a: any of the shares in the foreign company :
b: any of the shareholder decision-making rights for the company :
c: a right to—
i: receive any income of the company for the accounting period in which the time falls; or
ii: have the income of the company for the accounting period in which the time falls dealt with in their interest or on their behalf:
d: a right to—
i: receive any of the value of the net assets of the company, if they are distributed; or
ii: have the net value of the assets, if they are distributed, dealt with in their interest or on their behalf. Percentage of total is counted
2: The person's direct income interest is the percentage of the total that the person holds. Varying percentages
3: However, if the percentage varies between the different categories, the person's direct income interest is the highest. Measurement of available subscribed capital
4: When the direct income interest in the category in subsection (1)(a) is calculated, the percentage is the total of the available subscribed capital per share calculated under the slice rule of the shares held as a percentage of the total available subscribed capital per share calculated under the slice rule of all shares in the company. Varying decision-making rights
5: When the direct income interest in the category in subsection (1)(b) is calculated, if the percentage varies between the rights described in the different paragraphs of the definition of shareholder decision-making rights section OB 1 Income distribution rights: assumptions
6: When the direct income interest in the category in subsection (1)(c) is calculated, it is assumed that—
a: the income is distributed on the last day of the accounting period; and
b: the person's entitlement is unchanged during the period; and
c: a payment of interest on a debenture subject to section FC 1 FC 2 FC 2B accounting period available subscribed capital CFC debentures direct income interest foreign company income interest payment share shareholder decision-making rights slice rule 1994 No 164 ss CG 3(c), CG 5(2) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EX 9(1)(c) replaced 30 June 2014 section 202(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 9(1)(d) replaced 30 June 2014 section 202(2) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Section EX 9(6)(c) amended 6 October 2009 section 791 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 10: Indirect income interests
Looking through CFCs
1: If a person has a direct income interest in a CFC, and the first CFC has a direct income interest in another CFC, the person has an indirect income interest in the other CFC. Calculation of indirect income interest
2: The indirect income interest is calculated by multiplying the person's direct income interest in the first CFC by the first CFC's direct income interest in the other CFC. Chains of CFCs
3: If there are 2 or more CFCs in a chain of direct income interests between the person and a CFC, the person has an indirect income interest in the CFC at the end of the chain that is calculated by multiplying all the direct income interests in the chain. CFC direct income interest indirect income interest 1994 No 164 s CG 5(3)
EX 11: Options and similar rights in certain cases
Increase in income interest
1: The rules in this section apply to increase a person's income interest in a CFC (first CFC) in some cases. Entitlement to acquire
2: This section applies if the person (or some other person, such as another CFC taken into account when calculating an indirect income interest of the person in the first CFC) has at any time an entitlement (option) to acquire 1 of the things listed in section EX 9(1) Actual holder outside CFC rules attribution
3: For this section to apply, the actual holder of the thing subject to the option must not be—
a: another CFC :
b: a New Zealand resident, unless they are a New Zealand resident whose income interest in the first CFC for the accounting period in question is less than 10% under sections EX 14 to EX 17 Terms of option indicating economic ownership
4: For this section to apply, the option must have 1 of the following features:
a: if this section did not exist, the effect of the option would be to defeat the intent and application of subpart CQ DN :
b: the consideration payable for the exercise of the option is less than the market value of the thing acquired at the time of the acquisition :
c: the holder of the option (or an associated person) has directly or indirectly funded or assisted the actual holder to acquire or hold the thing subject to the option. Calculation as if option exercised
5: If each requirement for this section to apply is met, the person's income interest is calculated as if the option holder had exercised the option. accounting period associated person CFC income income interest indirect income interest New Zealand resident 1994 No 164 s CG 5(4) Subsection (3)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EX 11(3)(b) amended 19 December 2007 section 76(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (4)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EX 12: Reduction of total income interests
Application of this section
1: This section applies if the total income interests for a CFC for an accounting period would be more than 100% (because section EX 9(3) Proportional reduction
2: Each person's income interest for the period is reduced to the amount calculated using the formula— accounting period amount CFC income interest shareholder 1994 No 164 s CG 9
EX 13: Income interests of partners
When this section applies
1: This section applies when a partnership holds rights that would be an income interest in a CFC if the partnership were an individual. Partners' proportions
2: When income interests in the CFC are calculated, each partner is treated as holding a share of anything held by the partnership, in proportion to the partner's interest in the partnership. CFC income interest 1994 No 164 s CG 5(7) Ten percent threshold and variations in income interest level
EX 14: Attribution: 10% threshold
A person has attributed CFC income or attributed CFC loss from a CFC only if the person's income interest in the CFC is 10% or more for the relevant accounting period. accounting period attributed CFC income attributed CFC loss CFC income interest 1994 No 164 s CG 6(1)(b)
EX 15: Associates and 10% threshold
Associates included
1: For the purpose of applying the 10% threshold in section EX 14 Exception
2: Despite subsection (1), the income interest of an associate is not counted if the associate is a CFC. accounting period associated person CFC income interest 1994 No 164 s CG 6(2) Section EX 15(1) substituted 19 December 2007 section 77(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (1) amended 1 October 2005 section 196 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting EX 46(1)(a) EX 46(1)(b) Subsection (1) amended 1 April 2005 section 59(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting sections EX 32(b) and EX 46(1)(a) section EX 46(1)(a)
EX 16: Income interests for certain purposes
When this section applies
1: This section applies for the purposes of determining the attributed CFC income or loss of a person for a period if the person holds an income interest in the CFC on a day in the period. Zero income interest
2: For the purposes of calculating the attributed CFC income or loss of a person for a period, the person has an income interest in a CFC of zero on a day in the period if, on the day, the person is—
a: a non-resident:
b: a transitional resident. Attribution not prevented
3: This section does not override—
a: section CD 13
b: section CQ 2(3)
c: section CQ 5(4) accounting period attributed CFC income attributed repatriation CFC dividend FIF income income interest New Zealand resident non-resident transitional resident 1994 No 164 ss CG 5(6), CG 7(6), CG 8(13), CG 16(5) The heading to section EX 16 substituted 1 October 2005 section 87(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 87(5) and (6) Subsection (1) substituted 1 October 2005 section 87(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 87(5) and (6) Subsection (2) substituted 1 October 2005 section 87(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 87(5) and (6) The list of defined terms was amended 1 October 2005 section 87(4) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 87(5) and (6)
EX 17: Income interest if variations within period
When this section applies
1: This section applies if a person's income interest in a CFC, calculated under sections EX 8 to EX 16 Weighted average
2: The person's income interest for the period is the total of the amounts for the period, each of which is calculated using the formula in subsection (3) for a day in the period. Formula
3: The formula is— Definition of items in formula
4: In the formula,—
a: income interest for day
i: the income interest during the day, if the income interest does not vary during the day:
ii: the income interest at the start of the day, if the income interest varies during the day:
b: days in period CFC income interest Subsection (4)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EX 17 substituted 1 October 2005 section 88(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Calculation of attributed CFC income or loss
EX 18: Formula for calculating attributed CFC income or loss
If a person has attributed CFC income under section CQ 2 section DN 2 person's income interest for accounting period x branch equivalent income or loss of CFC for accounting period. accounting period amount attributed CFC income attributed CFC loss branch equivalent income CFC income interest loss 1994 No 164 s CG 7(2)
EX 19: Taxable distribution from non-qualifying trust
Application of this section
1: This section applies if—
a: a CFC derives a taxable distribution from a non-qualifying trust in an accounting period; and
b: a person has attributed CFC income or loss from the CFC for the period (or would have if the taxable distribution were included in the CFC's branch equivalent income). Additional attributed CFC income
2: The taxable distribution is excluded (under section EX 21(32) Calculation of additional attributed CFC income
3: The amount of the additional attributed CFC income is calculated using the formula— person's income interest in CFC for accounting period x taxable distribution. Non-qualifying trust tax rate
4: The person is liable for income tax on the additional attributed CFC income at the rate in schedule 1 section HH 3(4) Disclosure restrictions on grey list CFCs
5: No additional attributed CFC income arises under this section to the extent to which section EZ 29 2011–12 accounting period amount attributed CFC income branch equivalent income CFC income interest income tax loss non-qualifying trust taxable distribution 1994 No 164 ss CG 6(1)(c), CG 7(4) Subsection (5) amended 3 April 2006 section 89(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 2011–12 2006–07
EX 20: Reduction in attributed CFC loss
Application of this section: no economic loss
1: This section applies if—
a: a person has an amount of attributed CFC loss; and
b: the person suffers no, or substantially no, corresponding economic loss, whether because of a call option, a put option, or any other reason. Application of this section: attributed CFC loss excessive
2: This section also applies if—
a: a person has an amount of attributed CFC loss; and
b: the amount is more than any corresponding economic loss of the person, whether because of the application of the rules for calculating the person's income interest or for any other reason. Reduction to economic loss
3: The attributed CFC loss is reduced to be equal to the economic loss (if any). amount attributed CFC loss income interest 1994 No 164 s CG 7(3) Calculation of branch equivalent income or loss
EX 21: Branch equivalent income or loss: calculation rules
Rules set out in this section
1: For the purpose of calculating the attributed CFC income or loss of a person (taxpayer), the branch equivalent income or loss of the CFC for an accounting period is calculated under the rules in this section. CFC treated as New Zealand resident
2: The rules in this Act are applied as if the CFC were always a New Zealand resident, and—
a: the CFC's branch equivalent income for the accounting period is equal to the CFC's net income for the period; and
b: the CFC's branch equivalent loss for the accounting period is equal to the CFC's net loss for the period. Modifications to rules
3: However, the rules in the Act are modified for the purposes of the calculation by the following subsections. Conversion to New Zealand dollars
4: The taxpayer must choose—
a: for all the calculations to be done in New Zealand dollars; or
b: for all the calculations to be done in the currency of the CFC's financial accounts. If the CFC has no financial accounts, the currency used is that of the CFC's country of residence. The result is then converted into New Zealand dollars at the average of the close of trading spot exchange rates for the fifteenth day of each complete month that falls in the period. Consent for change of currency
5: Having chosen a currency, the taxpayer must use the same currency for calculating branch equivalent income or loss for the CFC for each later consecutive accounting period, unless the Commissioner allows the taxpayer to choose again. Change for commercial purpose
6: The Commissioner may consent to a change under subsection (5) only if satisfied that—
a: the taxpayer's main purpose in changing is a commercial one. (The reducing of tax is not a commercial purpose.); and
b: the change does not have an effect of defeating the intent and application of subpart CQ DN New Zealand currency for financial arrangements
7: Despite subsections (4) to (6), New Zealand currency calculations must be used to calculate that part of the branch equivalent income or loss attributable to financial arrangements if—
a: the total value of financial arrangements to which the CFC is a party is more than $1,000,000 at any time during the relevant accounting period (applying section EW 17(2)(b)
b: the CFC's total net foreign exchange loss attributable to financial arrangements, calculated under subsections (4) to (6) for the accounting period, is more than $100,000. Limit to subsection (7)
8: Subsection (7) does not apply to a financial arrangement if—
a: it is a variable principal debt instrument; and
b: all the rights and obligations of all the parties to the financial arrangement are expressed in the currency chosen under subsection (4)(b); and
c: no other party to the financial arrangement is associated with the CFC; and
d: no person enters into the financial arrangement under an arrangement that has a purpose of defeating the application of subsection (7). Opening cost base: tangible assets: first period
9: If the taxpayer had no attributed CFC income or loss from the CFC for the previous accounting period, the taxpayer must choose whether to measure the cost base at the start of an accounting period of premises, plant, machinery, equipment, and trading stock of the CFC at—
a: historical cost minus any accumulated amounts of depreciation loss, or another value used by the CFC as the starting value for the period for income tax calculations in the country in which the CFC is resident (but only if the value is below market value); or
b: the starting value that would be used under this Act if the CFC had always been a New Zealand resident. Opening cost base: tangible assets: later periods
10: If the taxpayer had attributed CFC income or loss from the CFC for the previous period, the cost base at the start of an accounting period of premises, plant, machinery, equipment, and trading stock of the CFC is the closing value at the end of the previous period used to calculate the income or loss. Opening cost base: financial arrangements: first period
11: If the taxpayer had no attributed CFC income or loss from the CFC for the previous accounting period, the taxpayer must choose to calculate the consideration under the financial arrangements rules for a financial arrangement at the start of an accounting period, at—
a: the market value of the financial arrangement; or
b: the absolute value calculated using the formula— consideration paid to the CFC + expenditure – consideration paid by the CFC – income. Definition of items in formula
12: In the formula,—
a: consideration paid to the CFC is the consideration paid to the CFC for all periods before the accounting period:
b: expenditure is expenditure that would have been incurred under the financial arrangements rules for all periods before the accounting period if the CFC had been resident in New Zealand:
c: consideration paid by the CFC is the consideration paid by the CFC for all periods before the accounting period:
d: income is income that would have been derived under the financial arrangements rules for all periods before the accounting period if the CFC had been resident in New Zealand. Provisions that do not apply
13: The following provisions do not apply:
a: the consolidation rules :
b: section CB 24 subparts DQ EH :
c: sections CD 34 to CD 41 subpart CQ DN :
d: section CW 8 :
e: section CW 33(1) :
f: sections DO 1 DO 2 :
g: sections EW 9 EW 11(b) :
h: subpart FG :
i: section GC 3 :
j: sections IE 1 IF 1 :
k: sections IG 2 IG 3 Business treated as if carried on in New Zealand
14: The following provisions apply as if the CFC's business activities were carried on in New Zealand:
a: sections CT 1 to CT 3 CT 5 to CT 7 CX 36 CX 37 CZ 8 DT 1 to DT 15 DT 17 to DT 19 IH 3 :
b: sections DO 4 DO 4D DO 6 DP 1 to DP 3 DP 7 DP 10 :
c: section EZ 15 section EZ 14 :
d: the definitions in subpart OB Transfer pricing rules
15: Section GD 13 sections DN 4 IE 3 IG 4 LC 4 LC 5 section GD 13 sections OD 7 OD 8(3) Dividends generally
16: Sections CW 9 to CW 11 CZ 13 Dividends: exempt income
17: Despite subsection (16)
a: the dividends are derived by the CFC from another CFC and the taxpayer has a 10% or greater income interest (under sections EX 14 to EX 17
b: the dividends are from shares that are an attributing interest in a FIF of the CFC. Benefits from money advanced
18: When section CC 7 No tainting by association
19: Sections CB 7 to CB 11 Crown acquisition of land
20: The reference in section EI 7(1) Amount of depreciation loss recovered
21: When sections EE 41 to EE 44 GST and value-added taxes
22: When sections CX 1 DB 2 EE 38 EE 37 EE 45 EZ 7 EZ 16 Government grants to businesses
23: When section DF 1 section DF 1 Subvention payments
24: If an amount is paid as consideration for the transfer of tax losses,—
a: it is income if derived by the CFC; and
b: it is a deduction if payable by the CFC but only if paid to a person resident in the same country as the CFC and if deductible under the taxation law of that country. Life insurers
25: Subsection (26) applies if—
a: the CFC itself carries on the business of providing life insurance; or
b: shares in the CFC are held (directly or indirectly) by a foreign company (parent company, in subsection (26)) that carries on the business of providing life insurance and those shares have to be taken into account under sections EX 8 to EX 13 Policyholders
26: If the test in subsection (25) is met, the life insurance rules do not apply and the branch equivalent income or loss of the CFC is the amount actuarially determined to be part of the CFC's profit or loss When subsection (26) does not apply
27: Despite subsection (25), subsection (26) does not apply if the Commissioner—
a: considers that the amount calculated is not a reasonable reflection of the part attributable to shareholders; or
b: has requested and not received sufficient information to enable the actuarial calculation to be reviewed. Mineral mining activities
28: Sections BC 7 CU 1 to CU 29 CX 38 to CX 40 CZ 2 CZ 4 DU 1 to DU 12 DZ 12 IH 4 IH 5 Petroleum mining activities
29: Sections CT 1 to CT 3 CT 5 CX 36 CX 37 CZ 8 DT 1 to DT 15 DT 17 to DT 19 IH 3 Finance leases and specified leases
30: A lease entered into by the CFC before the start of the first accounting period in which the CFC is a CFC is neither a finance lease (subject to the financial arrangements rules and sections FC 8A to FC 8H sections FC 6 to FC 8 When subsection (30) does not apply
31: Subsection (30) does not apply if another party to the lease is either a CFC or a New Zealand resident. Taxable distributions from non-qualifying trust
32: If the CFC gets a taxable distribution from a non-qualifying trust—
a: section HH 3(4)
b: the taxable distribution is not taken into account in calculating the CFC's branch equivalent income or loss; and
c: section EX 19 CFCs with interest in FIFs
33: If the CFC has rights in a FIF,—
a: the rights are not prevented from being an attributing interest of the CFC in a FIF merely because the notional New Zealand residence of the CFC under subsection (2) causes section EX 32
b: the CFC's FIF income or loss is not taken into account in calculating the branch equivalent income; and
c: section EX 46 Transitional treatment of cross-border reinsurance
34: Section CZ 12 Disclosure restrictions on grey list CFCs
35: A CFC has no amount of branch equivalent income or loss under this section for an accounting period to the extent to which section EZ 29 2011–12 absolute value accounting period adjusted tax value amount arrangement associated person attributed CFC income attributed CFC loss attributed repatriation attributing interest branch equivalent income branch equivalent loss business CFC close of trading spot exchange rate Commissioner consideration consolidation rules deduction depreciation loss dividend exempt income FIF FIF income finance lease financial arrangement financial arrangements rules foreign company GST GST payable income income interest income tax income year input tax lease life insurance life insurance rules loss mineral net income net loss New Zealand New Zealand resident non-qualifying trust non-resident output tax petroleum resident in New Zealand share shareholder specified lease tax taxable distribution trading stock variable principal debt instrument 1994 No 164 ss CG 6(1)(c), CG 11 Subsection (13)(a) (j) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (14)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (14)(b) amended 1 October 2005 section 197 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting to DO 4D, DO 4 Subsection (14)(b) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EX 21(26) amended 7 December 2009 section 157(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Section EX 21(30) amended 19 December 2007 section 78 Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (35) amended 3 April 2006 section 90(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 2011–12 2006–07 Grey list exemption
EX 22: Unqualified grey list CFCs
Criteria
1: A CFC is an unqualified grey list CFC for an accounting period if—
a: at all times in the accounting period it is resident in a country listed in schedule 3, part A
b: in that country the CFC's liability for income tax has not been reduced by applying any of the concessions listed in schedule 3, part B No attributed income or loss
2: Sections CQ 2(1)(g) DN 2(g) CFCs with interest in FIFs: look-through approach
3: This section does not prevent FIF income or loss arising under section EX 46 accounting period attributed CFC income attributed CFC loss CFC FIF FIF income grey list income tax loss 1994 No 164 s CG 13(1) Subsection (2) amended 1 April 2005 section 60(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting CQ 2(1)(g) CQ 2(g)
EX 23: Tax concession grey list CFCs
Criteria
1: A CFC is a tax concession grey list CFC for an accounting period if—
a: at all times in the accounting period it is resident in a country listed in schedule 3, part A
b: in that country the CFC's liability for income tax has been reduced by applying any of the concessions listed in schedule 3, part B Attribution using country's tax rules
2: In the case of a tax concession grey list CFC,—
a: section EX 21
b: when section EX 18
i: excluding any allowance for carrying forward prior period losses; and
ii: adjusted to exclude the benefit of concessions listed in schedule 3, part B
iii: converted to New Zealand dollars under section EX 21(4)(b) accounting period amount branch equivalent income CFC grey list income tax loss net income net loss New Zealand 1994 No 164 s CG 13(2) Residence of companies
EX 24: Residence in grey list country
Necessary liability to income tax
1: For the purposes of this subpart and subparts CQ DN LF schedule 3, part A
a: the CFC is liable in the country to income tax on the CFC's income because the CFC—
i: is domiciled in the country:
ii: is resident in the country:
iii: is incorporated in the country:
iv: has its place of management in the country:
b: the CFC is organised under the laws of the country and the country—
i: imposes on persons holding income interests in the CFC the liability for income tax on the CFC's income; and
ii: under the laws of the country, is the source of 80% or more of the income of the CFC. Relationship with section OE 2
2: This section overrides section OE 2 CFC grey list income tax 1994 No 164 s CG 13(1)(a) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (1) substituted 1 April 2006 section 91(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EX 25: Companies moving to or from New Zealand
Companies becoming foreign
1: If a company becomes a foreign company, an accounting period of the company starts on the day when the company becomes a foreign company and the former accounting period ends on the previous day. Companies ceasing to be foreign
2: If a foreign company ceases to be a foreign company, an accounting period of the company starts on the day when the company ceases to be a foreign company and the former accounting period ends on the previous day. Pro-rating
3: If subsection (1) or (2) applies to shorten an accounting period of a CFC, a person with attributed CFC income or loss from the CFC for the period may choose to calculate the branch equivalent income or loss of the CFC—
a: using the results for the shortened period only; or
b: by applying the pro-rating formula in subsection (4) to the results for the unshortened period. Formula
4: The formula for calculating branch equivalent income or loss under subsection (3)(b) is— accounting period attributed CFC income branch equivalent income CFC company foreign company loss New Zealand 1994 No 164 s CG 12 Change of CFC's balance date
EX 26: Change of CFC's balance date
Application of this section
1: This section applies if a person—
a: has an income interest in a CFC; and
b: has calculated attributed CFC income or loss or attributed repatriation from the CFC on the basis of 1 accounting year (old accounting year); and
c: wants to change to use a different accounting year (new accounting year) for the calculations. Change requiring Commissioner's consent
2: The person may make the change only if the Commissioner agrees. Commissioner's reasons
3: The Commissioner may consider any relevant factors when making the decision, including—
a: whether the change is sought because ownership of the CFC has changed :
b: whether the change is sought because of taxation or other legal requirements in a country where the CFC is resident or does business :
c: whether the change is sought to achieve consistent balance dates in a group of companies :
d: whether the change would postpone liability to income tax on attributed CFC income or on attributed repatriation or to dividend withholding payment on attributed repatriation. No transitional deferral
4: If the new accounting year ends in a later income year than the year the old accounting year ends in, and that fact would result in an amount of attributed CFC income or attributed repatriation being derived in the later income year, the amount is not deferred to the later income year and instead is treated as derived in the previous income year. However, this subsection applies only once, in the year of the transition. accounting year amount attributed CFC income attributed repatriation business CFC Commissioner dividend withholding payment group of companies income interest income tax income year loss 1994 No 164 s CG 10 Subsection (3)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Ownership measurement concession
EX 27: Use of quarterly measurement
Interests held at end of quarter
1: In order to simplify the process of calculating a person's control interest or income interest in a foreign company, the person is treated as holding at all times during a quarter the same interest (including a zero interest) as the interest they hold at the end of the quarter. Anti-avoidance
2: The concession in subsection (1) is overridden by the antiavoidance rules in sections GC 9 GC 10 Ignoring concession
3: A person may choose not to apply the concession in subsection (1) when calculating their attributed CFC income or loss from a foreign company. Election
4: An election under subsection (3)—
a: must be in the form required by the Commissioner; and
b: is irrevocable; and
c: applies in the income year in which it is made and later. attributed CFC income Commissioner control interest foreign company income interest income year loss quarter 1994 No 164 s CG 3(e) Anti-avoidance rule: stapled stock
EX 28: Anti-avoidance rule: stapled stock
When this section applies
1: This section applies when—
a: a New Zealand resident holds rights (stapled rights) that give rise to an income interest or control interest in a foreign company; and
b: the rights may, or may ordinarily, be disposed of only together with rights in another company; and
c: the other company is a New Zealand resident or a CFC. Stapled rights held by company
2: When each of subparts CQ DN CFC company control interest foreign company income interest New Zealand resident 1994 No 164 s CG 3(d) Foreign investment fund rules What is a foreign investment fund?
EX 29: Meaning of FIF
A foreign investment fund, or FIF, is any of the following:
a: a foreign company :
b: a foreign superannuation scheme :
c: an insurer under a life insurance policy, but not if the policy is offered or entered into in New Zealand (in which case the insurer must comply with the life insurance rules in relation to the policy) :
d: an entity described in schedule 4, part A FIF foreign company foreign investment fund foreign superannuation scheme life insurance policy life insurance rules offered or entered into in New Zealand Paragraphs (a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Attributing interests in FIFs
EX 30: Attributing interests in FIFs
Three categories
1: A person has an attributing interest in a FIF if—
a: the person holds rights in 1 of the categories of rights described in subsections (2) to (4); and
b: none of the exemptions in sections EX 32 to EX 37 Category 1: direct income interest in foreign company
2: The first category is a direct income interest in a foreign company, as defined in section EX 31 schedule 4, part A Category 2: foreign superannuation scheme entitlement
3: The second category is rights to benefit from a foreign superannuation scheme, as a beneficiary or a member. Category 3: foreign life policy entitlement
4: The third category is rights to benefit from a life insurance policy in relation to which a FIF is the insurer. Contingent rights
5: The second and third categories include rights that are contingent or discretionary. attributing interest direct income interest FIF foreign company foreign superannuation scheme life insurance policy 1994 No 164 ss CG 15(1), OB 1 entitlement of the person to benefit
EX 31: Direct income interests in FIFs
Categories of direct income interest
1: A person has a direct income interest in a foreign company at any time if they hold—
a: any of the shares in the foreign company :
b: any of the shareholder decision-making rights for the company :
c: a right to receive (or to apply) any of the income of the company for the accounting period in which the time falls :
d: a right to receive (or to apply) any of the value of the net assets of the company, if they are distributed. Percentage of total
2: The person's direct income interest is the percentage of the total that the person holds. Varying percentages
3: However, if the percentage varies between the different categories, the person's direct income interest is the highest. Measurement of available subscribed capital
4: When the direct income interest in the category in subsection (1)(a) is calculated, the percentage is the total of the available subscribed capital per share calculated under the slice rule of the shares held as a percentage of the total available subscribed capital per share calculated under the slice rule of all shares in the company. Varying decision-making rights
5: When the direct income interest in the category in subsection (1)(b) is calculated, if the percentage varies between the rights described in the different paragraphs of the definition of shareholder decision-making rights section OB 1 Income distribution rights: assumptions
6: When the direct income interest in the category in subsection (1)(c) is calculated, it is assumed that—
a: the income is distributed on the last day of the accounting period; and
b: the person's entitlement is unchanged during the period; and
c: a payment of interest on a debenture subject to section FC 1 FC 2 FC 2B Meaning of company
7: In this section, and in defined terms referred to in this section, company includes an entity listed in schedule 4, part A accounting period available subscribed capital company debentures direct income interest FIF foreign company income interest payment share shareholder decision-making rights slice rule 1994 No 164 ss CG 3(c), CG 5(2), CG 15(1)(a) Subsection (1)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Section EX 31(6)(c) amended 6 October 2009 section 792 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 32: CFC rules exemption
A person's rights in a FIF at any time are not an attributing interest if—
a: the FIF is a CFC at the time; and
b: the person has an income interest of 10% or more in the CFC for the accounting period during which the time falls , under sections EX 14 to EX 17 accounting period attributing interest CFC FIF income interest 1994 No 164 s CG 15(2)(a) Section EX 32(b) amended 19 December 2007 section 79(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 33: Exemptions: direct income interests in FIF in grey list country
Direct income interest of 10% or more
1: A person's rights in a FIF in an income year are not an attributing interest if, at all times in the year,—
a: the rights are a direct income interest of 10% or more; and
b: the person is not a portfolio investment entity, a superannuation scheme, a unit trust, a life insurer, or a group investment fund; and
c: the FIF is not an entity described in schedule 4, part B
d: the FIF meets the requirements of subsection (2). Further requirements under subsection (1)
2: A FIF meets the requirements of this subsection if—
a: the FIF is a grey list company and a country listed in the grey list imposes on the FIF liability for income tax on the FIF's income because the FIF—
i: is domiciled in the country:
ii: is resident in the country:
iii: is incorporated in the country:
iv: has its place of management in the country:
b: there is a country listed in the grey list that—
i: is the country under whose laws the FIF is organised; and
ii: imposes on persons holding income interests in the FIF liability for income tax on the FIF's income; and
iii: under the laws of the country, is the source of 80% or more of the income of the FIF. Shares acquired when FIF resident and unlisted company
3: A person's rights in a 1-111 in an income year are not an attributing interest if—
a: the rights are shares; and
b: the FIF is a grey list company that is not an entity described in schedule 4 part B
c: the person has held shares in the company at all times after a time when—
i: the company was resident in New Zealand; and
ii: the shares were not listed on a recognised exchange; and
d: the company became a grey list company immediately after having, for 12 months or more,—
i: carried on a business in New Zealand; and
ii: had in New Zealand more than 50% of its assets and employees; and
e: the year begins less than 10 years after the company became a grey list company; and
f: at all times in the year, the company has a fixed establishment in New Zealand; and
g: the company through the fixed establishment—
i: incurs in the year expenditure, other than interest, equal to or more than the lesser of $1,000,000 and 25% of the total expenditure, other than interest, incurred by the company in the year:
ii: at all times in the year, engages a number of fulltime employees or contractors equal to or more than the lesser of 10 and 25% of the total number engaged by the company. Shares acquired when FIF unlisted, FIF owns resident company
4: A person's rights in a FIF in an income year are not an attributing interest if—
a: the rights are shares; and
b: the FIF is a grey list company that is not an entity described in schedule 4, part B
c: the person has held shares in the grey list company at all times after a time when the shares were not listed on a recognised exchange; and
d: at all times in the year, the grey list company holds more than 50% of the voting interests in a company (the resident company
i: carried on a business in New Zealand; and
ii: had in New Zealand more than 50% of the resident company's assets and employees; and
e: the year begins less than 10 years after the grey list company first held more than 50% of the voting interests in the resident company; and
f: the resident company through a fixed establishment in New Zealand—
i: incurs in the year expenditure, other than interest, equal to or more than the lesser of $1,000,000 and 25% of the total expenditure, other than interest, incurred by the company in the year:
ii: at all times in the year, engages a number of fulltime employees or contractors equal to or more than the lesser of 10 and 25% of the total number engaged by the company. Shares acquired under venture investment agreement
4B: A person's rights in a FIF that is a grey list company at a time in an income year are not an attributing interest at the time if the person first acquires a share or option to buy a share in the company—
a: under a venture investment agreement; and
b: at the same time and on the same terms as an acquisition of an interest in the FIF by the Venture Investment Fund or a company owned by the Venture Investment Fund. Shares acquired under share purchase agreement
5: A person's rights in a FIF in an income year are not an attributing interest if—
a: the person is a natural person; and
b: the rights are shares; and
c: the FIF is a grey list company that is not an entity described in schedule 4, part B
d: at the time the person acquires the shares, the FIF—
i: employs the person:
ii: owns, directly or indirectly, the person's employer; and
e: the person acquires the shares under a share purchase agreement; and
f: the share purchase agreement includes a restriction on the disposal of the shares; and
g: at the beginning of the year, the period of the restriction has not expired or has expired for a period of less than 6 months. Exception: Categories 2 and 3
6: Subsections (1) to (5) do not apply if the rights of the person are those described in section EX 30(3) attributing interest company direct income interest employee employer FIF fixed establishment grey list company group investment fund income tax income year interest life insurer New Zealand resident non-resident portfolio investment entity recognised exchange resident share share purchase agreement superannuation scheme unit trust voting interest year Subsection (1) substituted 1 April 2006 section 92(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsections (1B) (1C) inserted 1 April 2006 section 92(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section EX 33 substituted 1 April 2007 section 61(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 61(2) Section EX 33(3)(c) amended 19 December 2007 section 80(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(3)(d)(i) substituted 19 December 2007 section 80(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(3)(g)(i) substituted 19 December 2007 section 80(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(3)(g)(ii) substituted 19 December 2007 section 80(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4)(c) substituted 19 December 2007 section 80(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4)(d) substituted 19 December 2007 section 80(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4)(d) amended 6 October 2009 section 793(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 33(4)(e) amended 6 October 2009 section 793(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 33(4)(f)(i) substituted 19 December 2007 section 80(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4)(f)(ii) substituted 19 December 2007 section 80(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4B) heading inserted 19 December 2007 section 80(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(4B) inserted 19 December 2007 section 80(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33(5)(f) substituted 19 December 2007 section 80(8) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33 list of defined terms non-resident inserted 19 December 2007 section 80(9) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33 list of defined terms voting interest amended 6 October 2009 section 793(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 33B: Exemptions limited by income years: shares in certain grey list companies
Exemption for shares in company meeting requirements for listing, shareholding and taxation
1: A person's rights in a FIF are not an attributing interest in an income year beginning before 1 April 2012 if—
a: the rights are shares (the shares company
b: on 17 May 2006, the company—
i: is not an entity described in schedule 4
ii: has more than 20 000 shareholders who have addresses in New Zealand on the company's share register in New Zealand; and
iii: has shareholders referred to in subparagraph (ii) who between them hold shares in the company carrying voting interests of more than 50%; and
iv: is liable to income tax in a country listed in the grey list; and
v: has assets of which more than 50% in total value are shares in other companies carrying voting interests of more than 50%; and
c: on 17 May 2006, the shares—
i: are listed on a recognised exchange in New Zealand; and
ii: are listed on a recognised exchange in a grey list country; and
d: in the period of 30 days beginning from 18 December 2006, the company gives to the Commissioner the notice required by paragraph (b), as that paragraph read before being substituted by section 81 Exemption for shares in company meeting requirements for investment
2: A person's rights in a FIF are not an attributing interest in an income year beginning before 1 April 2009 if—
a: the rights are shares (the shares company
b: on 17 May 2006, the company—
i: is not an entity described in schedule 4
ii: has shareholders of which more than 40% have addresses in New Zealand on the company's share register in New Zealand; and
iii: has shareholders referred to in subparagraph (ii) who between them hold shares in the company carrying voting interests of more than 50%; and
iv: is liable to income tax in a country listed in the grey list; and
v: has assets of which 50% or more in total value are shares in other companies each of which is resident in New Zealand; and
vi: has assets of which 90% or more in total value are shares in other companies each of which is resident in Australia or New Zealand and is listed on a recognised exchange in Australia or New Zealand; and
c: on 17 May 2006, the shares—
i: are listed on a recognised exchange in New Zealand; and
ii: are listed on a recognised exchange in a grey list country; and
d: in the period of 30 days beginning from 18 December 2006, the company gives to the Commissioner the notice required by paragraph (b), as that paragraph read before being substituted by section 81
e: at all times in the year, the company—
i: has assets of which 50% or more in total value are shares in other companies each of which is resident in New Zealand; and
ii: has assets of which 90% or more in total value are shares in other companies each of which is resident in Australia or New Zealand and is listed on a recognised exchange in Australia or New Zealand. Exception: Election in tax return that exemption not apply
3: An exemption under subsection (1) or (2) does not apply for a person for an income year (the initial year attributing interest company FIF grey list grey list company income income tax income year New Zealand resident recognised exchange resident resident in Australia share shareholder voting interest year Sections EX 33B to EX 33D inserted 1 April 2007 section 61(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 61(2) Section EX 33B(1) substituted 19 December 2007 section 81(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33B(2) substituted 19 December 2007 section 81(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 33C: Exemption: shares in listed Australian company
Exemption
1: A person's rights in a FIF in an income year are not an attributing interest if—
a: the rights are a share; and
b: the share is not a share that may not, or ordinarily may not, be disposed of unless together with rights in another company; and
c: the FIF is a company that meets the requirements of subsection (2). Australian listed company on approved index
2: The company must—
a: at all times in the income year when the person holds a right in the company, be resident in Australia; and
b: at all times in the income year when the person holds a right in the company, not be treated as resident in a country other than Australia under and for the purposes of an agreement that—
i: is between Australia and the other country; and
ii: would be a double tax agreement if negotiated between New Zealand and the other country; and
c: have shares included in an index that is an approved index under the ASX Market Rules, made under Chapter 7 of the Corporations Act 2001 (Aust),—
i: at the beginning of the income year, if subparagraph (ii) does not apply; or
ii: when the person acquires the shares, if the person does not own shares in the company earlier in the income year; and
d: at all times in the income year when the person holds a right in the company, not be an entity described in schedule 4
e: at all times in the income year when the person holds a right in the company, be required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account. attributing interest company double tax agreement FIF income year resident in Australia share year Sections EX 33B to EX 33D inserted 1 April 2007 section 61(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 61(2) Section EX 33C amended 19 December 2007 section 82(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33C list of defined terms direct income interest omitted 19 December 2007 section 82(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33C list of defined terms income omitted 19 December 2007 section 82(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33C list of defined terms income tax omitted 19 December 2007 section 82(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 33D: Exemption: units in certain Australian unit trusts
Exemption
1: A person's rights in a FIF in an income year are not an attributing interest if—
a: the FIF is a unit trust; and
b: the FIF is not an entity described in schedule 4, part B
c: at all times in the year when the person holds a right in the FIF, the unit trust is resident in Australia; and
d: at all times in the year when the unit trust makes a distribution to investors, there is an RWT proxy under section NF 2AA
e: the unit trust meets the requirements of—
i: subsection (2) relating to the assets of the unit trust that are shares (the held shares trust's year
ii: subsection (4) relating to the distributions by the unit trust during the trust's year. Requirements for unit trust's assets that are shares
2: A unit trust meets the requirements of this subsection if the total market value of the held shares exceeds the total cost of the held shares by an amount that is less than or equal to 3 times the amount calculated using the formula— disposal proceeds - share costs. Definition of items in formula
3: In the formula in subsection (2),—
a: disposal proceeds
b: share costs Requirements for unit trust's distributions
4: A unit trust meets the requirements of this subsection if the total amount of distributions by the unit trust during the trust's year is equal to or more than the amount calculated using the formula— The following table is small in size and contains a formula. 0.7 × (closing - opening - contributions). 0.3 Definition of items in formula
5: In the formula in subsection (4),—
a: closing
b: opening
c: contributions Currency of amounts in subsections (2) to (5)
6: In subsections (2) to (5), all amounts are expressed in the currency used in the unit trust's financial accounts. accounting year attributing interest company FIF income income year New Zealand resident resident in Australia RWT proxy share unit trust year Sections EX 33B to EX 33D inserted 1 April 2007 section 61(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 61(2) Section EX 33D(1)(c) substituted 19 December 2007 section 83(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(1)(d) substituted 19 December 2007 section 83(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(1)(e) substituted 19 December 2007 section 83(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(2) heading substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(2) substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(3) heading substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(3) substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(4) heading substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(4) substituted 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(5) heading added 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(5) added 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(6) heading added 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D(6) added 19 December 2007 section 83(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 33D list of defined terms accounting year inserted 19 December 2007 section 83(3) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 33E: Australian superannuation fund exemption
A person's rights in a FIF are not an attributing interest if—
a: the person is a natural person; and
b: the FIF is a foreign superannuation scheme that is—
i: an Australian approved deposit fund:
ii: an Australian exempt public sector superannuation scheme:
iii: an Australian regulated superannuation fund:
iv: an Australian retirement savings account. attributing interest Australian approved deposit fund Australian exempt public sector superannuation scheme Australian regulated superannuation fund Australian retirement savings account Section EX 33E inserted 1 April 2005 section 62(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
EX 34: Foreign exchange control exemption
A person's rights in a FIF are not an attributing interest if and to the extent to which—
a: the person is a natural person; and
b: the person acquired the rights—
i: before first becoming a New Zealand resident; or
ii: before exchange controls applying to the person and the interest were imposed by a foreign country; or
iii: before 8.00 pm (New Zealand Standard Time) on 2 July 1992; and
c: the exchange controls prevent the person from deriving amounts from the rights, or from disposing of the rights, in New Zealand dollars (or consideration that is readily convertible into New Zealand dollars). amount attributing interest FIF New Zealand New Zealand resident 1994 No 164 s CG 15(2)(e) The list of provisions for comparison was amended 1 April 2005 section 93(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting CG 15(2)(e) CG 15(2)(c), (e)
EX 35: Income interest of non-resident or transitional resident
Categories 2 and 3
1: Subsection (2) applies only to rights described in section EX 30(3) Exemption for non-resident or transitional resident
2: A person's rights in a FIF at any time are not an attributing interest if—
a: the person is a natural person; and
b: the person acquires the rights when a non-resident or transitional resident; and
c: at the time, the person is a non-resident or transitional resident. attributing interest FIF income year New Zealand resident non-resident transitional resident 1994 No 164 s CG 15(2)(f) The heading to section EX 35 substituted 1 October 2005 section 94(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 94(4) Subsection (2) substituted 1 October 2005 section 94(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 94(4) The list of defined terms was amended 1 October 2005 section 94(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting non-resident transitional resident See section 94(4)
EX 36: New resident's Exemption
1: The rights of a natural person to benefit, as a beneficiary or a member, from a foreign superannuation scheme at any time are not an attributing interest in a FIF—
a: to the extent to which the requirements in subsections (2) to (4) are met at the time; and
b: if the requirements in subsections (5) to (9) are met at the time. Rights accruing before or after becoming resident
2: The rights must have accrued during a period—
a: for which the person is not a New Zealand resident:
b: for which the person is a New Zealand resident and that—
i: begins when the person becomes a New Zealand resident; and
ii: ends before the first day of the fifth income year following the income year in which the person becomes a New Zealand resident. Calculation of rights accruing
3: The extent to which the rights have accrued during a period referred to in subsection (2) is calculated using the formula— closing value – opening value. Definition of items in formula
4: In the formula,—
a: closing value
b: opening value Employee scheme or self-employed
5: Either—
a: the scheme must be one where the person's rights can be acquired only through the person's employment; or
b: the person must be wholly or mainly self-employed, either when the person first acquired the rights or at the relevant time for applying this section. Contributions or benefits: link to income
6: The amount contributed to the scheme by or for the person must be calculated—
a: by some fixed relationship to the person's income from employment or self-employment; or
b: to provide benefits that bear a fixed relationship to the person's income from employment or self-employment, except to the extent to which the benefits are adjusted by reference to an objective measure of inflation. Contributions by person, employer, or other scheme
7: Contributions to the scheme for the person's benefit must be made only by or for—
a: the person; or
b: the person's employer (or a person associated with the employer); or
c: the representatives of another superannuation scheme—
i: as a transfer of the person's benefit rights in the other scheme; and
ii: if those benefit rights would have qualified for the exemption in this section. Restricted rights to assign or cash in
8: The person's future benefits under the scheme must not be able to be assigned, or exchanged for a current receipt of cash (or other property), except—
a: if the person becomes physically incapacitated; or
b: if the person is transferring the benefit rights into another, similar, scheme; or
c: when or after the person retires at normal retiring age; or
d: if the person is assigning the benefit rights to a spouse under a matrimonial agreement; or
e: at the cost of a substantial decrease in the present value of the benefits. Matrimonial property assignment
9: When the person has obtained the rights by their being assigned under a matrimonial agreement, the exemption in this section applies if the assignor spouse would have been entitled to it. amount associated person attributing interest employer FIF foreign superannuation scheme income income from employment market value matrimonial agreement New Zealand resident superannuation scheme 1994 No 164 ss CG 14(3), CG 15(2)(c), OB 1 interest in an employment- related foreign superannuation scheme The heading to section EX 36 amended 1 October 2005 section 95(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting New resident's Immigrant's See section 95(5) Subsection (1) amended 1 April 2005 section 63(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting in a FIF— in a FIF to the extent to which the requirements in subsections (2) to (9) Subsection (1)(a) (b) inserted 1 April 2005 section 63(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (2) substituted 1 October 2005 section 95(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 95(5) Subsection (3) substituted 1 October 2005 section 95(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 95(5) Subsection (4)(a) (b) substituted 1 October 2005 section 95(4) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 95(5)
EX 37: Non-resident's pension or annuity exemption
Exemption
1: The rights of a natural person to benefit from a pension or annuity provided by a FIF are not an attributing interest if the requirements in subsections (2) and (3) are met. Relevant period of non-residence
2: The person must have provided the consideration for acquiring the rights—
a: when the person was not resident in New Zealand; or
b: when the person was resident in New Zealand but in the period ending 3 years after the end of the income year in which they last became a New Zealand resident; or
c: when the person was resident in New Zealand but as a result of commuting or transferring their interest in a superannuation fund in anticipation of their ceasing to be a New Zealand resident. Restricted rights to assign or cash in
3: The person's future benefits must not be able to be assigned, or exchanged for a current receipt of cash (or other property), except—
a: if the person is assigning the benefit rights to a spouse under a matrimonial agreement; or
b: at the cost of a substantial decrease in the present value of the benefits. Elective exclusion of pre-1996-97 rights
4: Subsection (1) does not apply if—
a: the rights were acquired before the 1996-97 income year; and
b: the person chose to treat the rights as an interest in a foreign investment fund for the 1996-97 and later income years by complying with the requirements in section CG 15(4) of the Income Tax Act 1994 attributing interest FIF foreign investment fund income year matrimonial agreement New Zealand resident non-resident resident in New Zealand superannuation fund year 1994 No 164 ss CG 15(2)(g), (4), OB 1 qualifying private foreign annuity Calculation of FIF income or loss
EX 38: Six calculation methods
Use of 1 method
1: If the tests in section CQ 5 DN 6
a: the accounting profits method; or
b: the branch equivalent method; or
c: the comparative value method; or
d: the deemed rate of return method; or
e: the fair dividend rate method; or
f: the cost method. Choosing method
2: The person must choose which calculation method applies by completing their return of income accordingly, but the choice is limited by sections EX 40 EX 40B EX 41 EX 50 accounting profits method amount branch equivalent method calculation method comparative value method cost method deemed rate of return method fair dividend rate method FIF income loss return of income 1994 No 164 ss CG 16(1), CG 17(1) The heading to section EX 38 substituted 1 April 2007 section 64(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 64(5) Subsection (1)(d) amended 1 April 2007 section 64(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting method; or method. See section 64(5) Subsection (1)(e) (f) inserted 1 April 2007 section 64(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 64(5) Subsection (2) amended 1 April 2007 section 64(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting EX 40B, EX 40, The list of defined terms was amended 18 December 2006 section 64(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method See section 64(5)
EX 39: Exclusion of amounts of death benefit
No FIF income
1: When this section applies, a person is treated as not deriving FIF income to the extent to which the income arises solely from receiving a death benefit under a life insurance policy. Application of this section: contract before becoming resident
2: This section applies if—
a: the person or the deceased (contracting party), when not a New Zealand resident, entered into a binding contract that gave rise to the benefit; and
b: at the time the contract was entered into, the contracting party either had not previously been a New Zealand resident or had not been a resident for at least the previous 10 years; and
c: the benefit was not increased by a voluntary action taken after the contracting party became a resident. Application of this section: pre-1992 contracts
3: This section also applies if—
a: before 2 July 1992 the person or the contracting party entered into a binding contract giving rise to the benefit; and
b: the benefit was not increased by a voluntary action taken on or after 2 July 1992. amount FIF income life insurance policy New Zealand resident year 1994 No 164 s CG 16(7)
EX 40: Limits on choice of calculation methods
Same method for same FIF
1: If a person has 2 or more attributing interests in the same FIF for the same period, the person must use the same calculation method for calculating FIF income or loss from each interest in that period, except to the extent to which—
a: the interests are of different classes; and
b: this section prevents the same method being used. Accounting profits method
2: A person may use the accounting profits method for an accounting period to calculate FIF income or loss from an attributing interest in a FIF only if—
a: the FIF is a company; and
b: at all times during the accounting period when the FIF exists, interests in the FIF similar to the person's attributing interest were—
i: quoted on the official list of a recognised exchange; or
ii: offered widely by or for the FIF to the public in 1 or more countries; and
c: the net after-tax accounting profits or losses of the FIF for the accounting period are calculated under generally accepted accounting practice (or an equivalent standard for consistent and undistorted reporting of net profits) of the country in which the FIF is resident; and
d: the net after-tax accounting profits or losses are detailed in financial statements—
i: sent or made available to shareholders in the FIF; and
ii: readily available to interested members of the public; and
iii: audited by a chartered accountant (or accountant of equivalent professional standard in the country in which the FIF is resident); and
iv: for which such an accountant has given a standard audit opinion, without qualifications, to the effect that the financial statements represent the income and financial position of the FIF to the degree of validity normally required in the country in which the FIF is resident; and
e: the net after-tax accounting profits or losses are calculated, in any case in which the FIF has 1 or more subsidiaries, on a consolidated basis; and
f: the net after-tax accounting profits or losses include any extraordinary items; and
g: the person has no reason to believe that the net after-tax accounting profits or losses do not fairly represent the net after-tax profits or losses of the FIF for the accounting period; and
h: the FIF is not an entity described in schedule 4, part C
i: the Commissioner has not concluded that the net aftertax accounting profits or losses do not fairly represent the net after-tax profits or losses of the FIF for the accounting period. Branch equivalent method
3: A person may use the branch equivalent method to calculate FIF income or loss from an attributing interest in a FIF for an accounting period only if—
a: the FIF is a company; and
b: the person can provide to the Commissioner, if requested, sufficient information to enable the Commissioner to check the calculations required by section EX 43 Deemed rate of return method
4: A person may use the deemed rate of return method to calculate FIF income or loss from an attributing interest in a FIF for an income year only if any of the following apply:
a: it is not reasonably practicable for the person to use—
i: the comparative value method, because the person cannot determine the market value of the attributing interest at the end of the income year; or
ii: the accounting profits method for any accounting period that falls wholly or partly in the year; or
b: the person is a natural person and at all times during the income year the total value of attributing interests in FIFs held by the person is $250,000 or less, the value of each interest being—
i: its book value (calculated under section EX 45(7) :
ii: its market value, in any other case; or
bb: the person is required by section EX 40B
c: section EX 41
d: section EX 50 Deemed rate of return method: further limit
5: A person may not use the deemed rate of return method to calculate FIF income or loss for an income year from an attributing interest if—
a: the interest is a direct income interest in a foreign company of less than 10%; and
b: the person is not required by section EX 40B Comparative value method
6: A person may use the comparative value method to calculate FIF income or loss for an income year from an attributing interest that is a share in a foreign company only if—
a: the person's direct income interest in the FIF, increased for the purposes of this paragraph by each direct income interest of a person associated with the person, is 10% or more at any time in the income year:
b: the attributing interest does not meet the requirements of subsection (8)(a):
c: the person is a natural person:
d: the person is the trustee of a trust that—
i: has no gifting settlor who is not a natural person or deceased person; and
ii: at all times in the income year, would be a qualifying trust for a distribution made at the time; and
iii: is mainly for the benefit of an organisation or trust with income that is exempt income under section CW 34 CW 35
iv: is not a superannuation scheme. Fair dividend rate method for share in foreign company
7: A person may use the fair dividend rate method to calculate FIF income or loss for an income year from an attributing interest that is a share in a foreign company only if the requirements of subsection (8) are met and—
a: the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company and the FIF is a foreign investment vehicle:
b: the person's direct income interest in the FIF, increased for the purposes of this paragraph by each direct income interest of a person associated with the person, is less than 10%—
i: at any time in the income year, if the FIF is a grey list company; or
ii: at all times in the income year, if the FIF is not a grey list company. Fair dividend rate method: further requirements for share in foreign company
8: The further requirements under this subsection for a share in a foreign company are—
a: the attributing interest is—
i: of a type that the Commissioner has determined under section 91AAO
ii: not of a type that is listed in subsection (9); and
b: the person uses the comparative value method for no other attributing interest that is a share in a foreign company and for which the person would be allowed, in the absence of this paragraph, to use the fair dividend rate method. Fair dividend rate method: interests for which method not applicable
9: An attributing interest of a person (the investor
a: of a type that the Commissioner has determined under section 91AAO
b: a fixed rate share under section LF 2(3)
c: a non-participating redeemable share:
d: an interest in a non-resident having assets of which 80% or more by value consist of financial arrangements denominated in New Zealand dollars:
e: a share that involves an obligation—
i: of another person to provide to the investor an amount exceeding the issue price of the share; and
ii: that is direct to the investor or indirect through an arrangement; and
iii: that is non-contingent or subject to a contingency that is sufficiently remote to be immaterial. Meaning of gifting settlor
9B: A gifting settlor relevant trust
a: a settlor, under section HH 1(1)
i: the relevant trust:
ii: a trust with a trustee who settles property on the relevant trust, directly or through the trustees of other trusts; and
b: not the trustee of a trust. Cost method for share in foreign company
10: A person may use the cost method to calculate FIF income for an income year from an attributing interest that is a share in a foreign company only if—
a: the person's direct income interest in the FIF, increased for the purposes of this paragraph by each direct income interest of a person associated with the person, is less than 10%—
i: at any time in the income year, if the FIF is a grey list company; or
ii: at all times in the income year, if the FIF is not a grey list company; and
b: use of the fair dividend rate method is allowed but is not practical because the person cannot determine the market value of the attributing interest at the start of the income year except by an independent valuation. accounting period accounting profits method attributing interest branch equivalent method calculation method Commissioner company comparative value method cost method deemed rate of return method direct income interest exempt income fair dividend rate method FIF FIF income generally accepted accounting practice income income year loss market value qualifying trust recognised exchange superannuation scheme shareholder tax trustee 1994 No 164 s CG 17(2)-(6) Subsection (4)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (4)(bb) inserted 1 April 2007 section 65(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 65(4) Subsections (5) to (10) inserted 1 April 2007 section 65(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 65(4) Section EX 40(6)(b) substituted 19 December 2007 section 84(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(6)(d) substituted 19 December 2007 section 84(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(8)(a) substituted 19 December 2007 section 84(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(9) heading substituted 19 December 2007 section 84(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(9) substituted 19 December 2007 section 84(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(9B) heading inserted 19 December 2007 section 84(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40(9B) inserted 19 December 2007 section 84(4) Taxation (Business Taxation and Remedial Matters) Act 2007 The list of defined terms was amended 1 April 2007 section 65(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method direct income interest exempt income fair dividend rate method income qualifying trust superannuation scheme trustee
EX 40B: Use of particular calculation methods required
A person who is not allowed to use the fair dividend rate method to calculate FIF income from an attributing interest in a FIF for an income year but would be allowed to use the method in the absence of section EX 40(8)(a)(ii)
a: the comparative value method; or
b: the deemed rate of return method, if use of the comparative value method is not practical because the person cannot determine the market value of the attributing interest at the end of the income year. attributing interest comparative value method deemed rate of return method fair dividend rate method FIF FIF income income year Section EX 40B inserted 1 April 2007 section 66(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 66(2) Section EX 40B amended 19 December 2007 section 85 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 40B(b) substituted 6 October 2009 section 794(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 41: Default calculation method
When this section applies
1: This section applies when—
a: a person does not choose a calculation method to calculate FIF income or loss from an attributing interest for a period; and
b: sections EX 40 EX 40B EX 50 Default choice for direct income interests in FIF of less than 10%
2: The person is treated as having chosen to use, for the period,—
a: for a direct income interest in a foreign company of less than 10% for which section EX 40(7)
i: the fair dividend rate method, if it is practical to use that method; or
ii: the cost method, if it is not practical to use the fair dividend rate method; or
b: for any other interest,—
i: the accounting profits method, if section EX 40(2)
ii: the comparative value method, if subparagraph (i) does not apply and it is practical to use the comparative value method; or
iii: the deemed rate of return method, if subparagraph (i) does not apply and it is not practical to use the comparative value method. accounting profits method attributing interest calculation method comparative value method cost method deemed rate of return method fair dividend rate method FIF income loss 1994 No 164 s CG 17(7) Subection (1)(b) amended 1 April 2007 section 67(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting , EX 40B, EX 40 Subsection (2) substituted 1 April 2007 section 67(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 67(4) Section EX 41(2)(b)(ii) substituted 19 December 2007 section 86 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 41(2)(b)(iii) substituted 19 December 2007 section 86 Taxation (Business Taxation and Remedial Matters) Act 2007 The list of defined terms was amended 18 December 2006 section 67(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method See section 67(4)
EX 42: Accounting profits method
Formula
1: If a person is using the accounting profits method to calculate FIF income or loss from an attributing interest in a FIF, the total FIF income or loss from all their attributing interests in the FIF for the relevant accounting period is calculated using the formula— (accounting profits or losses – foreign tax) × income interest. Definition of items in formula
2: The items in the formula are defined in subsections (3) and (4). Accounting profits or losses
3: Accounting profits or losses is the net after-tax accounting profits or losses of the FIF for the accounting period.
3B: Foreign tax
a: for which the person is liable under the laws of a country or territory outside New Zealand; and
b: paid by the person in the accounting period. Income interest
4: Income interest is the person's income interest in the FIF for the accounting period. The income interest is calculated under all the following CFC rules (applying as if the FIF were a CFC):
a: sections EX 8 to EX 11 EX 13 :
b: sections EX 16 EX 17 :
c: section EX 27 Election to measure on 31 March only
5: For an income interest that the person has held for more than 12 months, the person may follow a simplified calculation process by choosing to be treated as holding, at all times in the income year, the same interest, including zero interest, that they held at the end of the income year. The person makes the election by completing their return of income accordingly for the relevant income year. Election irrevocable
6: An election under subsection (5) is—
a: irrevocable and applies to the person and all their attributing interests in the FIF in later years; and
b: overridden by the anti-avoidance rules in sections GC 9 GC 10 Conversion to New Zealand dollars
7: The person must choose, for the accounting period and each later accounting period and for all interests for which the person uses the accounting profits method,—
a: for all the calculations to be done in the currency of the FIF's financial accounts, with the result then converted into New Zealand dollars at the average of the close of trading spot exchange rates for the fifteenth day of each complete month that falls in the accounting period; or
b: for all the calculations of the net after-tax accounting profits or losses of the FIF to be done in New Zealand dollars. Reduction in FIF loss to economic loss
8: In the cases described in subsections (9) and (10), the amount of any FIF loss calculated under subsection (1) is reduced to be equal to the person's corresponding economic loss (if any). Application of subsection (8): no economic loss
9: Subsection (8) applies if the person suffers no, or substantially no, economic loss corresponding to the FIF loss, whether because of a call option, a put option, or any other reason. Application of subsection (8): FIF loss excessive
10: Subsection (8) also applies if the amount of FIF loss is more than any corresponding economic loss suffered by the person, whether because of the application of the rules for calculating the person's income interest or any other reason. accounting period accounting profits method amount attributing interest CFC close of trading spot exchange rate FIF FIF income FIF loss income interest income year loss New Zealand non-resident quarter return of income tax tax year 1994 No 164 ss CG 16(11)(a), (12), CG 20 Subsection (1) substituted 3 April 2006 section 96(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (3B) inserted 3 April 2006 section 96(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (4)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Section EX 42(5) substituted 7 December 2009 section 158(1) Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 Subsection (7) substituted 1 April 2007 section 68(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 68(2)
EX 43: Branch equivalent method
Formula
1: If a person is using the branch equivalent method to calculate FIF income or loss from an attributing interest in a FIF, the total FIF income or loss from all their attributing interests in the FIF for the relevant accounting period is calculated using the formula— branch equivalent income or loss x income interest. Definition of items in formula
2: The items in the formula are defined in subsections (3) and (4). Branch equivalent income or loss
3: Branch equivalent income or loss is the branch equivalent income or loss of the FIF for the accounting period. This is calculated by applying section EX 21
a: as if the FIF were a CFC and the person were calculating their attributed CFC income or loss; and
b: applying subsections (5) and (6). Income interest
4: Income interest is the person's income interest in the FIF for the accounting period. The income interest is calculated under all the following CFC rules (applying as if the FIF were a CFC):
a: sections EX 8 to EX 11 EX 13 :
b: sections EX 16 EX 17 :
c: section EX 27 Taxable distributions
5: If the FIF derives a taxable distribution from a non-qualifying trust in the accounting period,—
a: the taxable distribution is excluded when calculating the FIF's branch equivalent income or loss (due to the combined effect of subsection (1) and section EX 21(32)
b: the person has additional attributed CFC income calculated by multiplying the taxable distribution by the person's income interest in the FIF; and
c: the person is liable for income tax on the additional attributed CFC income at the rate in schedule 1 section HH 3(4) Calculation of additional FIF income or loss
6: If the FIF itself has an income interest (calculated under subsection (4)) in a foreign company for the accounting period, the person has additional FIF income or loss calculated using the formula— interest x FIF's FIF income or loss. Definition of items in formula
7: In the formula,—
a: interest is the person's income interest in the FIF for the period:
b: FIF's FIF income or loss is the FIF's FIF income or loss calculated under the rules in section EX 46(4)
i: the FIF were the CFC referred to; and
ii: the FIF's interest in the foreign company were an attributing interest, despite any application of section EX 32 Application of CFC rules tax credit rules
8: The rules in sections LC 4 Assumptions in reading tax credit rules
9: Sections LC 4
a: the FIF were a CFC; and
b: the FIF income of the person from the FIF were attributed CFC income; and
c: the person's income interest (calculated under subsection (4)) were their relevant income interest for the purposes of those sections; and
d: any relevant person's FIF income calculated under the branch equivalent method from a FIF that is resident in the relevant country were attributed CFC income. Reduction in FIF loss to economic loss
10: In the cases described in subsections (11) and (12), the amount of any FIF loss calculated under subsections (1) and (6) is reduced to be equal to the person's corresponding economic loss (if any). Application of subsection (10): no economic loss
11: Subsection (10) applies if the person suffers no, or substantially no, economic loss corresponding to the FIF loss, whether because of a call option, a put option, or any other reason. Application of subsection (10): FIF loss excessive
12: Subsection (10) also applies if the amount of FIF loss is more than any corresponding economic loss suffered by the person, whether because of the application of the rules for calculating the person's income interest or any other reason. accounting period amount attributed CFC income attributing interest branch equivalent income branch equivalent method CFC FIF FIF income FIF loss foreign company income interest income tax loss non-qualifying trust non-resident quarter tax taxable distribution 1994 No 164 s CG 21 Subsection (4)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EX 44: Comparative value method
Formula
1: If a person is using the comparative value method to calculate FIF income or loss from an attributing interest in a FIF, the FIF income or loss from that interest for the relevant income year is calculated using the formula— (closing value + gains) – (opening value + costs). Definition of items in formula
2: The items in the formula are defined in subsections (3) to (6). Closing value
3: Closing value is the market value of the person's interest in the FIF at the end of the income year. (The value is zero if the person has disposed of the interest or is then applying another calculation method to it.) Gains
4: Gains is the total of all amounts that the person derives during the income year from holding or disposing of the interest. The amounts include any foreign withholding tax or other amount that the person is allowed as a credit under section LB 2 LC 1 Opening value
5: Opening value Costs
6: Costs
a: all expenditure, if any, that—
i: the person incurs in acquiring or increasing the interest:
ii: another person incurs on behalf of the person referred to in subparagraph (i) in relation to the interest:
b: income tax on the income of the FIF—
i: for which the person is liable under the laws of a country or territory outside New Zealand; and
ii: paid by the person in the income year. Application of method to direct income interests of less than 10%
6B: Subsection (6C) applies to a person who calculates under subsection (1) an amount of FIF income or loss for an attributing interest in a FIF (the minor attributing interest)—
a: that is a direct income interest in a foreign company of less than 10% at a time in the relevant income year; and
b: that meets the requirements of section EX 40(8)(a) Reduction of total FIF loss from direct income interests of less than 10%
6C: If, in the absence of this subsection, the person would have under subsection (1) a total FIF loss for the income year from all the person's minor attributing interests in FIFs, the total FIF loss for the income year for the person from the minor attributing interests is zero. Conversion of foreign currency amounts
7: If an amount in a foreign currency is the market value of, or is derived from or incurred on, an interest during an income year, the person must choose that for the income year and each later income year and for all interests for which the person uses the comparative value method—
a: each foreign currency amount in the income year be converted into New Zealand dollars using the exchange rate on the day for which the market value is determined or on which the amount is derived or incurred; or
b: all foreign currency amounts in the income year be converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th day of each month that falls in the income year. amount attributing interest calculation method close of trading spot exchange rate comparative value method direct income interest FIF FIF income FIF loss foreign withholding tax income year loss market value New Zealand tax 1994 No 164 ss CG 16(11)(b), (12), CG 18 Section EX 44(4) amended 19 December 2007 section 87(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44(5) substituted 6 October 2009 section 795 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (6) amended 1 April 2006 section 97(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the definition of costs Section EX 44(6)(a) replaced 30 June 2014 section 203(1) Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 Subsections (6B) (6C) inserted 1 April 2007 section 69(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 69(4) Section EX 44(6B)(b) substituted 19 December 2007 section 87(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (7) substituted 1 April 2007 section 69(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 69(4) The list of defined terms was amended 1 April 2007 section 69(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting direct income interest FIF loss See section 69(4)
EX 44B: Fair dividend rate method
Alternative formulas used
1: If a person is using the fair dividend rate method unit valuer
a: makes investments for the benefit of other persons (the investors
b: assigns each investor an interest in a proportion of the net returns from the investments; and
c: determines the value of the investor's interest for each of a number of periods (the unit valuation periods FIF income for person not unit valuer
2: For a person who is not a unit valuer, the FIF income or loss for an income year from the attributing interests in FIFs for which the person uses the fair dividend rate method is the amount calculated for the income year using the method in—
a: section EX 44C
b: section EX 44D
i: determines the market value of the attributing interest for each period of a day in the income year; and
ii: chooses that this paragraph apply. FIF income for unit valuer
3: For a person who is a unit valuer, the FIF income for an income year from the attributing interests in FIFs for which the person uses the fair dividend rate method is the total of the amounts calculated for each unit valuation period in the income year using the method in section EX 44D FIF loss
4: If a person is using the fair dividend rate method to calculate FIF income or loss from an attributing interest in a FIF, the FIF loss from the attributing interest for an income year is zero. Treatment of attributing interests subject to returning share transfer
5: If an attributing interest in a FIF is an original share subject to a returning share transfer, for the purposes of a person using the fair dividend rate method to calculate FIF income or loss, the attributing interest is treated as being held by the share supplier. amount attributing interest fair dividend rate method FIF FIF income FIF loss income year investor loss unit trust Sections EX 44B to EX 44E inserted 1 April 2007 section 70(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 70(2) Section EX 44B(2) substituted 19 December 2007 section 88(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44B(5) heading added 19 December 2007 section 88(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44B(5) added 19 December 2007 section 88(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 44C: Fair dividend rate method: usual method
FIF income
1: If this section applies to a person who calculates FIF income from attributing interests in FIFs under the fair dividend rate method for an income year, the FIF income is the total of the amounts, each calculated for a FIF for the income year using the formula in subsection (2). Formula
2: The formula referred to in subsection (1) is— 0.05 x opening + quick sale adjustment. Definition of items in formula
3: The items in the formula are defined in subsections (4) and (5). Opening
4: Opening
a: for which the person uses the fair dividend rate method; and
b: that the person holds at the beginning of the income year; and
c: that are not, at the beginning of the income year, included in a direct income interest of 10% or more in a grey list company. Exclusion for certain managed funds
4B: Subsection (4)(c) does not apply if—
a: the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
b: the FIF is a foreign investment vehicle. Quick sale adjustment
5: Quick sale adjustment is—
a: zero, if the person in the income year—
i: acquires or increases the attributing interest in no FIF for consideration:
ii: disposes of or reduces the attributing interest in no FIF after an acquisition or increase of the interest for consideration; or
b: if paragraph (a) does not apply, the lesser of—
i: the amount (the peak holding adjustment
ii: the amount (the quick sale gains subsection (10B) Peak holding adjustment
6: The peak holding adjustment is the total for the income year of the amounts calculated for each FIF using the formula in subsection (7). Formula
7: The formula referred to in subsection (6) is— 0.05 × quick sales × average cost. Definition of items in formula
8: The items in the formula are defined in subsections (9) and (10). Quick sales
9: Quick sales
a: if the person in the income year does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the income year, the lesser of the following, determined in terms of the amount of the attributing interest in the FIF (the interest size
i: the difference between the interest size that is the greatest for the income year and the interest size at the beginning of the income year:
ii: the difference between the interest size that is the greatest for the income year and the interest size at the end of the income year; or
c: if paragraph (a) does not apply and a share reorganisation occurs in the income year, the amount calculated under section EX 44E Average cost
10: Average cost
a: if the person in the income year does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the income year, the total amount of expenditure that the person incurs in acquiring or increasing during the income year
c: if paragraph (a) does not apply and a share reorganisation occurs in the income year, the amount calculated under section EX 44E Quick sale gains
10B: The quick sale gains is the greater of zero and the total for the income year of amounts calculated, for each attributing interest that is both acquired and disposed of in the income year, using the formula— return - (interest x average cost). Definition of items in formula
10C: In the formula,—
a: return
b: interest
c: average cost Conversion of foreign currency amounts
11: If an amount in a foreign currency is the market value of, or is derived from or incurred on
a: each foreign currency amount in the income year be converted into New Zealand dollars using the exchange rate on the day for which the market value is determined or on which the amount is derived or incurred
b: all foreign currency amounts in the income year be converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th day of each month that falls in the income year. Identifying attributing interests disposed of in income year
12: For the purpose of calculating the quick sale gains under subsection (5)(b)(ii), attributing interests in a FIF are treated as being disposed of in the reverse order of their acquisition. Treatment of deemed transaction under section EX 51 or EX 54B
13: If a person is treated under section EX 51(5) EX 54B subsection (5) amount attributing interest company fair dividend rate method FIF FIF income foreign investment vehicle income year investor life insurance market value portfolio investment entity share reorganisation Sections EX 44B to EX 44E inserted 1 April 2007 section 70(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 70(2) Section EX 44C(4)(b) amended 19 December 2007 section 89(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(4)(c) added 19 December 2007 section 89(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(4B) heading inserted 6 October 2009 section 796(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44C(4B) inserted 6 October 2009 section 796(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44C(5)(b)(ii) substituted 19 December 2007 section 89(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(10)(b) amended 19 December 2007 section 89(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(10B) heading inserted 19 December 2007 section 89(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(10B) inserted 19 December 2007 section 89(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(10C) heading inserted 19 December 2007 section 89(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(10C) inserted 19 December 2007 section 89(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(11) amended 19 December 2007 section 89(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(11)(a) amended 19 December 2007 section 89(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(13) heading added 19 December 2007 section 89(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C(13) added 19 December 2007 section 89(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44C list of defined terms company inserted 6 October 2009 section 796(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44C list of defined terms foreign investment vehicle inserted 6 October 2009 section 796(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44C list of defined terms life insurance inserted 6 October 2009 section 796(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44C list of defined terms portfolio investment entity inserted 6 October 2009 section 796(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 44D: Fair dividend rate method: method for
unit valuers and persons valuing interests daily FIF income
1: If this section applies to an entity or person (the entity subsection (2) unit valuation period Formula
2: The formula for the entity is— Definition of items in formula
3: The items in the formula are defined in subsections (4) to (7). Opening
4: Opening
a: for which the entity uses the fair dividend rate method; and
b: that the entity holds at the beginning of the unit valuation period; and
c: that are not, at the beginning of the income year, included in a direct income interest of 10% or more in a grey list company. Exclusion for certain managed funds
4B: Subsection (4)(c) does not apply if—
a: the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
b: the FIF is a foreign investment vehicle. Period
5: Period Year
6: Year Quick sale adjustment
7: Quick sale adjustment
a: zero, if the unit valuation period is 1 day; or
b: zero, if the entity in the unit valuation period—
i: acquires or increases the attributing interest in no FIF for consideration:
ii: disposes of or reduces the attributing interest in no FIF after an acquisition or increase of the interest for consideration; or
c: if paragraphs (a) and (b) do not apply, the lesser of—
i: the amount (the peak holding adjustment
ii: the amount (the quick sale gains Peak holding adjustment
8: The peak holding adjustment is the total for the unit valuation period of the amounts calculated for each FIF using the formula in subsection (9). Formula
9: The formula referred to in subsection (8) is— 0.05 x quick sales × average cost. Definition of items in formula
10: The items in the formula are defined in subsections (11) and (12). Quick sales
11: Quick sales
a: if the entity in the unit valuation period does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the unit valuation period, the lesser of the following, determined in terms of the amount of the attributing interest in the FIF (the interest size
i: the difference between the interest size that is the greatest for the unit valuation period and the interest size at the beginning of the unit valuation period:
ii: the difference between the interest size that is the greatest for the unit valuation period and the interest size at the end of the unit valuation period; or
c: if paragraph (a) does not apply and a share reorganisation occurs in the unit valuation period, the amount calculated under section EX 44E Average cost
12: Average cost
a: if the entity in the unit valuation period does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the unit valuation period, the total amount of expenditure that the entity incurs in acquiring or increasing during the unit valuation period
c: if paragraph (a) does not apply and a share reorganisation occurs in the unit valuation period, the amount calculated under section EX 44E Quick sale gains
12B: The quick sale gains is the greater of zero and the total for the unit valuation period of amounts calculated, for each attributing interest that is both acquired and disposed of in the unit valuation period, using the formula— return - (interest x average cost). Definition of items in formula
12C: In the formula—
a: return
b: interest
c: average cost Conversion of foreign currency amounts
13: If an amount in a foreign currency is the market value of, or is derived from or incurred on
a: each foreign currency amount in the income year be converted into New Zealand dollars using the exchange rate on the day for which the market value is determined or on which the amount is derived or incurred
b: all foreign currency amounts in the income year be converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th day of each month that falls in the income year. Identifying attributing interests disposed of in income year
14: For the purpose of calculating the quick sale gains under subsection (7)(c)(ii), attributing interests in a FIF are treated as being disposed of in the reverse order of their acquisition. Treatment of deemed transaction under section EX 54B
15: If a person is treated under section EX 54B amount attributing interest close of trading spot exchange rate company fair dividend rate method FIF FIF income foreign investment vehicle income year life insurance market value portfolio investment entity Sections EX 44B to EX 44E inserted 1 April 2007 section 70(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 70(2) Section EX 44D heading amended 19 December 2007 section 90(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(1) heading substituted 19 December 2007 section 90(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(1) substituted 19 December 2007 section 90(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(4)(b) amended 19 December 2007 section 90(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(4)(c) added 19 December 2007 section 90(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(4B) heading inserted 6 October 2009 section 797(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44D(4B) inserted 6 October 2009 section 797(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44D(7)(c)(ii) substituted 19 December 2007 section 90(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(12)(b) amended 19 December 2007 section 90(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(12B) heading inserted 19 December 2007 section 90(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(12B) inserted 19 December 2007 section 90(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(12C) heading inserted 19 December 2007 section 90(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(12C) inserted 19 December 2007 section 90(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(13) amended 19 December 2007 section 90(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(13)(a) amended 19 December 2007 section 90(8) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(15) heading added 19 December 2007 section 90(9) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D(15) added 19 December 2007 section 90(9) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 44D list of defined terms company inserted 6 October 2009 section 797(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44D list of defined terms foreign investment vehicle inserted 6 October 2009 section 797(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44D list of defined terms life insurance inserted 6 October 2009 section 797(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 44D list of defined terms portfolio investment entity inserted 6 October 2009 section 797(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 44E: Fair dividend rate method and cost method: calculating items in formulas for periods affected by share reorganisations
Items and formulas
1: This section provides for the calculation, for an income year or unit valuation period (the affected period
a: the item quick sales sections EX 44C(7) EX 44D(9) EX 45B(2)
b: the item average cost sections EX 44C(7) EX 44D(9) EX 45B(2)
c: the item change section EX 45B(7)(b) Treatment of affected period in which share reorganisation occurs
2: For the purposes of calculating the items for an affected period under this section,—
a: the affected period is treated as consisting of periods (the reorganisation periods
b: each reorganisation period in the affected period—
i: begins with the beginning of the affected period or a share reorganisation in the affected period; and
ii: ends before the next later event that is a share reorganisation or the end of the affected period:
c: the amount of the attributing interest in the FIF held by the person at any time (the comparison time equivalent interest size
d: the amount of an acquisition or increase (the acquired interest equivalent acquired interest
i: the equivalent interest size for the time of the acquisition or increase; and
ii: the amount that would be the equivalent interest size for the time of the acquisition or increase if the person were not to have the acquired interest. Quick sales
3: Under this section, the item quick sales
a: the difference between the equivalent interest size that is the greatest for the affected period and the equivalent interest size for the beginning of the affected period:
b: the difference between the equivalent interest size that is the greatest for the affected period and the equivalent interest size for the end of the affected period. Average cost
4: Under this section, the item average cost incurs in acquiring or increasing during the affected period Change
5: Under this section, the item change Conversion of foreign currency amounts
6: If an amount in a foreign currency is incurred on an interest during an affected period, the person must use the method for converting the amount to New Zealand currency chosen under section EX 44C EX 44D EX 45B amount attributing interest FIF income year Sections EX 44B to EX 44E inserted 1 April 2007 section 70(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 70(2) Section EX 44E(4) amended 19 December 2007 section 91 Taxation (Business Taxation and Remedial Matters) Act 2007
EX 45: Deemed rate of return method
Formula changes if interest changes
1: If a person is using the deemed rate of return method to calculate FIF income or loss from an attributing interest in a FIF for an income year, the FIF income or loss is calculated—
a: by the formula in subsection (3) (standard formula) if the person has held the interest unchanged throughout the income year; and
b: by totalling the amounts calculated by the formula in subsection (5) (part-year formula) for each part of the income year during which the interest is unchanged, in any other case. When interest changes
2: A person's attributing interest in a FIF changes during an income year if the person—
a: acquires or increases the interest; or
b: disposes of or reduces the interest (but merely receiving an annuity payment from the interest is not a disposal or reduction). Standard formula
3: The standard formula is— opening book value x deemed rate. Definition of items in standard formula
4: In the standard formula,—
a: opening book value is the book value of the interest at the end of the previous income year, calculated under subsection (7):
b: deemed rate is the rate set by the Governor-General by Order in Council for this section for the relevant income year. Part-year formula
5: The part-year formula is— Definition of items in part-year formula
6: In the part-year formula,—
a: opening book value is the book value (if any) of the interest at the end of the period before the part of the income year, calculated under subsection (7):
b: costs
i: all expenditure, if any, that the person incurs in acquiring or increasing the interest:
ii: income tax on the income of the FIF for which the person is liable under the laws of a country or territory outside New Zealand and which is paid by the person in the part of the income year:
c: deemed rate is the rate set by the Governor-General by Order in Council for this section for the relevant income year:
d: days is the number of days in the part of the income year. (For this purpose, an acquisition or increase is treated as occurring at the start of a day and a disposition or reduction is treated as occurring at the end of a day.) Closing book value formula
7: The book value, at the end of an income year or (in a case in which subsection (5) applies) a part of an income year, of an attributing interest of a person in a FIF under the deemed rate of return method is, unless subsection (9) applies, calculated using the formula (closing book value formula)— (opening book value + costs + deemed income + top-up amounts) – gains. Definition of items in closing book value formula
8: In the closing book value formula,—
a: opening book value is the book value (if any) of the interest at the end of the previous income year or the part of the income year, calculated under subsection (7):
b: costs
i: all expenditure, if any, that the person incurs in acquiring or increasing the interest:
ii: income tax on the income of the FIF for which the person is liable under the laws of a country or territory outside New Zealand and which is paid by the person in the income year or part of the income year:
c: deemed income is the FIF income from the interest for the year or the part of the income year calculated under subsection (3) or (5):
d: top-up amounts is amounts (gains from holding or disposing of the interest) that are top-up FIF income in the year under section EX 48 EX 49
e: gains is the total of all amounts that the person derives during the year or the part of the income year from holding or disposing of the interest. (The amounts include any foreign withholding tax or other tax that the person is allowed as a credit under section LC 1 Closing book value zero if changing method
9: The closing book value is always zero if the person is using a calculation method for the interest different from the deemed rate of return method at the end of the income year or, in a case to which subsection (5) applies, the part of the income year. Top-up income if deemed rate inadequate
10: If the closing book value of a person's attributing interest in a FIF at the end of an income year or a part of an income year is below zero, the person has additional FIF income equal to the deficit for the relevant income year. When subsection (10) does not apply
11: Subsection (10) does not apply if—
a: the person is a natural person; and
b: at all times during the income year the total value of the person's attributing interests in FIFs is $250,000 or less, the value of each interest being—
i: its book value (calculated under subsection (7)) at the end of the previous income year, if the person held the interest then and used the deemed rate of return method to calculate FIF income for all attributing interests in the previous income year :
ii: its market value, in any other case; and
c: the deficit in closing book value arises only because the person disposed of some or all of the interest; and
d: the gain that the person derived from disposing of the interest or part-interest is not income (or is income only to the extent to which it gives rise to FIF income). Top-up income if gains more than deemed income
12: A person calculating FIF income under the deemed rate of return method can also have additional FIF income under section EX 48 FIF income reduced on disposal if deemed rate excessive
13: If a person has disposed of the whole of an attributing interest in a FIF and the closing book value for the relevant income year or the part of the income year is more than zero, the excess is subtracted when the person's FIF income under the deemed rate of return method for the income year is calculated. When subsection (13) does not apply
14: Subsection (13) does not apply if—
a: the person is a natural person; and
b: at all times during the income year the total value of attributing interests in FIFs held by the person is $250,000 or less, the value of each interest being—
i: its book value (calculated under subsection (7)) at the end of the previous income year, if the person held the interest then and used the deemed rate of return method to calculate FIF income for all attributing interests in the previous income year :
ii: its market value, in any other case; and
c: the gain that the person derived from disposing of the interest or part-interest is not income (or is income only to the extent to which it gives rise to FIF income). Conversion of foreign currency amounts
15: If an amount is derived from, or incurred on, the interest in a foreign currency during the income year, the person must choose, for the year and each later year and for all interests for which the person uses the deemed rate of return method,—
a: for each such foreign currency amount in the income year to be converted into New Zealand dollars using the exchange rate on the day the amount is derived or incurred; or
b: for all such foreign currency amounts in the year to be converted into New Zealand dollars at the average of the close of trading spot exchange rates for the fifteenth day of each complete month that falls in the income year. amount attributing interest calculation method close of trading spot exchange rate deemed rate of return method FIF FIF income foreign withholding tax income income year loss market value New Zealand tax 1994 No 164 ss CG 16(11)(b), (12), CG 19(1)-(5) Subsection (6)(b) amended 1 April 2006 section 98(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the definition of costs Subsection (8)(b) amended 1 April 2006 section 98(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the definition of costs Subsection (11)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (14)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (15) substituted 1 April 2007 section 71(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 71(2) Additional FIF income or loss if CFC owns FIF
EX 45B: Cost method
FIF income from interest, disposal of interest
1: If a person is using the cost method
a: the FIF income from that interest for the relevant income year is the greater of zero and the amount calculated using the formula in subsection (2):
b: the FIF loss from that interest for the relevant income year is zero. Formula
2: The formula referred to in subsection (1) is— 0.05 × (opening value + (quick sales × average cost)). Definition of items in formula
3: The items in the formula are defined in subsections (4) to (6). Opening value
4: Opening value
a: zero, if the relevant income year is the year in which the person acquires the interest; or
ab: the amount that is shown as the net asset value of the interest in audited financial statements of the person for the relevant income year made available to the general public, if—
i: paragraph (a) does not apply; and
ii: the FIF makes available to the general public audited financial statements for its accounting year ending in the relevant income year; and
iii: the person chooses that this paragraph apply; or
ac: the amount of the cost of the interest, if—
i: paragraphs (a) and (ab) do not apply; and
ii: the person acquires the interest in the 2005–06 or 2006–07 income year; and
iii: the interest was not an attributing interest for the income year before the relevant income year; or
b: the amount of an independent valuation of the market value of the interest at the beginning of the relevant income year, if paragraphs (a), (ab), and (ac)
i: the interest was not an attributing interest for which the person has FIF income or loss
ii: the person has used the cost method for the interest for a period of 4 or more income years ending before the relevant income year and has not applied this paragraph to the interest for any of those income years; or
c: the amount calculated using the formula in subsection (7)(a), if paragraphs (a), (ab), (ac), and (b) do not apply and current opening interest preceding opening interest
d: the amount calculated using the formula in subsection (7)(b), if paragraphs (a), (ab), (ac), and (b) do not apply and
e: the amount calculated using the formula in subsection (7)(c), if paragraphs (a), (ab), (ac), and (b) do not apply and Quick sales
5: Quick sales
a: if the person in the relevant income year does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the relevant income year, the lesser of the following, determined in terms of the amount of the attributing interest in the FIF (the interest size
i: the difference between the interest size that is the greatest for the income year and the interest size at the beginning of the income year:
ii: the difference between the interest size that is the greatest for the income year and the interest size at the end of the income year; or
c: if paragraph (a) does not apply and a share reorganisation occurs in the income year, the amount calculated under section EX 44C Average cost
6: Average cost
a: if the person in the relevant income year does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the relevant income year, the total amount of expenditure that the person incurs in acquiring or increasing during the relevant income year
c: if paragraph (a) does not apply and a share reorganisation occurs in the relevant income year, the amount calculated under section EX 44E Formulas for opening value
7: In subsection (4),—
a: the first formula is— preceding + FIF income:
b: the second formula is— preceding + FIF income + (change x average cost):
c: the third formula is— Definition of items in formulas
8: The items in the formulas are defined in subsections (9) to (14). Preceding
9: Preceding FIF income
10: FIF income Change
11: Change
a: if no share reorganisation occurs in the income year before the relevant income year, the difference between the person's attributing interest at the beginning of the relevant income year and the person's attributing interest at the beginning of the income year before the relevant income year:
b: if a share reorganisation occurs in the income year before the relevant income year, the amount calculated under section EX 44E Average cost
12: Average cost
a: if the person in the income year before the relevant income year does not acquire or increase the attributing interest in the FIF for consideration or does not dispose of or reduce the attributing interest in the FIF after such an acquisition or increase, zero; or
b: if paragraph (a) does not apply and no share reorganisation occurs in the income year before the relevant income year, the total amount of expenditure that the person incurs in acquiring or increasing during the income year before the relevant income year
c: if paragraph (a) does not apply and a share reorganisation occurs in the income year before the relevant income year, the amount calculated under section EX 44E Opening interest
13: Opening interest Preceding interest
14: Preceding interest Conversion of foreign currency amounts
15: If an amount in a foreign currency is the market value of, or is incurred on, an interest during an income year, the person must choose that for the income year and each later income year and for all interests for which the person uses the cost method—
a: each foreign currency amount in the income year be converted into New Zealand dollars using the exchange rate on the day for which the market value is determined or on which the amount is incurred; or
b: all foreign currency amounts in the income year be converted into New Zealand dollars at the average of the close of trading spot exchange rates for the 15th day of each month that falls in the income year. amount attributing interest calculation method close of trading spot exchange rate dividend FIF FIF income foreign withholding tax income year loss New Zealand tax Section EX 45B inserted 1 April 2007 section 72(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 72(2) Section EX 45B(4)(ab) inserted 19 December 2007 section 92(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(ac) inserted 19 December 2007 section 92(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(ac)(ii) amended 6 October 2009 section 798(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 45B(4)(ac)(iii) inserted 6 October 2009 section 798(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 45B(4)(b) amended 19 December 2007 section 92(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(b)(i) amended 19 December 2007 section 92(3) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(c) amended 19 December 2007 section 92(4) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(d) amended 19 December 2007 section 92(5) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(4)(e) amended 19 December 2007 section 92(6) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(6)(b) amended 19 December 2007 section 92(7) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(6)(c) amended 19 December 2007 section 92(8) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(11)(b) amended 19 December 2007 section 92(9) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(12)(b) amended 19 December 2007 section 92(10) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B(12)(c) amended 19 December 2007 section 92(11) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 45B list of defined terms attributing interest amended 6 October 2009 section 798(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EX 46: Additional FIF income or loss if CFC owns FIF
Application of this section
1: This section applies if—
a: a person has an income interest of 10% or more in a CFC for an accounting period under sections EX 8 to EX 17
b: because section EX 21(33) Calculation of FIF income or loss
2: The person instead has FIF income or loss, for the income year in which the period ends, calculated using the formula— income interest x CFC's FIF income or loss. Definition of items in formula
3: In the formula,—
a: income interest is the person's income interest in the CFC for the period under sections EX 8 to EX 13
b: CFC's FIF income or loss is the CFC's FIF income or loss for the period calculated under subsections (4) and (5). Application of FIF rules to choice of method
4: The person must—
a: choose, under sections EX 38 to EX 41
b: otherwise apply the calculation rules in sections EX 38 to EX 49
c: apply the FIF loss ring-fencing rules in section DN 9 Exclusion of policyholders' entitlements
5: Despite subsection (4), the CFC's FIF income or loss does not include any amount actuarially determined to be attributable to policyholders in the CFC or another company as a result of applying section EX 21(25) and (26) Unqualified grey list CFCs
6: This section applies whether or not the CFC is an unqualified grey list CFC under section EX 22 Disclosure restrictions on grey list CFCs
7: No FIF income or loss arises under this section to the extent to which section EZ 29 2011-12 accounting period amount attributing interest branch equivalent income calculation method CFC company FIF FIF income FIF loss FIF rules grey list income interest income year loss 1994 No 164 ss CG 7(5), CG 11(25)(b), (c), CG 13(1) Subsection (4)(c) substituted 1 April 2007 section 73(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 73(2) Subsection (7) amended 3 April 2006 section 99(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting 2011-12 2006–07 Relationship with other provisions in Act
EX 47: Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method
When this section applies
1: This section applies if a person holding an attributing interest in a FIF calculates the FIF income or loss from the interest for a period using—
a: the comparative value method:
b: the deemed rate of return method:
c: the fair dividend rate method:
d: the cost method. Exclusion for interests in grey list companies
1B: Subsection (1)(c) does not apply if—
a: the FIF is a grey list company; and
b: the person holds a direct income interest of 10% or more in the FIF at the beginning of the income year in which the period falls. Application of rule for certain managed funds
1C: Subsection (1B) does not apply if—
a: the person is a portfolio investment entity, an entity eligible to be a portfolio investment entity, or a life insurance company; and
b: the FIF is a foreign investment vehicle. No income other than FIF income
2: The person is treated as not having any income from the interest for the period other than FIF income and, in particular, any dividends derived in the period from the interest and any income gained from disposing of the interest in the period are disregarded. No deductions other than FIF loss
3: The person is denied a deduction for any amount incurred in the period on acquiring some or all of the interest, except to the extent to which the amount is taken into account under the relevant calculation method in calculating FIF income or loss for the period. Application of trading stock rules
4: The interest is not trading stock in the period and accordingly subpart EB amount attributing interest calculation method comparative value method deduction cost method deemed rate of return method direct income interest dividend fair dividend rate method FIF FIF income FIF loss foreign investment vehicle income life insurance loss portfolio investment entity trading stock 1994 No 164 s CG 16(6) The heading to section EX 47 substituted 1 April 2007 section 74(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 74(4) Subsection (1) substituted 1 April 2007 section 74(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 74(4) Section EX 47(1)(c) substituted 7 September 2010 section 203 Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 Section EX 47(1)(c) substituted 6 October 2009 section 799(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47(1)(c) substituted 19 December 2007 section 93 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 47(1B) heading inserted 6 October 2009 section 799(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47(1B) inserted 6 October 2009 section 799(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47(1C) heading inserted 6 October 2009 section 799(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47(1C) inserted 6 October 2009 section 799(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47 list of defined terms direct income interest inserted 6 October 2009 section 799(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47 list of defined terms foreign investment vehicle inserted 6 October 2009 section 799(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47 list of defined terms life insurance inserted 6 October 2009 section 799(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 47 list of defined terms portfolio investment entity inserted 6 October 2009 section 799(3) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 The list of defined terms was amended 1 April 2007 section 74(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method
EX 48: Top-up FIF income: deemed rate of return method
When this section applies
1: This section applies at any time when a person—
a: has an attributing interest in a FIF for a period; and
b: is calculating the FIF income or loss from the interest using the deemed rate of return method; and
c: derives in the period, from holding or disposing of the interest, an amount that would have been income if section EX 47(2) Formula
2: The gain is FIF income to the extent to which the amount calculated using the following formula is positive: total income gains – total FIF income. Definition of items in formula
3: In the formula,—
a: total income gains is the total of amounts (including the amount in question) derived by the person until that time from holding or disposing of the interest that would have been income if section EX 47(2)
b: total FIF income is the total of FIF income (reduced by the total of any FIF losses) derived by the person from the interest until (and including) the relevant period. Consequence of partial sales
4: If the person disposes of part of the interest, this section applies to the part disposed of and the part retained as if they were separate interests. If this means that an apportionment is necessary, it must be done on the basis of the respective market values at the time the part interest is disposed of. amount attributing interest deemed rate of return method FIF FIF income FIF loss income loss market value 1994 No 164 s CG 22
EX 49: Top-up FIF income: 1 April 1993 uplift interests
When this section applies
1: This section applies at any time if a person—
a: has an attributing interest in a FIF for a period; and
b: held the interest on 2 July 1992; and
c: calculated their FIF income from the interest in the period starting on 1 April 1993 under the comparative value method or the deemed rate of return method; and
d: was treated as having reacquired the interest on 1 April 1993 for an uplifted cost under section CG 23(1)(d) of the Income Tax Act 1994
e: derives in the period, from holding or disposing of the interest, an amount that would have been income if section EX 47(2) Formula
2: The gain is FIF income to the extent to which the amount calculated using the following formula is positive: total income gains – total FIF income. Definition of items in formula
3: In the formula,—
a: total income gains is the total of amounts (including the amount in question) that the person derived until that time from holding or disposing of the interest that would have been income if section EX 47(2)
b: total FIF income is the total of FIF income (reduced by the total of any FIF losses) that the person derived from the interest until (and including) the relevant period. Consequence of partial sales
4: If the person disposes of part of the interest, this section applies to the part disposed of and the part retained as if they were separate interests. If this means that an apportionment is necessary, it must be done on the basis of the respective market values at the time the part interest is disposed of. amount attributing interest comparative value method deemed rate of return method FIF FIF income FIF loss income market value 1994 No 164 s CG 22 Changing calculation method
EX 50: Limits on changes of method
No change unless allowed
1: Once a person uses a particular calculation method to calculate FIF income or loss for an attributing interest in a FIF for a particular period, they must use the same method for interests in the FIF for the next period unless they are allowed to change under subsections (2) to (8) Change on practical grounds
2: The person may change if it is not practical to continue with the same method because—
a: in the case of the accounting profits method, section EX 40(2) :
b: in the case of the branch equivalent method, it is impossible to obtain enough information to continue to use it :
c: in the case of the comparative value method, it is impossible to find out the end-of-year market value of the interest :
d: in the case of the deemed rate of return method, if the person was entitled to use that method only by falling under the $250,000 threshold in section EX 40(4)(b) :
e: in the case of the deemed rate of return method, if it was the default method under section EX 41
f: in the case of the fair dividend rate method, it is impossible to find out the start-of-year market value of the interest except by an independent valuation:
g: in the case of the cost method, if it was the default method under section EX 41 Choosing to change
3: The person may also change by notice to the Commissioner if—
a: the notice complies with subsection (4); and
b: either—
i: the person is a natural person and the $250,000 threshold in subsection (5) is not exceeded; or
ii: the change is to, or from, the branch equivalent method and within subsections (6) and (7). Notice of election
4: The notice of an election to change under subsection (3) must—
a: give the reasons for the change; and
b: comply with the Commissioner's notice requirements; and
c: be given before the end of the first income year or accounting period for which the change is to take effect, unless the Commissioner agrees to a retrospective notice; and
d: in the case of a natural person relying on the $250,000 threshold test in subsection (3)(b)(i), be given before the end of the year or period that is before the one from the end of which the change takes effect. Natural person: $250,000 threshold
5: A natural person may make an election under subsection (3) if the total market value of their attributing interests in FIFs is $250,000 or less at the end of the income year or accounting period before the year or period from the end of which the change takes effect. Changing to or from branch equivalent method
6: A person may make an election under subsection (3) to change—
a: to the branch equivalent method if—
i: this is the first time they have chosen to change to the branch equivalent method for an attributing interest in the FIF; or
ii: subsection (7) allows them to make another election :
b: from the branch equivalent method if—
i: they are changing back to a calculation method that they used for attributing interests in the fund before they used the branch equivalent method; and
ii: this is the first time they have chosen to change from the branch equivalent method, unless subsection (7) allows them to make another election. Repeated changes to or from branch equivalent method
7: A person may change more than once to, or from, the branch equivalent method if—
a: there has been a change in circumstances (such as a significant change in shareholding) that significantly changes their ability to obtain enough information to use the branch equivalent method; and
b: altering their income tax liability is not the principal purpose or effect of the change. Repeated changes between fair dividend rate method and comparative value method
8: A person may change more than once from the fair dividend rate method to the comparative value method and from the comparative value method to the fair dividend rate method if the person is a natural person or the trustee of a trust that—
a: has no gifting settlor who is not a natural person or deceased person; and
b: at all times in the income year, would be a qualifying trust for a distribution made at the time; and
c: is mainly for the benefit of—
i: an organisation or trust with income that is exempt income under section CW 34 CW 35
ii: at all times in the income year, a natural person for whom the gifting settlors of the trust have natural love and affection or had natural love and affection when alive; and
d: is not a superannuation scheme. accounting period accounting profits method attributing interest branch equivalent method calculation method Commissioner comparative value method cost method deemed rate of return method exempt income fair dividend rate method FIF FIF income income tax liability income year loss market value notice qualifying trust settlor superannuation scheme trustee 1994 No 164 s CG 17(8)-(10) Section EX 50(1) amended 19 December 2007 section 94(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (2)(a) (d) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (2)(f) (g) inserted 1 April 2007 section 75(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 75(4) Subsection (6)(a)(ii) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (8) inserted 1 April 2007 section 75(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 75(4) Section EX 50(8)(a) substituted 19 December 2007 section 94(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 50(8)(b) substituted 19 December 2007 section 94(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 50(8)(c) substituted 19 December 2007 section 94(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 50(8)(d) substituted 19 December 2007 section 94(2) Taxation (Business Taxation and Remedial Matters) Act 2007 The list of defined terms was amended 1 April 2007 section 75(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method exempt income fair dividend rate method qualifying trust settlor superannuation scheme trustee
EX 51: Consequences of changes in method
Changes between cost-based methods and look-through methods
1: Subsection (2) applies if a person holding an attributing interest in a FIF changes the calculation method for calculating FIF income or loss from the interest—
a: from 1 of the 4 cost-based calculation methods (the comparative value method, or the deemed rate of return method, or the fair dividend rate method, or the cost method) to either of the look-through calculation methods (the accounting profits method or the branch equivalent method):
b: from either of the look-through calculation methods to 1 of the 4 rust-based calculation methods. Treatment as sale for market value
2: The person is treated as having—
a: disposed of the interest to an unrelated person immediately before the start of the first accounting period to which the new method applies; and
b: reacquired it immediately after the start of the period; and
c: received for the disposal and paid for the reacquisition an amount equal to the interest's market value at the time. Changes from comparative value method or fair dividend rate method to cost method or deemed rate of return method
3: If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to either of the cost method and the deemed rate of return method for calculating the FIF income or loss from the interest, the person is treated as having—
a: disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and
b: reacquired the interest immediately after the start of the income year; and
c: received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal. Changes from cost method or deemed rate of return method to comparative value method or fair dividend rate method
4: If a person holding an attributing interest in a FIF changes from either of the cost method and the deemed rate of return method to either of the comparative value method and the fair dividend rate method for calculating the FIF income or loss from the interest, the person is treated as having—
a: disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and
b: reacquired the interest immediately after the start of the income year; and
c: received for the disposal and paid for the reacquisition an amount equal to,—
i: if the person changes from the cost method, what would have been the interest's opening value under section EX 45B
ii: if the person changes from the deemed rate of return method, the interest's closing book value under section EX 45(7) year. Changes between comparative value method and fair dividend rate method
5: If a person holding an attributing interest in a FIF changes from either of the comparative value method and the fair dividend rate method to the other of the comparative value method and the fair dividend rate method for calculating the FIF income or loss from the interest, the person is treated as having—
a: disposed of the interest to an unrelated person immediately before the start of the first income year to which the new method applies; and
b: reacquired the interest at the start of the income year; and
c: received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal. accounting period accounting profits method amount attributing interest branch equivalent method calculation method comparative value method cost method deemed rate of return method fair dividend rate method FIF FIF income income year loss market value 1994 No 164 s CG 24 Subsection (1)(a) (b) substituted 1 April 2007 section 76(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 76(4) Subsections (3) (4) substituted 1 April 2007 section 76(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 76(4) Section EX 51(4)(c)(ii) amended 19 December 2007 section 95(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 51(5) heading added 19 December 2007 section 95(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 51(5) added 19 December 2007 section 95(2) Taxation (Business Taxation and Remedial Matters) Act 2007 The list of defined terms was amended 1 April 2007 section 76(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method Cases of entry into and exit from FIF rules
EX 52: Migration of persons holding FIF interests
Leaving New Zealand
1: Subsection (2) applies if a person—
a: ceases to be resident in New Zealand; and
b: holds an attributing interest in a FIF at the time; and
c: for the period before the change of residence, calculates FIF income or loss from the interest using—
i: the comparative value method:
ii: the deemed rate of return method:
iii: the fair dividend rate method:
iv: the cost method. Treatment as sale at market value
2: The person is treated as—
a: having sold the interest immediately before the change of residence for an amount equal to its market value at the time; and
b: not holding the interest when not resident in New Zealand (unless they become resident again and subsections (3) and (4) apply). Coming to New Zealand
3: Subsection (4) applies if a person—
a: is a non-resident or a transitional resident; and
ab: becomes a New Zealand resident who is not a transitional resident; and
b: holds an attributing interest in a FIF at the time; and
c: for the period after the change of residence or status, calculates FIF income or loss from the interest using—
i: the comparative value method:
ii: the deemed rate of return method:
iii: the fair dividend rate method:
iv: the cost method. Treatment as purchase at market value
4: The person is treated as—
a: having bought the interest immediately after the change of residence or status
b: not holding it when the person is a transitional resident or not a New Zealand resident Look-through calculation method: relevance of income interest rules
5: Subsection (6) applies if a person—
a: ceases to be—
i: a New Zealand resident who is not a transitional resident, and becomes a non-resident:
ii: a non-resident, and becomes a New Zealand resident who is not a transitional resident:
iii: a transitional resident, and becomes a New Zealand resident who is not a transitional resident; and
b: holds an attributing interest in a FIF at the time; and
c: for the accounting period in which the change occurs, uses the accounting profits method or branch equivalent method Income interest rules
6: The income interest rule in section EX 16 accounting period accounting profits method amount attributing interest branch equivalent method calculation method comparative value method cost method deemed rate of return method fair dividend rate method FIF FIF income income interest loss market value New Zealand New Zealand resident non-resident resident in New Zealand transitional resident 1994 No 164 ss CG 16(4), CG 23(2), (3) Subsection (1)(c) substituted 1 April 2007 section 77(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 77(8) Subsection (3)(a) substituted 1 October 2005 section 100(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 100(5) and (6) Subsection (3)(ab) inserted 1 October 2005 section 100(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 100(5) and (6) Subsection (3)(c) amended 1 October 2005 section 100(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting change of residence or status change of residence See section 100(5) and (6) Subsection (3)(c) substituted 1 April 2007 section 77(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 77(8) Subsection (4)(a) amended 1 October 2005 section 77(3)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting residence or status residence Subsection (4)(b) amended 1 October 2005 section 77(3)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting when the person is a transitional resident or not a New Zealand resident when not resident in New Zealand Subsection (5)(a) substituted 1 October 2005 section 100(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 100(5) and (6) Subsection (5)(c) amended 1 April 2005 section 77(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting branch equivalent method deemed rate of return method The list of defined terms was amended 1 October 2005 section 100(4)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting New Zealand resident See section 100(5) and (6) The list of defined terms was amended 1 October 2005 section 100(4)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting non-resident See section 100(5) and (6) The list of defined terms was amended 1 October 2005 section 100(4)(c) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by omitting resident of New Zealand See section 100(5) and (6) The list of defined terms was amended 1 October 2005 section 100(4)(d) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by inserting transitional resident See section 100(5) and (6) The list of defined terms was amended 18 December 2006 section 77(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting branch equivalent method The list of defined terms was amended 1 April 2007 section 77(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method
EX 53: Changes in application of FIF exemptions
Exemptions ceasing to apply
1: Subsections (2) to (4)
a: holds rights in 1 of the categories of rights described in section EX 30(2) to (4)
b: either—
i: the rights become an attributing interest in a FIF because 1 of the exemptions in sections EX 32 to EX 37
ii: the person starts having FIF income or loss from the rights because they incur a cost on an attributing interest in a FIF and exceed the $50,000 threshold in sections CQ 5(1)(d) or (db) DN 6(1)(d) or (db) Market value for cost-based methods
2: If the person uses the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method
a: disposed of the rights to an unrelated person immediately before the change; and
b: reacquired them immediately after the change; and
c: received for the sale and paid for the repurchase an amount equal to their market value at the time. Calculation of reduction in FIF income or loss
3: If the change occurs during an accounting period of the FIF and the person uses the accounting profits method or the branch equivalent method Definition of items in formula
4: In the formula,—
a: FIF income or loss is the FIF income or loss of the person from the rights for the period before allowing for the reduction:
b: days before change is the number of complete days in the period before the change occurs:
c: days in period is the number of days in the period. Exemptions applying
5: Subsections (6) to (8)
a: holds an attributing interest in a FIF; and
b: either—
i: the interest ceases to be an attributing interest in a FIF because 1 of the exemptions in sections EX 32 to EX 37
ii: the person ceases having FIF income or loss from the interest because they dispose of an attributing interest in a FIF and fall below the $50,000 threshold in sections CQ 5(1)(d) or (db) DN 6(1)(d) or (db) Market value for cost-based methods
6: If the person uses the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method
a: disposed of the interest to an unrelated person immediately before the change; and
b: reacquired
c: received for the sale and paid for the repurchase an amount equal to its market value at the time. Calculation of reduction in FIF income or loss
7: If the change occurs during an accounting period of the FIF and the person uses the accounting profits methods or the branch equivalent method Definition of items in formula
8: In the formula,—
a: FIF income or loss is the FIF income or loss of the person from the interest for the period before allowing for the reduction:
b: days after change is the number of complete days in the period after the change occurs:
c: days in period is the number of days in the period. accounting period accounting profits method amount attributing interest branch equivalent method comparative value method cost method deemed rate of return method fair dividend rate method FIF FIF income loss market value 1994 No 164 s CG 23(7), (8) Subsection (1) amended 1 April 2005 section 78(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting Subsections (2) to (4) Subsections (2) and (3) Subsection (1)(b)(ii) amended 1 April 2007 section 78(1)(b)(i) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) CQ 5(1)(d) See section 78(10) Subsection (1)(b)(ii) amended 1 April 2007 section 78(1)(b)(ii) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) DN 6(1)(d) See section 78(10) Subsection (2) amended 1 April 2007 section 78(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method the comparative value method or deemed rate of return method See section 78(10) Subsection (3) amended 1 April 2005 section 78(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting branch equivalent method deemed rate of return method Subsection (5) amended 1 April 2005 section 78(4)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting Subsections (6) to (8) Subsections (2) to (4) Subsection (5)(b)(ii) amended 1 April 2007 section 78(4)(b)(i) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) CQ 5(1)(d) See section 78(10) Subsection (5)(b)(ii) amended 1 April 2007 section 78(4)(b)(ii) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) DN 6(1)(d) See section 78(10) Subsection (6) amended 1 April 2007 section 78(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method the comparative value method or the deemed rate of return method See section 78(10) Subsection (6)(b) amended 1 April 2005 section 78(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting reacquired repurchased Subsection (7) amended 1 April 2005 section 78(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting branch equivalent method deemed rate of return method The list of defined terms was amended 1 April 2007 section 78(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting branch equivalent method cost method fair dividend rate method
EX 54: FIFs migrating from New Zealand
When this section applies
1: This section applies when a person holds rights that become an attributing interest in a FIF because an entity becomes a FIF. Treatment as sale and repurchase
2: The person is treated as having—
a: disposed of the interest immediately before the change to an unrelated person; and
b: repurchased it immediately after the change; and
c: received for the sale and paid for the repurchase an amount equal to the market value of the interest at the end of the business day on which the change occurred. Calculation of reduction in FIF income or loss
3: If the change occurs during an accounting period of the FIF and the person uses the accounting profits method or branch equivalent method to calculate FIF income or loss from the rights for that period, section EX 25 Definition of items in formula
4: In the formula,—
a: FIF income or loss is the FIF income or loss of the person from the rights for the period before allowing for the reduction:
b: days before change is the number of complete days in the period before the change occurs:
c: days in period is the number of days in the period. accounting period accounting profits method amount attributing interest branch equivalent method business FIF FIF income loss market value New Zealand 1994 No 164 ss CG 14(1)(ca), CG 23(7A)-(7D)
EX 54B: FIF rules first applying to interest for income year beginning on or after 1 April 2007
When this section applies
1: This section applies when a person has rights in a FIF that—
a: for the period ending on a day (the preceding day
i: not an attributing interest:
ii: an attributing interest for which the person does not have FIF income or loss:
iii: rights for which the person is a share supplier in a returning share transfer; and
b: for the period beginning on the day (the application day Disposal and acquisition
2: The person is treated as having—
a: disposed of the interest to an unrelated person immediately before the application day; and
b: reacquired the interest at the beginning of the application day; and
c: received for the disposal and paid for the reacquisition an amount equal to the market value of the interest at the time of the disposal. Payment of tax liability arising from transition
3: A person who is liable to pay an amount of income tax (the tax amount the disposals in an income year, and related acquisitions, treated as occurring under this section
a: may satisfy the liability by making payments to the Commissioner of at least—
i: one third of the tax amount, in the income year following the income year in which the disposals are
ii: one half of the balance of the tax amount remaining owing after the payments made under subparagraph (i), in the second income year following the income year in which the disposals are
iii: the balance of the tax amount remaining owing after the payments made under subparagraphs (i) and (ii), in the third income year following the income year in which the disposals are
b: is not liable to pay any penalty or interest for which the entity would otherwise be liable for an inaccuracy in an estimate, or shortfall in the payment, of provisional tax to the extent that the inaccuracy or shortfall arises because of the disposals attributing interest FIF FIF income income year loss portfolio calculation period revenue account property Section EX 54B inserted 1 April 2007 section 79(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 79(2) Section EX 54B(1) heading substituted 19 December 2007 section 96(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(1) substituted 19 December 2007 section 96(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(2)(b) substituted 19 December 2007 section 96(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(3) amended 19 December 2007 section 96(3)(a) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(3)(a)(i) amended 19 December 2007 section 96(3)(b) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(3)(a)(ii) amended 19 December 2007 section 96(3)(c) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(3)(a)(iii) amended 19 December 2007 section 96(3)(d) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 54B(3)(b) amended 19 December 2007 section 96(3)(e) Taxation (Business Taxation and Remedial Matters) Act 2007
EX 55: Death of persons holding FIF interests
Section EX 55 repealed 1 October 2005 section 49 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Measurement of cost
EX 56: Measurement of cost
When this section applies
1: This section applies when the cost of a person's attributing interest in a FIF is being measured for the purposes of—
a: the natural person $50,000 exemption in sections CQ 5(1)(d) or (db) DN 6(1)(d) or (db) arises):
b: the comparative value method:
c: the deemed rate of return method.
d: the fair dividend rate method:
e: the cost method. FIFO cost flow identification
2: If sections EX 44C(12) EX 44D(14) FIFO Definition of items in formula
2B: Share splits or similar
3: If the person acquires the interest as the result of a share split, non-taxable bonus issue, or similar event, and the acquisition is not income for the person, subsections (4) and (5) apply. Allocation of original cost
4: The cost of the interest is a fair allocation (based on market values at the time of the split) of the cost of the original property that is split. Allocation replacing original cost
5: For the income year in which the split occurs and later,—
a: the cost allocated to the interest is no longer the cost of the original property that was split; and
b: the person is treated as having incurred the allocated cost amount on acquiring the interest when the original property was acquired; and
c: the person is treated as not incurring any other cost on the interest merely because the original property ceases to exist. Non-monetary cost
6: If any cost is incurred in kind and not in money, the amount of the cost is equal to the market value of the cost incurred in kind, measured as at the time incurred. Exclusion of term life insurance element of premiums
7: If the interest is rights to benefit under a life insurance policy, the cost of the interest excludes a premium incurred in a previous income year (or accounting period) to the extent to which the premium relates only to term life insurance for the previous period and does not increase the policy's surrender value. Exclusion of holding costs
8: The cost of the interest does not include any expenditure under the financial arrangements rules or interest on money borrowed to acquire it, or other holding costs, incurred after its acquisition. accounting period attributing interest amount comparative value method cost method deemed rate of return method fair dividend rate method FIF financial arrangements rules income income year interest life insurance life insurance policy market value non-taxable bonus issue premium share 1994 No 164 s CG 14(1) Subsection (1)(a) amended 1 April 2005 section 80(1)(c) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting arises): arises); and Subsection (1)(a) amended 1 April 2007 section 80(1)(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) CQ 5(1)(d) See section 80(7) Subsection (1)(a) amended 1 April 2007 section 80(1)(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting or (db) DN 6(1)(d) See section 80(7) Subsection (1)(b) amended 1 April 2005 section 80(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting method: method; and Subsection (1)(d) (e) inserted 1 April 2007 section 80(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 80(7) Section EX 56(2) heading substituted 19 December 2007 section 97 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EX 56(2) substituted 19 December 2007 section 97 Taxation (Business Taxation and Remedial Matters) Act 2007 Subsection (2) substituted 1 April 2007 section 80(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 80(7) Section EX 56(2B) heading repealed 6 October 2009 section 800 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EX 56(2B) repealed 6 October 2009 section 800 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (2B) inserted 1 April 2007 section 80(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 80(7) The list of defined terms was amended 1 April 2007 section 80(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method Change of FIF's balance date
EX 57: Change of FIF's balance date
When this section applies
1: This section applies when a person—
a: has an attributing interest in a FIF; and
b: calculates their FIF income or loss from the FIF using the accounting profits method or the branch equivalent method; and
c: has calculated FIF income or loss from the FIF on the basis of 1 accounting year (old accounting year); and
d: wants to change to use a different accounting year (new accounting year) for the calculations. Commissioner's consent
2: The person may make the change only if the Commissioner agrees. Commissioner's reasons
3: The Commissioner may take into account any relevant factors when making the decision, including—
a: whether the change is sought because ownership of the FIF has changed; and
b: whether the change is sought because of taxation or other legal requirements in a country where the FIF is resident or does business; and
c: whether the change would postpone liability to income tax on FIF income. New accounting year
4: If the change is approved, the person may use the new accounting year. Limit on transitional deferral
5: If, in order to make the transition, the transitional accounting period is more than 1 year and ends in a later income year than the old accounting year ends in, and that would result in an amount of FIF income being derived in the later income year, subsection (6) applies and section CQ 5(1)(f) Income pro-rated over whole period
6: For the transitional accounting period, the FIF income is divided by the number of days in the period and the resulting amount is FIF income of the person derived on each day in the period. accounting period accounting profits method accounting year amount attributing interest branch equivalent method business Commissioner FIF FIF income income tax income year loss year 1994 No 164 s CG 16(8)-(10) Market value rules
EX 58: Market value of life policy and superannuation entitlements
When this section applies
1: This section applies when, in order to calculate a person's FIF income or loss, it is necessary to calculate the market value of a person's rights to benefit under a life insurance policy or as a beneficiary under a superannuation scheme. Value of life insurance policy
2: The market value of rights to benefit under a life insurance policy is equal to their surrender value. Limit to subsection (2)
3: Subsection (2) applies only for the purpose of calculating the cost of a person's rights to benefit from a life insurance policy under—
a: section EX 52(4)
b: section EX 53(2)
c: section EZ 7 Value of superannuation scheme entitlement
4: The market value at any time of a person's rights to benefit under a superannuation scheme is equal to the total of costs incurred up to that time by or for the person on acquiring the rights if—
a: it is not reasonably practicable to calculate the actual market value; and
b: they have not derived any material gain from the rights up to that time. FIF income life insurance policy loss market value superannuation scheme 1994 No 164 s CG 23(9)
EX 59: Non-market transactions in FIF interests
Section GD 14 the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method attributing interest comparative value method cost method deemed rate of return method fair dividend rate method FIF 1994 No 164 s CG 23(5), (6) Section EX 59 amended 1 April 2007 section 81(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method the comparative value method or the deemed rate of return method See section 81(3) The list of defined terms was amended 1 April 2007 section 81(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by inserting cost method fair dividend rate method Commissioner's default assessment power
EX 60: Commissioner's default assessment power
When this section applies
1: This section applies when—
a: a person has failed to disclose their control interest or income interest in a CFC or attributing interest in a FIF, under section 61 :
b: a person has failed to disclose information regarding their control interest or income interest in a CFC or attributing interest in a FIF, requested under section 17 :
c: a person cannot obtain enough information to calculate their attributed CFC income or loss, FIF income or loss, or attributed repatriation for a period. Commissioner's power
2: The Commissioner may make an assessment of the amount of attributed CFC income or loss, FIF income or loss, or attributed repatriation for the relevant period. Examples of methods
3: Without limiting the Commissioner's discretion, the assessment may be based on any of the following:
a: the accounts of the CFC or FIF for the relevant period prepared for tax authorities, creditors, shareholders, or others :
b: the application of a rate of presumed increase of 10% or more (compounding annually) to the CFC's or FIF's branch equivalent income calculated under section EX 21 :
c: the application of a rate of presumed increase of 10% or more (compounding annually) to the CFC's or FIF's accounting profits as shown in its accounts for a previous period :
d: an imputed rate of return on the market value of the interest at the start of the period :
e: the actual gains or losses of the person in the period from holding or disposing of the interest :
f: the change in the market value of the interest over the period. amount assessment attributed CFC income attributed repatriation attributing interest branch equivalent income CFC Commissioner control interest FIF FIF income income interest loss market value shareholder 1994 No 164 s CG 25 Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (3)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EY: Life insurance rules
Contents
EY 1: What this subpart does
Life insurance rules
1: This subpart contains most of the life insurance rules. Meaning of life insurance rules
2: Life insurance rules means—
a: the sections in this subpart; and
b: subpart CR
c: section CX 33
d: subpart DR
e: section DZ 2
f: section EZ 1
g: section GD 7
h: section GD 8
i: subpart II life insurance rules 1994 No 164 ss OB 1 life insurance rules
EY 2: Matters to which this subpart relates
The matters to which this subpart relates are—
a: the meaning of actuarial reserves, claim, life insurance, life insurance policy, life insurer, life reinsurance, life reinsurer, and life reinsurance policy ( sections EY 3 to EY 13 :
b: life insurers' premium loading ( sections EY 14 to EY 23 :
c: life insurers' mortality profit ( sections EY 24 to EY 33 :
d: life insurers' discontinuance profit ( sections EY 34 to EY 40 :
e: life insurers' policyholder income ( sections EY 41 to EY 44 :
f: life insurers' income and deductions when disposing of property ( sections EY 45 EY 46 :
g: non-resident life insurers ( sections EY 47 EY 48 actuarial reserves claim deduction discontinuance profit income life insurance life insurance policy life insurer life reinsurance life reinsurance policy life reinsurer mortality profit non-resident premium loading property Paragraphs (a) (f) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 3: Meaning of actuarial reserves
Meaning
1: Actuarial reserves means a life insurer's reserves as calculated under section EY 4 Link between actuarial reserves and life insurer
2: Actuarial reserves, for a life insurer at any time, means the life insurer's actuarial reserves at that time. actuarial reserves life insurer 1994 No 164 s CM 8(1)
EY 4: Actuarial reserves: calculation
Calculation by actuary
1: The life insurer's actuarial reserves must be calculated by an actuary. All reserves or 1 or more amounts
2: The actuary may calculate—
a: the actuarial reserves for all the life insurance policies for which the life insurer is the insurer; or
b: the amount in the life insurer's actuarial reserves for 1 or more life insurance policies for which the life insurer is the insurer. Interest, mortality, and other assumptions and bases of calculation
3: The actuary must do the calculation using interest, mortality, and other assumptions and bases of calculation that—
a: are based on the same principles as those used in the actuarial advice on which the following are calculated:
i: the level of surplus funds available to the life insurer for allotment or payment to shareholders or policyholders; or
ii: the level of surplus funds available to the life insurer, if a superannuation scheme, for allotment to objects of the scheme other than the object of providing for members' benefits; and
b: are likely to produce a reasonable estimation of the future experience of the life insurer in relation to life insurance policies of which the life insurer is the insurer, having regard to the past experience of the life insurer in relation to life insurance policies of which the life insurer was the insurer; and
c: conform with commercially acceptable practice. Reserves for policy never negative
4: The amount in the actuarial reserves for a life insurance policy must never be negative. Reserves for all policies never less than total of surrender values
5: The actuarial reserves at any time must not be less than the total of the surrender values of all the life insurance policies they cover at that time. Reserves for policies same at end of one, and start of next, income year
6: The amount in the actuarial reserves for life insurance policies at the start of an income year is the same as the amount in the actuarial reserves for the life insurance policies at the end of the previous income year. Effect of partial reinsurance
7: The actuarial reserves of a life insurer who has partial reinsurance must be reduced by an amount that the actuary responsible for actuarial control of the life insurer considers appropriate having regard to the nature of the life reinsurance policies. actuarial reserves actuary amount income year life insurance policy life insurer life reinsurance policy partial reinsurance payment shareholder superannuation scheme 1994 No 164 ss CM 8(1), (2)(a), (b), CM 13(1)(d)
EY 5: Actuarial reserves: actuary's declaration
Content
1: The actuary responsible for actuarial control of a life insurer must provide, with the life insurer's return of income, a declaration that—
a: states that the actuary is the actuary responsible for actuarial control of the life insurer; and
b: states the specific interest, mortality, and other assumptions and bases of calculation applied in calculating the life insurer's premium loading, mortality profit, discontinuance profit, and policyholder income or policyholder net loss for the income year of the return; and
c: states that the assumptions and bases of calculation comply with section EY 4 Form
2: The declaration must be in the form (if any) required by the Commissioner. actuarial reserves actuary Commissioner discontinuance profit income year life insurer mortality profit policyholder income policyholder net loss premium loading return of income 1994 No 164 s CM 8(2)(c)
EY 6: Actuarial reserves: powers of Commissioner
Seek advice from Government Actuary or other actuary
1: The Commissioner may seek the advice of the Government Actuary or any other actuary on the interest, mortality, and other assumptions and bases of calculation used by the actuary who did the calculation under section EY 4(3) Assess on different basis
2: Whether or not the Commissioner seeks or obtains any such advice, the Commissioner may make an assessment for a life insurer and an income year on the basis of interest, mortality, and other assumptions and bases of calculation different from those used by the actuary who did the calculation under section EY 4(3) actuarial reserves actuary assessment Commissioner income year life insurer 1994 No 164 s CM 8(3)
EY 7: Meaning of claim
Meaning in life insurance rules
1: In the life insurance rules, claim
a: means the amount that a life insurer is liable to pay under a life insurance policy because the contingency against which the life insured is covered under the policy has occurred. Subsections (2) to (5) expand on the amount that a life insurer is liable to pay :
b: includes a payment made by a life insurer on the transfer of some or all of its life insurance business :
c: in the expression claim arising claim Includes cash and non-cash benefits
2: For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay includes—
a: a payment on the death of a life insured :
b: a payment on maturity :
c: a payment of a cash bonus :
d: a payment on the surrender of a policy :
e: an annuity payment :
f: a benefit other than in cash. Does not include advance or amount in actuarial reserves
3: For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay does not include—
a: an advance against the security of the policy; or
b: a bonus or other discretionary amount added to the actuarial reserves. Means amount before certain subtractions
4: For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay means the amount before the subtraction of the following amounts payable to the life insurer:
a: an advance against the security of the policy; and
b: an unpaid premium for the policy; and
c: interest on an amount referred to in paragraph (a) or (b). Amount may be zero
5: For the purposes of subsection (1)(a), the amount that a life insurer is liable to pay may be zero. actuarial reserves amount business claim interest life insurance life insurance policy life insurance rules life insured life insurer pay payment premium 1994 No 164 s OB 1 claim Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and Subsection (2)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 8: Meaning of life insurance
Meaning
1: Life insurance means insurance under which—
a: person A (life insurer) is liable to provide person B (policyholder) with a benefit described in subsection (2); and
b: the life insurer is entitled to receive consideration in return, either from the policyholder or from some other person. Benefits
2: The benefits are—
a: a benefit whose payment is contingent on the death of 1 or more human beings, including an annuity whose term is contingent on human life; or
b: a benefit whose payment is contingent on the survival of 1 or more human beings to a date, or an age, specified as part of the insurance, including an annuity whose term is contingent on human life; or
c: a benefit that is an annuity whose term is not contingent on human life, if the life insurer enters into the arrangement to provide the annuity as part of their business of providing life insurance. Exclusion: death benefits provided under accident or medical insurance
3: Life insurance does not include accident or medical insurance under which—
a: 1 or more benefits are payable for the death of the person whose life is insured; and
b: all the benefits referred to in paragraph (a) are—
i: payable if the death is caused by a specified cause named in the policy; or
ii: payable incidentally to the provision of accident or medical benefits, if the death is caused by a specified cause named in the policy. Exclusion: death benefits provided by superannuation funds
4: Life insurance does not include an arrangement in which—
a: a superannuation fund is liable to pay, as a benefit to a beneficiary of the fund, a lump sum on—
i: the death of 1 or more human beings specified in the trust deed; or
ii: the survival of 1 or more human beings specified in the trust deed to a date, or an age, specified in the trust deed; and
b: the lump sum is made up of—
i: superannuation contributions made by or for the beneficiary; and
ii: allocated investment earnings attributable to contributions made by or for the beneficiary; and
iii: any other allocation from the profits of the superannuation fund attributable to contributions made by or for the beneficiary. arrangement business life insurance life insurer pay payment superannuation contribution superannuation fund 1994 No 164 ss CM 2, OB 1 life insurance Subsection (3)(b) substituted 1 April 2005 section 82(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 82(2) and (3) Subsection (3) of that Act subsection (1) of that Act subsection (2) subsection (1)
EY 9: Meaning of life insurance policy
Life insurance policy means a policy to the extent to which it states the terms under which life insurance is covered. life insurance life insurance policy
EY 10: Meaning of life insurer
Meaning
1: Life insurer means a person carrying on a business of providing life insurance. Exclusion
2: A person carrying on a business of providing life insurance in an income year is treated as not carrying on a business of providing life insurance while the person has full reinsurance. Inclusion
3: An association of persons, a body of persons, or a trustee is treated as carrying on a business of providing life insurance to the extent to which—
a: the association, body, or trustee provides life insurance; and
b: the consideration for the provision is something other than natural love and affection. Parties to policies treated as being unrelated
4: Every life insurance policy entered into by the association, body, or trustee as insurer is treated as entered into with an unrelated party, even if the life insurer and the policyholder are, for example,—
a: an association and a member of the association; or
b: a trustee and a beneficiary of the trust. Relationship with section HF 1
5: Section HF 1 business full reinsurance income year life insurance life insurance policy life insurer trustee 1994 No 164 ss CM 12, CM 14, OB 1 life insurer
EY 11: Meaning of life reinsurance
Meaning
1: Life reinsurance means insurance provided to a life insurer by another person (person C), under which person C secures the life insurer, fully or partially, against the life insurer's liability under a life insurance policy. The words ‘‘fully'' and ‘‘partially'' describe the extent to which the life insurer is secured against the life insurer's liability under the life insurance policy; they do not describe the term for which the reinsurance is provided. Full reinsurance
2: The life insurer has full reinsurance if all the following apply:
a: the life insurer offered or was offered or entered into a life insurance policy or policies,—
i: in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or
ii: in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and
b: the life insurer holds a life reinsurance policy or policies covering every life insurance policy described in paragraph (a); and
c: the life insurer is fully secured against liability under the life insurance policy or policies by the life reinsurance policy or policies; and
d: the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand. Partial reinsurance
3: The life insurer has partial reinsurance if all the following apply:
a: the life insurer—
i: holds a life reinsurance policy or policies fully securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); or
ii: holds a life reinsurance policy or policies for all the life insurance policies described in paragraph (b) but only partially securing them against liability; or
iii: holds a life reinsurance policy or policies partially securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); and
b: the life insurer offered or was offered or entered into the life insurance policy or policies covered by the life reinsurance policy or policies,—
i: in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or
ii: in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and
c: the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand. Life reinsurer
4: Life reinsurer means a person in the position of person C. business full reinsurance life insurance life insurance policy life insurer life reinsurance life reinsurance policy life reinsurer New Zealand business offered or was offered or entered into partial reinsurance resident in New Zealand 1994 No 164 ss CM 12, CM 13(1)(a)
EY 12: Meaning of life reinsurance policy
Life reinsurance policy means a policy to the extent to which it states the terms under which life reinsurance is covered. life reinsurance life reinsurance policy
EY 13: Life insurance and life reinsurance: how sections relate
Life insurance definitions
1: Sections EY 8 to EY 10 Life reinsurance definitions
2: Sections EY 11 EY 12 Life insurance term usually includes life reinsurance term
3: A reference in this Act to any of the terms defined in sections EY 8 to EY 10 sections EY 11 EY 12 life insurance life insurer life reinsurance life reinsurer Premium loading
EY 14: How premium loading is calculated
Life insurer providing life insurance at start of income year
1: Section EY 15 Life insurer not providing life insurance at start of income year
2: Section EY 16 Premium loading formula (life)
3: Section EY 17(1) Premium loading formula (active annuities)
4: Section EY 17(2) business income year life insurance life insurance policy life insured life insurer pay premium loading premium loading formula 1994 No 164 s CM 6(1), (3)
EY 15: Premium loading: when life insurers providing life insurance at start of income year
Calculation of premium loading
1: If a life insurer is in the business of providing life insurance at the start of an income year, the life insurer calculates their premium loading for the income year by following the steps in subsection (2). Steps
2: The steps are,—
a: first, use the relevant premium loading formula to calculate an amount for each life insured under each life insurance policy existing at the start of the income year :
b: second, for each such life insurance policy, add together the amounts for the lives insured under it :
c: third, add together the totals reached under paragraph (b). amount business income year life insurance life insurance policy life insured life insurer premium loading premium loading formula 1994 No 164 s CM 6(1) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 16: Premium loading: when life insurers not providing life insurance at start of income year
Calculation of premium loading
1: If a life insurer has started to carry on a business of providing life insurance in an income year, the life insurer calculates the life insurer's premium loading for the income year by following the steps in subsection (2). Steps
2: The steps are,—
a: first, use the relevant premium loading formula, adjusted as described in section EY 18 :
b: second, for each such life insurance policy, add together the amounts for the lives insured under it :
c: third, add together the totals reached under paragraph (b). amount business income year life insurance life insurance policy life insured life insurer premium loading premium loading formula 1994 No 164 s CM 6(3) Subsection (2)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 17: Premium loading formulas
Premium loading formula (life)
1: The premium loading formula (life) is— 0.2 x claim probability x (opening sum assured – opening actuarial reserves). Premium loading formula (active annuities)
2: The premium loading formula (active annuities) is— 0.01 x claim probability x opening actuarial reserves. Definition of items in formulas
3: The items in the formulas are defined in subsections (4) to (6). Claim probability
4: Claim probability is the probability of a claim arising under the policy for the life insured's death in the income year. It is determined at the start of the income year using the same mortality assumptions as are used to calculate the life insurer's actuarial reserves at the start of the income year. It is expressed as a decimal. Variations to claim probability are in sections EY 18(2) EY 19(2) Opening sum assured
5: Opening sum assured is the claim that would be payable under the policy for the life insured's death in the income year or, if no such claim would be payable, the claim that would be payable under the policy for the life insured's survival to the relevant date or age specified in the policy. It is determined at the start of the income year. It may be zero. Variations to opening sum assured are in sections EY 18(3) EY 20(2) EY 21(3) EY 22(2) Opening actuarial reserves
6: Opening actuarial reserves is the amount in the life insurer's actuarial reserves for the life insured under the policy. It is determined at the start of the income year. A variation to opening actuarial reserves is in section EY 18(4) actuarial reserves amount claim income year life insured life insurer pay premium loading formula 1994 No 164 s CM 6(1)
EY 18: Premium loading formulas: when life insurers not providing life insurance at start of income year
When this section applies
1: This section applies when a life insurer has started to carry on a business of providing life insurance in an income year. Claim probability
2: In using the relevant premium loading formula, the life insurer treats the reference in claim probability to the start of the income year as a reference to the date on which the life insurance policy started to cover the life insured. Opening sum assured
3: In using the premium loading formula (life), the life insurer treats the reference in opening sum assured to the start of the income year as a reference to the date on which the life insurance policy started to cover the life insured. Opening actuarial reserves
4: In using the relevant premium loading formula, the life insurer treats the reference in opening actuarial reserves to the start of the income year as a reference to the end of the income year. business income year life insurance life insurance policy life insurer premium loading formula 1994 No 164 s CM 6(3)
EY 19: Premium loading formulas: option when more than 1 life insured
When this section applies
1: This section applies when a life insurance policy covers more than 1 life insured. Claim probability
2: In using the relevant premium loading formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy. Features of common factor
3: The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured's death in the income year. It must be weighted as necessary to take account of—
a: differing claims for individual lives insured under the policy; and
b: differing amounts in the life insurer's actuarial reserves for individual lives insured under the policy. actuarial reserves amount claim income year life insurance policy life insured life insurer premium loading formula 1994 No 164 s CM 6(2)
EY 20: Premium loading formula (life): when annuity payable on death
When this section applies
1: This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured's death. Opening sum assured
2: In using the premium loading formula (life), the life insurer uses as opening sum assured the net present value of the annuity. The net present value is determined—
a: at the start of the income year; and
b: on the assumption that the life insured died at the start of the income year; and
c: using the same assumptions and bases of calculation as are used to calculate the life insurer's actuarial reserves for the income year. actuarial reserves income year life insurance policy life insured life insurer payment premium loading formula 1994 No 164 s CM 6(4)
EY 21: Premium loading formulas: when annuity payable on survival to date or age specified in policy
When this section applies
1: This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured's survival to the relevant date or age specified in the policy. Claim probability
2: In using the relevant premium loading formula, the life insurer must use claim probability as defined in section EY 17(4) Opening sum assured
3: In using the premium loading formula (life), the life insurer must use as opening sum assured the net present value of the annuity. The net present value is determined—
a: at the relevant date or age specified in the policy; and
b: on the assumption that the life insured survived to the date or age; and
c: using the same assumptions and bases of calculation as are used to calculate the life insurer's actuarial reserves for the income year. actuarial reserves income year life insurance policy life insured life insurer pay payment premium loading formula 1994 No 164 s CM 6(5)
EY 22: Premium loading formula (life): when partial reinsurance exists
When this section applies
1: This section applies when a life insurer has partial reinsurance. Opening sum assured
2: In using the premium loading formula (life), the life insurer must reduce opening sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contingency against which the life insured is covered under the life insurance policy. claim life insurance policy life insured life insurer life reinsurance policy partial reinsurance premium loading formula 1994 No 164 s CM 13(1)(a), (b)
EY 23: Premium loading formulas: individual result may never be negative
If a life insurer gets a negative result from using a premium loading formula to calculate an amount for a life insured under a life insurance policy for an income year, the result is treated as zero. income year life insurance policy life insured life insurer premium loading formula 1994 No 164 s CM 6(6) Mortality profit
EY 24: How mortality profit is calculated
Life insurer providing life insurance at start of income year
1: Section EY 25 Life insurer not providing life insurance at start of income year
2: Section EY 26 Mortality profit formula
3: Section EY 27 business income year life insurance life insurance policy life insured life insurer mortality profit mortality profit formula 1994 No 164 s CM 5(1), (3)
EY 25: Mortality profit: when life insurers providing life insurance at start of income year
Calculation of mortality profit
1: If a life insurer is in the business of providing life insurance at the start of an income year, the life insurer calculates the life insurer's mortality profit for the income year by following the steps in subsection (2). Steps
2: The steps are,—
a: first, use the mortality profit formula to calculate an amount for each life insured under each life insurance policy existing at the start of the income year :
b: second, for each such life insurance policy, add together the amounts for the lives insured under it :
c: third, add together the totals reached under paragraph (b) :
d: fourth, if the result is positive, take it as the mortality profit. If the result is negative, sections EY 32 EY 33 amount business income year life insurance life insurance policy life insured life insurer mortality profit mortality profit formula 1994 No 164 s CM 5(1) Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 26: Mortality profit: when life insurers not providing life insurance at start of income year
Calculation of mortality profit
1: If a life insurer has started to carry on a business of providing life insurance in an income year, the life insurer calculates the life insurer's mortality profit for the income year by following the steps in subsection (2). Steps
2: The steps are,—
a: first, use the mortality profit formula, adjusted as described in section EY 28 :
b: second, for each such life insurance policy, add together the amounts for the lives insured under it :
c: third, add together the totals reached under paragraph (b) :
d: fourth, if the result is positive, take it as the mortality profit. If the result is negative, sections EY 32 EY 33 amount business income year life insurance life insurance policy life insured life insurer mortality profit mortality profit formula 1994 No 164 s CM 5(3) Subsection (2)(a) (c) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 27: Mortality profit formula
Formula
1: The mortality profit formula is— claim probability x (opening sum assured – opening actuarial reserves) – (closing sum assured – opening actuarial reserves). Definition of items in formula
2: The items in the formula are defined in subsections (3) to (8). Claim probability
3: Claim probability is the probability of a claim arising under the policy for the life insured's death in the income year. It is determined at the start of the income year using the same mortality assumptions as are used to calculate the life insurer's actuarial reserves at the start of the income year. It is expressed as a decimal. Variations to claim probability are in sections EY 28(2) EY 29(2) Opening sum assured
4: Opening sum assured is the claim that would be payable under the policy for the life insured's death in the income year. It is determined at the start of the income year. It may be zero. Variations to opening sum assured are in sections EY 28(3) EY 30(2) EY 31(2) Opening actuarial reserves
5: Opening actuarial reserves is the amount in the life insurer's actuarial reserves for the life insured under the policy. It is determined at the start of the income year. A variation to opening actuarial reserves is in section EY 28(4) Closing sum assured if life insured dies in current income year
6: If a life insured dies in the income year to which the formula is being applied, closing sum assured is the claim payable under the policy for the death. It may be zero. A variation to closing sum assured is in section EY 31(3) Closing sum assured if life insured dies in 1990-91 income year or year up to current income year
7: If a life insured dies in the 1990-91 income year or a later income year before the income year to which the formula is being applied, and the claim has not already been included in closing sum assured for an income year, closing sum assured is the claim payable under the policy for the death. It may be zero. A variation to closing sum assured is in section EY 31(3) Closing sum assured if subsections (6) and (7) do not apply
8: If subsections (6) and (7) do not apply, closing sum assured is the same as opening actuarial reserves. actuarial reserves amount claim income year life insured life insurer mortality profit formula pay 1994 No 164 s CM 5(1)
EY 28: Mortality profit formula: when life insurers not providing life insurance at start of income year
When this section applies
1: This section applies when a life insurer starts to carry on a business of providing life insurance in an income year. Claim probability
2: In using the mortality profit formula, the life insurer treats the reference in claim probability to the start of the income year as a reference to the date on which the life insurance policy started to cover the life insured. Opening sum assured
3: In using the mortality profit formula, the life insurer treats the reference in opening sum assured to the start of the income year as a reference to the date on which the life insurance policy started to cover the life insured. Opening actuarial reserves
4: In using the mortality profit formula, the life insurer treats the reference in opening actuarial reserves to the start of the income year as a reference to the end of the income year. business income year life insurance life insurance policy life insurer mortality profit formula 1994 No 164 s CM 5(3)
EY 29: Mortality profit formula: option when more than 1 life insured
When this section applies
1: This section applies when a life insurance policy covers more than 1 life insured. Claim probability
2: In using the mortality profit formula, the life insurer may use as claim probability a common factor for all the lives insured under the policy. Features of common factor
3: The common factor must be a reasonable approximation of the average probability of a claim arising under the policy for each life insured's death in the income year. It must be weighted as necessary to take account of—
a: differing claims for individual lives insured under the policy; and
b: differing amounts in the life insurer's actuarial reserves for individual lives insured under the policy. actuarial reserves amount claim income year life insurance policy life insured life insurer mortality profit formula 1994 No 164 s CM 5(2)
EY 30: Mortality profit formula: when annuity payable on death
When this section applies
1: This section applies when, and to the extent to which, a life insurance policy provides for the payment of an annuity the start of which is contingent on the life insured's death. Opening sum assured
2: In using the mortality profit formula, the life insurer uses as opening sum assured the net present value of the annuity. The net present value is determined—
a: at the start of the income year; and
b: on the assumption that the life insured died at the start of the income year; and
c: using the same assumptions and bases of calculation as are used to calculate the life insurer's actuarial reserves for the income year. actuarial reserves income year life insurance policy life insured life insurer mortality profit formula pay payment 1994 No 164 s CM 5(4)
EY 31: Mortality profit formula: when partial reinsurance exists
When this section applies
1: This section applies when a life insurer has partial reinsurance. Opening sum assured
2: In using the mortality profit formula, the life insurer must reduce opening sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contingency against which the life insured is covered under the life insurance policy. Closing sum assured
3: In using the mortality profit formula, the life insurer must reduce closing sum assured by the claim receivable by the life insurer under the life reinsurance policy for the contingency against which the life insured is covered under the life insurance policy. claim life insurance policy life insured life insurer life reinsurance policy mortality profit formula partial reinsurance 1994 No 164 s CM 13(1)(a)
EY 32: Mortality profit formula: individual result may be negative only in some cases
Rule: not negative
1: If a life insurer gets a negative result from using the mortality profit formula to calculate an amount for a life insured under a life insurance policy for an income year, the result is treated as zero. However, a negative result is not treated as zero if 1 of the exclusions in subsections (2) to (4) applies. Exclusion: death in income year
2: The first exception is when the life insured died in the income year. Exclusion: death in 1990-91 income year or later
3: The second exception is when—
a: the life insured died in the 1990-91 income year or a later income year before the income year for which the formula is being used; and
b: the claim has not already been included in closing sum assured for an income year. Exclusion: annuity being paid
4: The third exception is when, and to the extent to which, the benefit under the policy is an annuity that is being paid at some time in the income year. claim income year life insurance policy life insured life insurer mortality profit formula pay 1994 No 164 s CM 5(5)
EY 33: Mortality profit formula: negative result
When this section applies
1: This section applies when a life insurer is allowed a deduction under section DR 1 Amount of deduction
2: The amount of the deduction is the negative result. Timing of deduction
3: The life insurer is allowed the deduction in the income year. amount deduction income year life insurer mortality profit formula 1994 No 164 s DK 3A Discontinuance profit
EY 34: How discontinuance profit is calculated
Life insurer providing life insurance at any time
1: Section EY 35 Discontinuance profit formula (existing policies)
2: Section EY 36
a: it terminates, wholly or partly, for a reason other than the life insured's death or the life insured's survival to the relevant date or age specified in the policy; or
b: a claim is paid under it for a reason other than the life insured's death or the life insured's survival to the relevant date or age specified in the policy. Discontinuance profit formula (new policies)
3: Section EY 37
a: it does not exist at the start of the income year; and
b: it terminates in the income year for a reason other than the life insured's death or the life insured's survival to the relevant date or age specified in the policy. claim discontinuance profit discontinuance profit formula income year life insurance life insurance policy life insured life insurer pay 1994 No 164 s CM 7(1)
EY 35: Discontinuance profit for income year
Calculation of discontinuance profit
1: A life insurer calculates the life insurer's discontinuance profit for an income year by following the steps in subsection (2). Steps
2: The steps are,—
a: first, use the relevant discontinuance profit formula to calculate an amount for each life insurance policy existing at some time in the income year :
b: second, add all the amounts together. amount discontinuance profit discontinuance profit formula income year life insurance policy life insurer 1994 No 164 s CM 7(1) Subsection (2)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EY 36: Discontinuance profit formula (existing policies)
Formula
1: The discontinuance profit formula (existing policies) is— pre-termination actuarial reserves – post-termination actuarial reserves – termination payment. Definition of items in formula
2: The items in the formula are defined in subsections (3) to (5). Pre-termination actuarial reserves
3: Pre-termination actuarial reserves is the amount in the life insurer's actuarial reserves for the life insurance policy, determined immediately before the event described in section EY 34(2)(a) Post-termination actuarial reserves
4: Post-termination actuarial reserves is the amount in the life insurer's actuarial reserves for the life insurance policy, determined immediately after the event described in section EY 34(2)(a) Termination payment
5: Termination payment is the claim payable by the life insurer on the occurrence of the event described in section EY 34(2)(a) section EY 38(2) actuarial reserves amount claim discontinuance profit formula income year life insurance policy life insurer pay 1994 No 164 s CM 7(1)(a)
EY 37: Discontinuance profit formula (new policies)
Formula
1: The discontinuance profit formula (new policies) is— premium – termination payment. Definition of items in formula
2: The items in the formula are defined in subsections (3) and (4). Premium
3: Premium is all the premiums paid to the life insurer for the life insurance policy, including a premium due before, but paid after, it terminates. A variation to premium is in section EY 39(2) Termination payment
4: Termination payment is the claim payable by the life insurer when the life insurance policy terminates. It may be zero. A variation to termination payment is in section EY 39(3) claim discontinuance profit formula life insurance policy life insurer pay premium 1994 No 164 s CM 7(1)(b)
EY 38: Discontinuance profit formula (existing policies): when partial reinsurance exists
When this section applies
1: This section applies when a life insurer has partial reinsurance. Termination payment
2: In using the discontinuance profit formula (existing policies), the life insurer must reduce termination payment by the claim receivable by the life insurer under the life reinsurance policy on the occurrence of the event described in section EY 34(2)(a) claim discontinuance profit formula life insurer life reinsurance policy partial reinsurance 1994 No 164 s CM 13(1)(c)(ii)
EY 39: Discontinuance profit formula (new policies): when partial reinsurance exists
When this section applies
1: This section applies when a life insurer has partial reinsurance. Premium
2: In using the discontinuance profit formula (new policies), the life insurer must reduce premium by an amount to which both the following apply:
a: it is part of the premiums payable by the life insurer in the income year for a life reinsurance policy or policies (life reinsurance premiums); and
b: it is the part of the life reinsurance premiums that relates to the life insurance policy. Termination payment
3: In using the discontinuance profit formula (new policies), the life insurer must reduce termination payment by the claim receivable by the life insurer under the life reinsurance policy for the termination of the life insurance policy. amount claim discontinuance profit formula income year life insurance policy life insurer life reinsurance policy partial reinsurance pay payment premium 1994 No 164 ss CM 7(1), CM 13(1)(c)(i)
EY 40: Discontinuance profit formulas: individual result may never be negative
If a life insurer gets a negative result from using a discontinuance profit formula to calculate an amount for a life insurance policy for an income year, the result is treated as zero. discontinuance profit formula income year life insurance policy life insurer 1994 No 164 s CM 7(2) Policyholder income
EY 41: How policyholder income is calculated
Section EY 42 income year life insurer policyholder income policyholder income formula 1994 No 164 s CM 15(1)
EY 42: Policyholder income formula
Formula
1: The policyholder income formula The following table is small in size and contains a formula. claim due + (closing actuarial reserves – opening actuarial reserves) – (FDR adjustment + PIE adjustment) – (premium – underwriting result) (1 – tax rate). Definition of items in formula
2: The items in the formula are defined in subsections (3) to (8). Claim due
3: Claim due is the total of—
a: each claim that became due and payable in the income year; and
b: each claim that became due and payable in a previous income year to the extent to which—
i: the claim relates to a contingency that was met in the 1990-91 income year or a later income year before the income year for which the formula is being used; and
ii: the claim has not already been included in claim in an income year. Closing actuarial reserves
4: Closing actuarial reserves is the life insurer's actuarial reserves, determined at the end of the income year. A variation to closing actuarial reserves is in section EY 44(2) Opening actuarial reserves
5: Opening actuarial reserves is the life insurer's actuarial reserves, determined at the start of the income year. A variation to opening actuarial reserves is in section EY 44(3) FDR adjustment
5B: FDR adjustment section EY 42B PIE adjustment
5C: PIE adjustment section EY 42C Premium
6: Premium is all the premiums due and payable to the life insurer in the income year. Premium does not include a premium due and payable to the life insurer in a previous income year. A variation to premium is in section EY 43 Underwriting result
7: Underwriting result is the total of the following that the life insurer has in the income year:
a: the premium loading; and
b: the mortality profit; and
c: the discontinuance profit. Tax rate
8: Tax rate is the rate of tax specified in schedule 1, part A, clause 1 Positive result
9: A positive result from using the policyholder income formula is policyholder income in the income year. Negative result
10: A negative result from using the policyholder income formula is policyholder net loss for the income year, and is dealt with under sections II 1 actuarial reserves claim discontinuance profit income year life insurer mortality profit pay policyholder income policyholder income formula policyholder net loss premium premium loading tax 1994 No 164 ss CM 15(1), (2), (4), OB 1 underwriting result Section EY 42(1) heading substituted 19 December 2007 section 98(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EY 42(1) substituted 19 December 2007 section 98(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EY 42(5B) heading inserted 19 December 2007 section 98(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EY 42(5B) inserted 19 December 2007 section 98(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EY 42(5C) heading inserted 19 December 2007 section 98(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Section EY 42(5C) inserted 19 December 2007 section 98(2) Taxation (Business Taxation and Remedial Matters) Act 2007
EY 42B: Policyholder income formula: FDR adjustment
When this section applies
1: This section applies for the purposes of section EY 42(5B)
a: the property is an attributing interest in a FIF held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indirectly invested in; and
b: the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property; and
c: section EY 42C When has life insurer indirectly invested in portfolio tax rate entity?
2: For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity ( PTRE A FDR adjustment
3: In using the policyholder income formula, the life insurer may calculate the item FDR adjustment
a: using the formula in subsection (5); or
b: by calculating, using any reasonable method for the information available to the life insurer, the amount credited to actuarial reserves in relation to the property, but excluding amounts which are related to FIF income under the fair dividend rate method. Consistency requirement
4: A life insurer, in using the policyholder income formula, must calculate the item FDR adjustment subsection (3)(a) or (b) Formula
5: The formula described in subsection (3)(a) for the calculation of the item FDR adjustment 0.6 × (FIF result - FDR income). Definition of items in formula
6: The items in the formula are defined in subsections (7) and (8). FIF result
7: FIF result FDR income
8: FDR income amount attributing interest fair dividend rate method FIF FIF income FIF loss income portfolio investment entity portfolio investment-linked life fund Section EY 42B inserted 19 December 2007 section 99(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EY 42C: Policyholder income formula: PILF adjustment
When this section applies
1: This section applies for the purposes of section EY 42(5C)
a: an attributing interest in a FIF,—
i: held by the life insurer, or by a portfolio tax rate entity that the life insurer has directly or indirectly invested in; and
ii: for which the life insurer or the portfolio tax rate entity uses the fair dividend rate method for the property:
b: shares described in section CX 44C When has life insurer indirectly invested in portfolio tax rate entity?
2: For the purposes of subsection (1), a life insurer is treated as indirectly investing in a portfolio tax rate entity ( PTRE A PIE adjustment
3: In using the policyholder income formula, the life insurer may calculate the item PILF adjustment
a: using the formula in subsection (5); or
b: by calculating, using any reasonable method for the information available to the life insurer, the amount credited to actuarial reserves in relation to the property, but excluding amounts that are—
i: related to FIF income under the fair dividend rate method:
ii: dividends or distributions for shares described subsection (1)(b), other than distributions from a portfolio tax rate entity to which section CX 44D(2) Consistency requirement
4: A life insurer, in using the policyholder income formula, must calculate the item PILF adjustment subsection (3)(a) or (b) Formula
5: The formula described in subsection (3)(a) for the calculation of the item PILF adjustment 0.9 × (FIF result - FDR income) + 0.9 × excluded shares. Definition of items in formula
6: The items in the formula are defined in subsections (7) to (9). FIF result
7: FIF result subsection (1)(a) FDR income
8: FDR income Excluded shares
9: Excluded shares
a: the positive amount of income excluded by section CX 44C(2)
b: the negative amount of a deduction not allowed by section DB 17(3)(b)
c: the gains and losses for the shares, calculated using accepted accounting practice, but excluding—
i: amounts already accounted for under paragraph (a) or (b) of this subsection, or under subsection (7):
ii: dividends and distributions for the shares, other than distributions from a portfolio tax rate entity to which section CX 44D(2) amount attributing interest deduction dividend excluded income fair dividend rate method FIF FIF income FIF loss income portfolio investment-linked life fund portfolio tax rate entity share Section EY 42C inserted 19 December 2007 section 99(1) Taxation (Business Taxation and Remedial Matters) Act 2007
EY 43: Policyholder income formula: when partial reinsurance exists
When this section applies
1: This section applies when a life insurer has partial reinsurance. Premium
2: In using the policyholder income formula, the life insurer must reduce premium by an amount calculated using the formula— reinsurance premium – reinsurance claim. Definition of items in formula
3: The items in the formula are defined in subsections (4) and (5). Reinsurance premium
4: Reinsurance premium is the total of the premiums due and payable by the life insurer in the income year under the life reinsurance policies under which the life insurer has partial reinsurance. Reinsurance premium does not include premiums due and payable by the life insurer in previous income years. Reinsurance claim
5: Reinsurance claim is the total of the claims receivable by the life insurer in the income year under the life reinsurance policies under which the life insurer has partial reinsurance. Reinsurance claim does not include claims receivable by the life insurer in previous income years. amount claim income year life insurer life reinsurance policy partial reinsurance policyholder income formula premium 1994 No 164 s CM 17(1)
EY 44: Policyholder income formula: when life insurance business transferred
When this section applies
1: This section applies when a life insurance business is transferred in a transfer to which all the following apply:
a: the transferor and the transferee, whether or not resident in New Zealand, are members of the same whollyowned group of companies immediately before and immediately after the transfer; and
b: 1 of the following is met:
i: if the transferor is resident in New Zealand, all the transferor's life insurance business is transferred to the transferee; or
ii: if the transferor is not resident in New Zealand, all the life insurance policies offered or entered into in New Zealand that are held by the transferor are transferred to the transferee; and
c: the Commissioner receives confirmation from the Government Actuary that—
i: paragraph (b) is met; and
ii: no policyholder will be unduly disadvantaged as a result of the transfer; and
d: the Commissioner is satisfied that the transfer is being undertaken for commercial reasons and that no undue tax advantage to either the transferor or the transferee will arise as a result of the transfer. Closing actuarial reserves
2: In using the policyholder income formula for the income year in which the transfer occurs, the transferor must use as closing actuarial reserves the transferor's actuarial reserves immediately before the transfer. Opening actuarial reserves
3: In using the policyholder income formula for the income year in which the transfer occurs, the transferee must use as opening actuarial reserves the total of—
a: the transferee's actuarial reserves, determined at the start of the income year; and
b: the transferee's actuarial reserves for the business or policies transferred to the transferee, determined immediately after the transfer. actuarial reserves business Commissioner income year life insurance life insurance policy offered or entered into in New Zealand policyholder income formula resident in New Zealand wholly-owned group of companies 1994 No 164 s CM 18 Disposal of property
EY 45: Income from disposal of property
When this section applies
1: This section applies when a life insurer disposes of any property of their life insurance business. Property generally
2: An amount that a life insurer derives from disposing of any property of their life insurance business is income of the life insurer under section CR 1(5) Financial arrangement: application of financial arrangements rules
3: If the life insurer disposes of a financial arrangement to which the financial arrangements rules apply, subpart EW Financial arrangement: application of old financial arrangements rules
4: If the life insurer disposes of a financial arrangement to which the old financial arrangements rules apply, sections EZ 30 to EZ 49 Financial arrangement: before old financial arrangements rules
5: If the life insurer receives an amount on or after 1 April 1982 as repayment or partial repayment of a financial arrangement to which the old financial arrangements rules would have applied if section EZ 42 amount business financial arrangement financial arrangements rules income life insurance life insurer old financial arrangements rules property 1994 No 164 s CM 10
EY 46: Deductions for disposal of property
When this section applies
1: This section applies when a life insurer is allowed a deduction under section DR 2 Amount of deduction
2: The amount of the deduction is—
a: the property's acquisition value or cost; or
b: the amount described in section EZ 2(1)
c: the amount described in section EZ 2(2) Timing of deduction
3: The life insurer is allowed the deduction in the income year in which they dispose of the property. amount deduction income year life insurer property 1994 No 164 s DK 3B(1), (3) Non-resident life insurers
EY 47: Non-resident life insurers with life insurance policies in New Zealand
When this section applies
1: This section applies when a life insurer not resident in New Zealand offers or is offered or enters into life insurance policies in New Zealand. Income derived from New Zealand
2: The life insurer's income from the business of providing life insurance, as determined under this section, is income derived from New Zealand. Underwriting result and policyholder income
3: The life insurer applies the items of the premium loading formula, the mortality profit formula, the discontinuance profit formula, and the policyholder income formula only to—
a: the life insurance policies the life insurer, as insurer, offered or was offered or entered into in New Zealand; and
b: the life reinsurance policies held by the life insurer that relate exclusively to the life insurance policies the life insurer, as insurer, offered or was offered or entered into in New Zealand. Other income
4: The life insurer's income from the business of providing life insurance, other than under a formula referred to in subsection (3), is determined only in relation to the life insurer's New Zealand business. business discontinuance profit formula income income derived from New Zealand life insurance life insurance policy life insurer life reinsurance policy mortality profit formula New Zealand New Zealand business non-resident offered or was offered or entered into policyholder income formula premium loading formula resident in New Zealand 1994 No 164 ss CM 13(2), CM 16, CM 17(2), CN 3(1), (1A)
EY 48: Non-resident life insurer may become resident
Non-resident life insurer may apply
1: A life insurer not resident in New Zealand may apply to be treated for its New Zealand business as resident in New Zealand on and after the first day of a particular income year. Application
2: The life insurer applies by—
a: completing a written application specifying the particular income year; and
b: giving the application to the Commissioner not less than 20 working days before the start of the particular income year. Commissioner may grant
3: The Commissioner may grant the application. Company resident in New Zealand
4: If the application is granted, the life insurer's New Zealand business is treated, on and after the first day of the particular income year, as being carried on by a company resident in New Zealand in which the life insurer holds all the issued shares. Life insurer agent for company
5: The life insurer is treated as carrying on its New Zealand business as agent for the company and is liable, as agent for the company, to pay amounts payable to the Commissioner and to provide returns of income and other information required by the Commissioner. Company and life insurer separate persons
6: The life insurer and the company are treated as being separate persons in relation to the life insurer's New Zealand business. agent amount Commissioner company income year life insurer New Zealand business non-resident resident in New Zealand return of income share working day 1994 No 164 s OE 3
EZ: Terminating provisions
Contents
Life insurance
EZ 1: Life insurers acquiring property before 1 April 1988
When this section applies
1: This section applies when section DZ 2 Amount of deduction
2: The amount of the deduction is calculated using the formula— Definition of items in formula
3: The items in the formula are defined in subsections (4) to (9). Specific liability
4: Specific liability
a: superannuation policies; and
b: pre-1983 mortgage repayment insurance policies; and
c: annuities that have been granted. Total liability
5: Total liability Property sum
6: The property sum Property acquired before last day of 1982-83 income year
7: For property acquired on or before the last day of the 1982-83 income year, the property sum is calculated by subtracting the specified base cost for 1983 income year property from the market value of the property on 1 April 1988. Property acquired after end of 1982-83 income year: not financial arrangement
8: For property acquired after the end of the 1982-83 income year that is not a financial arrangement, the property sum is calculated by subtracting the cost price or acquisition value of the property from the market value of the property on 1 April 1988. Property acquired after end of 1982-83 income year: financial arrangement
9: For property acquired after the end of the 1982-83 income year that is a financial arrangement, the property sum is the base price adjustment for the arrangement, calculated as if the arrangement had matured on 1 April 1988 but using the formula in section EW 31 Timing of deduction
10: The life insurer is allowed the deduction in the income year in which they dispose of the property. amount deduction financial arrangement income year Life Insurance Fund life insurance policy life insurer property specified base cost for 1983 income year property superannuation policy 1994 No 164 s DK 3C
EZ 2: Deductions for disposal of property: 1982-83 and 1989-90 income years
Section EY 46(2)(b)
1: For the purposes of section EY 46(2)(b)
a: the property is land or buildings acquired on or before the last day of the 1989-90 income year; and
b: the profit from the property's disposal on or before the last day of the 1989-90 income year, had it been disposed of then at a profit, would have been a capital profit or gain and not a profit on disposal of an investment subject to income tax under section 204 of the Income Tax Act 1976 section 13(1) of the Income Tax Amendment Act (No 2) 1990 Section EY 46(2)(c)
2: For the purposes of section EY 46(2)(c)
a: the property was acquired on or before the last day of the 1982-83 income year; and
b: subsection (1) does not apply to the property. amount deduction income year property specified base cost for 1983 income year property 1994 No 164 s DK 3B(1) Petroleum mining
EZ 3: Petroleum development expenditure from 1 October 1990 to 15 December 1991
Timing of deduction
1: Expenditure that is allowed as a deduction under section DZ 3
a: the income year in which commercial production starts; and
b: the income year in which the expenditure is incurred. Petroleum mining operations outside New Zealand
2: This section applies with any necessary modifications to a petroleum miner who undertakes petroleum mining operations that are—
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by this Act. Partnership interests
3: For the purposes of this section, a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their income interest in the partnership. Disposal of part of asset
4: For the purposes of this section, references to the disposal of an asset apply equally to the disposal of part of an asset. amount commercial production controlled foreign company foreign company deduction dispose income year New Zealand petroleum petroleum miner petroleum mining operations 1994 No 164 ss DM 1(3), DM 7(1), DM 9, DM 10 Livestock
EZ 4: Valuation of livestock bailed or leased as at 2 September 1992
When this section applies
1: This section applies when—
a: an owner of livestock valued a class of livestock for the 1991-92 income year under section 86 of the Income Tax Act 1976 section 21 of the Income Tax Amendment Act (No 2) 1993
b: either—
i: the livestock was, as at 2 September 1992, at the use of a person under a bailment, lease, or other agreement that the owner entered into on or before that date, or was, on or before that date, livestock that was subject to a binding contract to bail or lease the livestock to a person, or otherwise allow them to use the livestock; or
ii: the class of livestock was not one that the owner had on hand in the previous income year, but was a class that, as at 2 September 1992, was at the use of a person under a bailment, lease, or other agreement that the owner entered into on or before that date. Rolling average value
2: The owner may value the livestock at a value equal to 70% of the rolling average value of that class of livestock. When subsection (2) applies
3: Subsection (2) applies for the 1992-93 income year and any later income year in which the livestock continues to be bailed, leased, or otherwise used by the person under the bailment, lease, or other agreement. Number of livestock valued
4: The number of specified livestock of a class that may be valued under this section is the number that is the least of—
a: the number of livestock of the class bailed, leased, or otherwise used (or, for a binding contract entered into before 2 September 1992 but not yet applying, the number of livestock of that class provided for in the contract); and
b: the number of livestock of the class bailed, leased, or otherwise used as at the end of the 1992-93 income year; and
c: the lesser of the opening and closing number of stock of the class bailed, leased, or otherwise used in a later income year up to and including the income year in which the livestock is being valued. Meaning of rolling average value
5: In this section, rolling average value class income year lease national average market value rolling average value specified livestock 1994 No 164 s EZ 4(1), (2), (5)
EZ 4B: Reduction: bloodstock not previously used for breeding in New Zealand: pre-1 August 2006
Bloodstock to which this section applies
1: This section applies to bloodstock that—
a: was not used for breeding in New Zealand before 16 December 1991; and
b: before a person ( person A
i: the other person transferred the bloodstock to person A under a matrimonial agreement to which section FF 12
ii: the other person and person A were companies in the same wholly-owned group at the time person A acquired the bloodstock from the other person; and
c: section EC 39(1)
i: before 1 August 2006; or
ii: for an income year ending on or after 1 August 2006, if a requirement in paragraphs (a) to (c) of section EC 39(1) or (2) Stallion
2: For the purposes of sections EC 39 EC 40 Stallion valued by reducing value method
3: When person A chooses to value the stallion by the reducing value method, the reduction applying to the value of the stallion is 37.5% of its cost price in the first income year and 37.5% of its opening value in each later income year. Person A must give notice to the Commissioner of their election in their return of income for the first income year. Broodmare when first used before 1 April 2001
4: For the purposes of sections EC 39 EC 40 Definition of item in formula
5: In the formula, age of broodmare
a: 12 years of age; or
b: the actual age in years, if the broodmare is 11 years of age or less at the end of the income year. Broodmare when first used on or after 1 April 2001 but before 1 August 2006
6: For the purposes of sections EC 39 EC 40 section EC 39(2) Definition of item in formula
7: In the formula, age of broodmare
a: 8 years of age; or
b: the actual age in years, if the broodmare is 7 years of age or less at the end of the income year. bloodstock broodmare Commissioner company cost price income year matrimonial agreement New Zealand notice return of income stallion wholly-owned group year Sections EZ 4B EZ 4C inserted 1 August 2006 section 101 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
EZ 4C: Reduction: broodmare previously used for breeding in New Zealand: pre-1 August 2006
Broodmare to which this section applies
1: This section applies to a broodmare that section EC 39(1)
a: before 1 August 2006; or
b: for an income year ending on or after 1 August 2006, if a requirement in paragraphs (a) to (c) of section EC 39(1) (2) Broodmare when first used before 1 April 2001
2: For the purposes of sections EC 39 EC 40 section EC 39(1) sections EC 41 EZ 4B Definition of item in formula
3: In the formula, age of broodmare
a: 12 years of age; or
b: the actual age in years, if the broodmare is 11 years of age or less at the end of the income year. Broodmare when first used on or after 1 April 2001 but before 1 August 2006
4: For the purposes of sections EC 39 EC 40 section EC 39(2) sections EC 41 EZ 4B Definition of item in formula
5: In the formula, age of broodmare
a: 8 years of age; or
b: the actual age in years, if the broodmare is 7 years of age or less at the end of the income year. broodmare cost price income year year Sections EZ 4B EZ 4C inserted 1 August 2006 section 101 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Patent rights
EZ 5: Buying patent rights before 1 April 1993
When this section applies
1: This section applies when section DZ 8 Amount of deduction
2: The amount of the deduction is the expenditure that the person has incurred in buying the patent rights. Amount when patent rights expired or disposed of
3: If, before the expiry of the patent rights, the rights have come to an end or have been disposed of, the person is allowed a deduction of an amount that bears to the total sum of the expenditure on the purchase of the rights the same proportion as the unexpired term of the rights when they came to an end or were disposed of bears to their unexpired term at the date of their purchase. An amount that the person has otherwise been allowed as a deduction is not included. Timing of deduction: subsection (2)
4: The deduction referred to in subsection (2) is allocated to the income years in relation to which the term of the patent rights that is unexpired at the date of purchase applies. Timing of deduction: subsection (3)
5: The deduction referred to in subsection (3) is allocated to the income year in which the rights have come to an end or been disposed of. amount deduction income year patent rights 1994 No 164 s EZ 5 Leases of land
EZ 6: Premium paid on land leased before 1 April 1993
When this section applies
1: This section applies when section DZ 9 Amount of deduction
2: The amount of the deduction is the premium paid on the grant or renewal of the lease. If person A does not use the land for the whole of a tax year, the amount of the deduction is reduced proportionately. Amount when lease or renewal granted to another person
3: If the lease or the renewal of the lease is granted to another person, the deduction must not be more than the amount of the premium paid by person A on the acquisition of the lease. Timing of deduction
4: The deduction is allocated evenly to the income years in relation to which the term of the lease applies. Meaning of term of the lease
5: In this section, term of the lease amount deduction income year lease premium tax year term of the lease 1994 No 164 s EZ 6 Foreign investment fund rules
EZ 7: FIF interests held on 1 April 1993
Section EZ 7 repealed 1 April 2007 section 83(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 83(2) Depreciation
EZ 8: Pool method for items accounted for by globo method for 1992-93 income year
If a person chooses the pool method for an item of property of a kind described in section EE 57(3)(c) income year pool pool method 1994 No 164 s EG 3(5)
EZ 9: Pool items accounted for by globo method for 1992-93 income year
Limit on amount of income
1: If a person's pool consists solely of items of depreciable property accounted for at the end of the person's 1992-93 income year using, with the Commissioner's permission, the globo accounting method, the amount of income under section EE 22(5)(a) depreciation allowed – income. Definition of items in formula
2: In the formula,— (a) depreciation allowed (b) income section EE 22(5)(a) amount Commissioner depreciable property depreciation loss income year pool 1994 No 164 s EG 11(4A)
EZ 10: Amounts of depreciation recovery income and depreciation loss for part business use in or before 1992-93 income year
For the purposes of sections EE 42(1)(b)(ii)
a: the item is, at any time during the period the person owns it, subject to section EG 2(1)(d) or (e) of the Income Tax Act 1994 :
b: the item is, at any time during the period the person owns it, subject to section 108A(1)(d) or (e) of the Income Tax Act 1976 :
c: the item was, in the 1992-93 income year or a previous income year, an item that the person did not use wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income and for which, consequently, the person was allowed a smaller deduction for depreciation under section 108 of the Income Tax Act 1976 assessable income business income year 1994 No 164 s EG 19(4) Paragraphs (a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or
EZ 11: Amount of depreciation loss for item acquired from associated person on or before 23 September 1997
When this section applies
1: This section applies when, on or before 23 September 1997, a person ( person A Exclusions
2: This section does not apply—
a: if the item is acquired under a relationship agreement section FF 16(1)
b: if the item is listed in schedule 17
c: if the item is not listed in schedule 17 No greater amount of depreciation loss
3: Whether or not the associated person has been allowed a deduction for an amount of depreciation loss, person A does not have a greater amount of depreciation loss for the item than that which the associated person would have had if the associated person had kept the item. Amount of depreciation loss dealt with under section EE 41
4: If the associated person has an amount of depreciation loss that has been dealt with under section EE 41
a: all amounts dealt with under section EE 41
b: the depreciated value of the item immediately before person A acquired it. When subsection (6) applies and does not apply
5: Subsection (6) applies when, on or before 23 September 1997, the holder of management rights created under the Radiocommunications Act 1989 section 11(1) Licence right price
6: The price of the licence right is treated as being zero for the purposes of subpart EE amount associated person Commissioner depreciation loss matrimonial agreement 1994 No 164 s EZ 11 Subsection (2)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
EZ 12: Annual rate for item acquired on or after 1 April 1993 and before end of person's 1994-95 income year
What this section is about
1: This section is about the annual rate that applies to an item of depreciable property that a person acquires before the end of their 1994-95 income year (not including fixed life intangible property or excluded depreciable property, for which rates are set in sections EE 27 Rate
2: The rate is—
a: the item's economic rate; or
b: the pre-1993 depreciation rate described in section EZ 13 annual rate depreciable property economic rate excluded depreciable property fixed life intangible property income year 1994 No 164 s EG 5(1)
EZ 13: Pre-1993 depreciation rate
Scope of election
1: A person may choose the pre-1993 depreciation rate for all items, or any item, that they acquire before the end of their 1994-95 income year. How election made
2: The election is made by applying the pre-1993 depreciation rate for the item to the item in the person's return of income for the income year for which the election is made. Election unchangeable
3: The election must not be changed for the income year for which it is made. Moving from diminishing value to straight-line and vice versa
4: A person who chooses the pre-1993 depreciation rate has the following choices:
a: if the rate is a diminishing value rate, the person may instead use the straight-line rate by—
i: rounding the diminishing value rate to the nearest rate specified in schedule 10
ii: taking the equivalent straight-line rate specified in column 2 of the schedule; or
b: if the rate is a straight-line rate, the person may instead use the diminishing value rate by—
i: rounding the straight-line rate to the nearest rate specified in schedule 10
ii: taking the equivalent diminishing value rate specified in column 1 of the schedule. Pre-1993 depreciation rate
5: The pre-1993 depreciation rate is the rate calculated using the formula— section 108 rate + section 108A rate + section 113A rate. Definition of items in formula
6: The items in the formula are defined in subsections (7) to (9). Section 108 rate
7: Section 108 rate section 108 of the Income Tax Act 1976 Section 108A rate
8: Section 108A rate section 108A of the Income Tax Act 1976 Section 113A rate
9: Section 113A rate section 113A of the Income Tax Act 1976 Section 113A rate Commissioner diminishing value rate income year return of income standard balance date straight-line rate tax year 1994 No 164 s EG 5(2)-(4)
EZ 14: Annual rate for excluded depreciable property: 1992-93 tax year
What this section is about
1: This section is about the annual rate that applies to an item of excluded depreciable property. Rate
2: The rate is the section 108 section 108A Section 108 rate
3: Section 108 rate section 108 of the Income Tax Act 1976 Section 108A rate
4: Section 108A rate section 108A of the Income Tax Act 1976 Other sections rate
5: Other sections rate section 113A Income Tax Act 1976 Amount of depreciation loss under any other provision
6: If a person has an additional amount of depreciation loss for an income year for an item of excluded depreciable property under section EZ 15 EZ 16
a: the rate applicable to the item under subsection (2) may be adjusted to incorporate the additional amount of depreciation loss in a manner prescribed or allowed by the Commissioner; and
b: when an adjusted rate is applied to the item, the person does not have a separate amount of depreciation loss for the item under section EZ 15 EZ 16 Changing rate
7: A person applying the rate in subsection (2) has the following choices:
a: if the rate is a diminishing value rate, the person may instead use the straight-line rate by—
i: rounding the diminishing value rate to the nearest rate specified in schedule 10
ii: taking the equivalent straight-line rate specified in column 2 of the schedule; or
b: if the rate is a straight-line rate, the person may instead use the diminishing value rate by—
i: rounding the straight-line rate to the nearest rate specified in schedule 10
ii: taking the equivalent diminishing value rate specified in column 1 of the schedule. annual rate Commissioner depreciation loss diminishing value rate excluded depreciable property prescribed standard balance date straight-line rate tax year 1994 No 164 s EG 9
EZ 15: Amount of depreciation loss for plant or machinery additional to section EZ 14 amount
When this section applies
1: This section applies when a person carrying on a business in New Zealand incurs, wholly for the purpose of the business, capital expenditure in acquiring, installing, or extending plant or machinery that—
a: is excluded depreciable property; and
b: is—
i: plant or machinery that is normally in operation for an average of at least 16 hours each working day and is not normally in operation for 24 hours each working day :
ii: plant or machinery that is normally in operation for 24 hours each working day. Exclusions
2: This section does not apply to—
a: aluminium smelting plant or machinery :
b: motorcars :
c: petroleum refining plant or machinery :
d: ships, aircraft, or hovercraft :
e: plant or machinery for which a deduction by way of a fixed rate was denied under section 108 of the Income Tax Act 1976 :
f: plant or machinery for which the Commissioner did not prescribe a differential rate for more than 1 shift operation when determining under section 108 of the Income Tax Act 1976 Additional amount of depreciation loss
3: The person has an amount of depreciation loss for the plant or machinery under this section in addition to any amounts of depreciation loss that they have for the plant or machinery under section EZ 14 Relevant income years
4: The person has the additional amount of depreciation loss in the first, second, third, fourth, and fifth income years in which the plant or machinery is used in deriving assessable income. Rate
5: The rate of the additional amount of depreciation loss is,—
a: for plant or machinery described in subsection (1)(b)(i), 3% of the diminishing value of the plant or machinery in each income year :
b: for plant or machinery described in subsection (1)(b)(ii), 6% of the diminishing value of the plant or machinery in each income year. amount assessable income business Commissioner depreciation loss excluded depreciable property income year motorcar New Zealand petroleum working day 1994 No 164 s EG 18 Subsection (1)(b)(i) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (2)(a) (e) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; or Subsection (5)(a) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EZ 16: Additional amount of depreciation loss: between 16 December 1991 and 1 April 1994
When this section applies
1: This section applies when a person incurs expenditure of the kind described in subsection (2) in—
a: the acquisition or installation of a qualifying asset; or
b: the making of a qualifying improvement to an item the person owns. Expenditure described
2: The expenditure is expenditure of a capital nature, excluding any amount of input tax applying to the supply of the qualifying asset or qualifying improvement to the person. Additional amount of depreciation loss
3: The person has an amount of depreciation loss for the asset or item under this section in addition to any amount of depreciation loss they have for it under subpart EE section EZ 15 section EE 41(2) Amount
4: The additional amount of depreciation loss for an income year is 25% of the lesser of—
a: the amount of depreciation loss that the person has under subpart EE section EZ 15
b: the amount of depreciation loss that the person would have had under subpart EE section EZ 15 acquire amount depreciation loss income year qualifying capital value qualifying improvement qualifying asset 1994 No 164 ss ED 4(5), EG 15(1), (2)
EZ 17: Section EZ 16 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993
When this section applies
1: This section applies when, before 1 April 1993, a company in a wholly-owned group of companies disposes of a qualifying asset, or an item to which the company has made a qualifying improvement, to another company in the same wholly-owned group. Transferee has amount of depreciation loss
2: The transferee company has an amount of depreciation loss under section EZ 16 Amount
3: The amount of depreciation loss that the transferor company has under section EZ 16 section EZ 16 How definitions affected
4: This section applies despite any limitations in the definitions of new asset New Zealand-new asset qualifying capital value qualifying improvement qualifying asset amount company depreciation loss dispose income year new asset New Zealand-new asset qualifying capital value qualifying improvement qualifying asset wholly-owned group of companies 1994 No 164 s EG 15(3)
EZ 18: Section EZ 16 amount of depreciation loss when person previously exempt from tax acquires item
When this section applies
1: This section applies when a person who has derived nothing but exempt income—
a: starts in an income year to derive income that is not exempt income; and
b: would have had an amount of depreciation loss under section EZ 16 section EZ 16 section EZ 16 How qualifying capital value determined
2: The item's qualifying capital value is determined as if the person had had an amount of depreciation loss for the period during which they derived nothing but exempt income. amount depreciation loss exempt income income income year qualifying capital value qualifying improvement 1994 No 164 s EG 15(4)
EZ 19: Adjusted tax value for software acquired before 1 April 1993
What this section applies to
1: This section applies to any of the following items for the acquisition of which a person was allowed a deduction before 1 April 1993:
a: the copyright in software :
b: the right to use the copyright in software :
c: the right to use software. Meaning of adjusted tax value
2: The adjusted tax value acquire adjusted tax value 1994 No 164 s EG 19(9), (10)(a) Subsection (1)(a) (b) amended 21 December 2004 section 270 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting : ; and
EZ 20: Sections EE 38 and EE 40: permanent removal: allowance before 1 April 1995
Section EE 38(8)
1: For the purposes of section EE 38(8) section EE 37
a: if the person makes a taxable supply, market value
b: this subsection does not apply to a transfer under a relationship agreement Section EE 40(10)
2: For the purposes of section EE 40(10) section EE 37 section 112(1) to (7) of the Income Tax Act 1976
a: has been taken out of New Zealand temporarily; and
b: will, after its return to New Zealand, be used in or for the purpose of a business in New Zealand. business GST matrimonial agreement New Zealand taxable supply 1994 No 164 s EG 19(7)(d), (9) Subsection (1)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
EZ 21: Base value and total deductions in section EE 47: before 1 April 1995
Base value in section EE 47 when section 108 of the Income Tax Act 1976 applies
1: For the purposes of section EE 47 section 108 of the Income Tax Act 1976 Base value Section EE 48(3)(d)
2: For the purposes of section EE 48(3)(d) section EE 47 sections EE 49 EE 50 EZ 21(1)
a: the expenditure is expenditure for which a person has been allowed a deduction for depreciation under any of sections 108 to 108N or section 113A of the Income Tax Act 1976
b: the expenditure is expenditure for which a person has been allowed a deduction for depreciation under any other provision of the Income Tax Act 1976 Section EE 49(1)(e)(ii)
3: For the purposes of section EE 49(1)(e)(ii) section EE 47 section 108 of the Income Tax Act 1976 Section EE 51(2)(c)
4: For the purposes of section EE 51(2)(c) section EE 47 section 117(5) of the Income Tax Act 1976 amount income year 1994 No 164 s OB 1 adjusted tax value
EZ 21B: Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005
What this section is about
1: This section is about setting the economic depreciation rate that applies to items of a kind of depreciable property if—
a: the kind of depreciable property is not fixed life intangible property, or excluded depreciable property, for which an economic rate cannot be set; and
b: the items are—
i: plant or equipment acquired before 1 April 2005:
ii: buildings acquired before 19 May 2005:
iii: buildings acquired on or after 19 May 2005, as relationship property or from a company in the same wholly-owned group of companies, from a person who applied to the item an economic depreciation rate set under this section or a corresponding provision. Rate set by Commissioner
2: The Commissioner sets the rate from time to time by—
a: following the procedure set out in this section; and
b: issuing a determination under section 91AAF Procedure for setting economic rate
3: To set the diminishing value rate for a kind of item of depreciable property, the Commissioner—
a: gets a figure by applying the formula in subsection (4) to items of that kind; and
b: rounds the figure up or down to the nearest rate specified in schedule 11
c: sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
i: the rate calculated for each kind; and
ii: the reduction in compliance costs that is likely to be achieved. Formula
4: The formula is— Definition of item in formula
5: In the formula,—
a: residual value
i: estimated residual market value, which is defined in section EE 58
ii: 13.5% of cost:
b: cost
c: estimated useful life section EE 54 Commissioner depreciable property diminishing value rate economic rate estimated residual market value estimated useful life excluded depreciable property fixed life intangible property Section EZ 21B inserted 3 April 2006 section 102(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Definitions
EZ 22: Meaning of new asset
Meaning
1: New asset Acquisition date
2: The item is—
a: acquired by the person in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other than under a binding contract that they entered into before 16 December 1991; or
b: acquired by the person in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract that they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; or
c: one to which all the following apply:
i: it was acquired by the person before 16 December 1991 as trading stock; and
ii: it was used by the person as a capital item for the first time in the period starting on 16 December 1991 and ending with the close of 31 March 1993; and
iii: it qualified for a deduction for depreciation under section 108 of the Income Tax Act 1976 Used before 1 April 1994
3: The item is used by the person before 1 April 1994. Not used by anyone previously
4: The item is—
a: not acquired by any other person before the date on which the person acquired it; and
b: not used by any other person before the date on which the person acquired it; and
c: not held for use by any other person before the date on which the person acquired it; and
d: not an item or part of an item that qualified for a deduction for depreciation under the Income Tax Act 1976 Exclusion
5: A constructed item that a person owns is not a new asset if—
a: its construction started before 16 December 1991 (but this paragraph does not apply to the extent to which the item is trading stock to which subsection (2)(c) applies); or
b: its construction started on or after 16 December 1991 under a binding contract that the person entered into before 16 December 1991; or
c: its construction was not completed before 1 April 1994; or
d: the item was not first used by the person before 1 April 1994. acquire new asset trading stock 1994 No 164 s OB 1 new asset
EZ 23: Meaning of New Zealand-new asset
Meaning
1: New Zealand-new asset Not new
2: The item is not a new asset. Date of acquisition
3: The item is—
a: acquired by the person in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other than under a binding contract that they entered into before 16 December 1991; or
b: acquired by the person in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract that they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; or
c: one to which all the following apply:
i: it was acquired by the person before 16 December 1991 as trading stock; and
ii: it was used by the person as a capital item for the first time in the period starting on 16 December 1991 and ending with the close of 31 March 1993; and
iii: it qualified for a deduction for depreciation under section 108 of the Income Tax Act 1976 Used before 1 April 1994
4: The item is used by the person before 1 April 1994. Not used
5: The item is—
a: not used in New Zealand before the date on which the person acquired it; and
b: not an item or part of an item that qualified for a deduction for depreciation under the Income Tax Act 1976 acquire new asset New Zealand New Zealand-new asset trading stock 1994 No 164 s OB 1 New Zealand-new asset
EZ 24: Meaning of qualifying capital value
Meaning
1: Qualifying capital value means, for an income year,—
a: for a qualifying asset that a person owns, the amount calculated for the income year using the formula in subsection (2); or
b: for an item that a person owns that is not a qualifying asset but to which they have made a qualifying improvement, the amount calculated for the income year using the formula in subsection (7). Formula
2: The formula referred to in subsection (1)(a) is— (acquisition cost + improvement cost) – item's depreciation. Definition of items in formula
3: The items in the formula are defined in subsections (4) to (6). Acquisition cost
4: Acquisition cost is the amount of capital expenditure the person incurs in acquiring the asset or item. In the case of a constructed item, the amount of capital expenditure is reduced by the amount of capital expenditure the person incurs on the construction on or after 1 April 1993, other than under a binding contract that the person entered into before 1 April 1993. Improvement cost
5: Improvement cost is the amount of capital expenditure (if any) the person incurs in making a qualifying improvement to the asset or item. Item's depreciation
6: Item's depreciation is the amount of depreciation loss for which the person has been allowed a deduction for the qualifying capital value of the asset or item in previous income years, not including an amount of depreciation loss calculated using the straight-line method. Formula
7: The formula referred to in subsection (1)(b) is— capital expenditure – improvement's depreciation. Definition of items in formula
8: The items in the formula are defined in subsections (9) and (10). Capital expenditure
9: Capital expenditure is the amount of capital expenditure the person incurs for the improvement. Improvement's depreciation
10: Improvement's depreciation is the amount of depreciation loss for which the person has been allowed a deduction for the qualifying capital value of the improvement in previous income years, not including an amount of depreciation loss calculated using the straight-line method. acquire amount depreciation loss income year qualifying capital value qualifying improvement qualifying asset straight-line method 1994 No 164 s EG 15(5)
EZ 25: Meaning of qualifying improvement
Meaning
1: Qualifying improvement, for a person's income year, means an improvement of an item that the person owns, if all the following apply:
a: the person incurred the expenditure on the improvement—
i: in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other than under a binding contract they entered into before 16 December 1991; or
ii: in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; and
b: the person used the item in its improved form before 1 April 1994; and
c: the person is allowed a deduction for depreciation under the Income Tax Act 1976 Exclusions
2: Qualifying improvement does not include—
a: an improvement to a building; or
b: an improvement requiring construction, if—
i: the construction started before 16 December 1991; or
ii: the construction started on or after 16 December 1991 under a binding contract that the person entered into before 16 December 1991; or
iii: the construction was not completed before 1 April 1994; or
iv: the improvement was not first used by the person before 1 April 1994. income year qualifying improvement 1994 No 164 s OB 1 qualifying improvement
EZ 26: Meaning of qualifying asset
Qualifying asset means—
a: a new asset, other than a building, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 for the income year; or
b: a New Zealand-new asset, other than a building or a motorcar, that a person owns in an income year and for which they are allowed a deduction for depreciation under the Income Tax Act 1976 income year motorcar new asset New Zealand-new asset qualifying asset 1994 No 164 s OB 1 qualifying asset Accident insurance
EZ 27: Private insurers under Accident Insurance Act 1998
When this section applies
1: This section applies when an insurer, as defined in paragraph (a) of the definition of insurer section 13 of the Accident Insurance Act 1998 Accident Insurance Act 1998
a: claims that have been made with the insurer but have not been settled before the end of the tax year; and
b: claims that are expected to be made with the insurer in relation to events that the insurer knows about; and
c: an estimate of claims that have not been reported to the insurer in relation to events that the insurer does not know about. Adjustment to deduction
2: When the closing value of the reserve for a tax year is more than the opening value, the deduction that the insurer is allowed is adjusted by an amount equal to the amount calculated using the formula— closing value – opening value. Adjustment to income
3: When the opening value of the reserve for a tax year is more than the closing value, the income of the insurer is adjusted by an amount equal to the amount calculated using the formula— opening value – closing value. Amount
4: The reserve at the end of the tax year is—
a: an amount calculated by an actuary applying subsection (5) and adopted by the insurer for financial reporting purposes; or
b: if no such amount has been calculated, an amount determined by the Commissioner, who may seek the advice of the Government Actuary or any other actuary in determining it. Calculation or determination of reserve
5: A person calculating or determining the amount of a reserve under subsection (4) must ensure that the amount has regard to—
a: generally accepted accounting practice; and
b: generally accepted actuarial practice; and
c: the present value of expected future payments. Link with subpart DA
6: This section supplements the general permission. The general limitations still apply. actuary amount Commissioner deduction general limitation general permission generally accepted accounting practice supplement tax year 1994 No 164 s DK 5
EZ 28: Base premium for 1998-99 premium year under Accident Insurance Act 1998
Discount payment date
1: An amount of base premium for the 1998-99 premium year that is paid on or before the discount payment date is treated as expenditure in the tax year in which the discount payment date falls if the discount payment date is before the date on the invoice that specifies when payment is due. This subsection overrides section EF 3(1) Monthly instalment plan
2: Interest payable on a base premium for the 1998-99 premium year under a monthly instalment plan is treated as being payable on the date that the interest is applied under regulation 8 Some definitions
3: In this section, base premium for the 1998-99 premium year, discount payment date, and monthly instalment plan have the meanings given to them in the Accident Insurance (Payment of Base Premiums) Regulations 1999 amount base premium for the 1998-99 premium year discount payment date interest monthly instalment plan tax year 1994 No 164 ss ED 1A(1A), (5), ED 6A CFC and FIF rules
EZ 29: Disclosure restrictions on grey list CFCs before 2011–12
No attributed CFC income from taxable distribution
1: No attributed CFC income arises under section EX 19 No branch equivalent income or loss
2: No branch equivalent income or loss arises under section EX 21 No FIF income or loss
3: No FIF income or loss arises under section EX 46 Application of subsections (1) and (2)
4: Subsection (1) or (2) applies in respect of a person's income interest for an accounting period in a CFC if—
a: the income interest arises from an interest of the person in a CFC that satisfies subsection (6); and
b: the person holds information that would, if considered by the Commissioner, satisfy the Commissioner under subsection (7). Application of subsection (3)
5: Subsection (3) applies in respect of a person's income interest for an accounting period in a CFC if—
a: the income interest satisfies subsection (6); and
b: the person holds information that would, if considered by the Commissioner, satisfy the Commissioner under subsection (7). Relevant grey list CFC
6: An interest in a CFC satisfies this subsection for an accounting period if the CFC is, throughout the accounting period,—
a: resident in a country on the grey list; and
b: quoted on the official list of a recognised exchange in the country; and
c: under the law of the country or the rules of the exchange,—
i: prevented from disclosing to the person information necessary for calculating attributed CFC income or loss or FIF income or loss:
ii: required, as a result of the disclosure, to make a further disclosure of information that would be harmful to the commercial interests of the CFC. Person must satisfy Commissioner
7: For this section to apply in respect of a person's income interest for an accounting period in a CFC, the person must hold information that would satisfy the Commissioner that, for the accounting period, an effect of the law or rules referred to in subsection (6) is that the person cannot calculate the attributed CFC income or loss or FIF income or loss in respect of the income interest. Section terminates after 2010–11 income year
8: This section does not apply to the tax on income derived by a person in an income year after the income year that corresponds to the 2010–11 tax year. accounting period attributed CFC income attributed CFC income or loss branch equivalent income or loss Commissioner CFC FIF FIF income or loss grey list income income interest income year recognised exchange tax tax year Section EZ 29 substituted 1 October 2006 section 103(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Old financial arrangements rules
EZ 30: Application of old financial arrangements rules
The old financial arrangements rules apply to financial arrangements entered into on or after the implementation date and before 20 May 1999. 1994 No 164 s EH A1
EZ 31: Election to apply financial arrangements rules in
subpart EW Despite section EZ 30 section EZ 48 1994 No 164 s EH A2
EZ 32: Accruals in relation to income and expenditure in respect of financial arrangements
1: For the purpose of calculating the amount deemed to be income or expenditure of any person under subsections (2) to (7), regard must be had to,—
a: if the person is a holder in relation to the financial arrangement,—
i: the amount of all consideration paid and to be paid to the person in relation to the financial arrangement; and
ii: any amount remitted and to be remitted by the person in relation to the financial arrangement; and
iii: the acquisition price of the financial arrangement in relation to the person; and
b: if the person is an issuer in relation to the financial arrangement,—
i: the amount of all consideration paid and to be paid by the person in relation to the financial arrangement; and
ii: the acquisition price of the financial arrangement in relation to the person.
2: Subject to this section, where any person is a holder or an issuer of a financial arrangement, the amount that is deemed to be income or expenditure of that person in respect of the financial arrangement in any income year is an amount calculated using the yield to maturity method so as to result in the allocation to each income year of an amount that is fair and reasonable, and such amount so allocated to each income year is income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the financial arrangement in the income year: provided that the Commissioner must accept an alternative method to the yield to maturity method, that has regard to the principles of accrual accounting, and—
a: conforms with commercially acceptable practice; and
b: except to the extent that the Commissioner may otherwise allow under subsection (8), is adopted by the person and is or will be consistently applied in respect of all such financial arrangements for financial reporting purposes; and
c: results in the allocation to each income year of amounts that are not materially different from amounts that would be calculated but for this proviso.
3: Notwithstanding subsection (2), but subject to the other provisions of this section, where in any income year the total value of all financial arrangements of which a person is a holder or an issuer has on no day within that income year exceeded $1,500,000 or such greater amount as the Governor-General may by Order in Council declare for the purposes of this section,—
a: the person may calculate income or expenditure for that income year in respect of those financial arrangements by using the straight-line method so as to result in the allocation to that income year and subsequent income years of amounts that are fair and reasonable in respect of those arrangements; and
b: where the straight-line method is used under paragraph (a), that method must be used by the person in respect of all financial arrangements of which the person was the holder or issuer during that income year; and
c: where the person has in accordance with this subsection calculated income or expenditure using the straight-line method in respect of a financial arrangement for any income year, the person must, unless otherwise authorised in writing by the Commissioner, continue to use that method in respect of that financial arrangement for any subsequent income year, until the maturity, remittance, sale, or other transfer of the arrangement, notwithstanding that the total value of all financial arrangements of which the person is holder or issuer may at any time in any such subsequent income year exceed $1,500,000 or such other amount as may be declared for the purposes of this section,— and any amount calculated in respect of a financial arrangement in accordance with this subsection is income deemed to be derived by or expenditure deemed to be incurred by the person in respect of the financial arrangement for the relevant income year.
4: For the purposes of subsection (3), a person must take into account financial arrangements to which subpart EW
5: For the purposes of subsection (3),—
a: the value of any financial arrangement to be taken into account in determining whether the total value of all financial arrangements of which a person is the holder or issuer on any day exceeds $1,500,000 or such other amount as may be declared for the purposes of this section is,—
i: in the case of a fixed principal financial arrangement, the nominal or face value of the arrangement; and
ii: in the case of a variable principal debt instrument, the amount owing by or to the person under the arrangement on the relevant day; and
iii: in the case of a financial arrangement to which subpart EW
b: in the first income year for which income or expenditure is calculated under subsection (3) in respect of a financial arrangement that—
i: was acquired or issued by the person in a previous income year; and
ii: continues to be held or issued by the person at the end of the first income year for which income or expenditure is calculated under subsection (3),— the amount of income or expenditure of the person in respect of that financial arrangement for that first income year is an amount calculated in accordance with the following formula: a – b – c + d where—
a: is the sum of all amounts that would have been income derived by the person in respect of the financial arrangement if the straight-line method referred to in subsection (3) had been applied to the financial arrangement from the date it was acquired or issued by the person until the end of that first income year
b: is the sum of all amounts that would have been expenditure incurred by the person in respect of the financial arrangement if the straight-line method referred to in subsection (3) had been applied to the financial arrangement from the date it was acquired or issued by the person until the end of that first income year
c: is the sum of all amounts of income deemed to have been derived by the person in respect of the financial arrangement before the commencement of that first income year
d: is the sum of all amounts deemed to have been expenditure incurred by the person in respect of the financial arrangement before the commencement of that first income year;— and any amount so calculated is, if a positive amount, deemed to be income derived by the person in that first income year and, if a negative amount, deemed to be expenditure incurred by the person in that first income year.
6: Where it is not possible to calculate an amount to be deemed to be income or expenditure in respect of a financial arrangement using the yield to maturity method as provided for in subsection (2) or (in a case to which subsection (3) applies) the straight-line method as provided for in subsection (3), the amount that is deemed to be income or expenditure of the person in any income year is an amount calculated by the person—
a: using the method, if any, prescribed by the Commissioner for the financial arrangement in a determination made under section 90(1)(c) provided that the Commissioner must accept an alternative method to the method prescribed in any such determination that has regard to the principles of accrual accounting, and—
i: conforms with commercially acceptable practice; and
ii: except to the extent that the Commissioner may otherwise allow under subsection (8), is adopted by the person and is or will be consistently applied in respect of all such financial arrangements for financial reporting purposes; and
iii: results in the allocation to each income year of amounts that are not materially different from the amounts that would be calculated, but for this proviso; and
b: in the absence of any such determination, by applying a method that satisfies subparagraphs (i) and (ii) of the proviso to paragraph (a) and that results in the allocation to each income year of an amount that, having regard to the tenor of subsection (2), is fair and reasonable;— and such amount of income or expenditure so allocated to each income year is income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in the income year.
7: Notwithstanding subsections (2) and (6), the Commissioner must accept an alternative method for calculating the amount to be deemed to be income or expenditure of the person, in respect of a financial arrangement, to the methods provided for under subsections (2) and (6), if the alternative method has regard to market valuation, and—
a: conforms with commercially acceptable practice; and
b: except to the extent that the Commissioner may otherwise allow under subsection (8), is adopted by the person and is or will be consistently applied in respect of all such financial arrangements for financial reporting purposes; and
c: either—
i: the business of the person comprises dealing in such financial arrangements; or
ii: the financial arrangement is a forward or future contract for foreign exchange, or a futures contract; and
d: the market, the method, and the source of the information used to determine the market values have been approved by the Commissioner under a determination issued under section 90(1)(e)
e: the person and any other person who is a holder (where the person is an issuer) or an issuer (where the person is a holder) of the financial arrangement are not associated persons;— and such amount of income or expenditure so calculated is income deemed to be derived or, as the case may be, expenditure deemed to be incurred by the person in respect of the financial arrangement in the income year: provided that where income or expenditure in respect of a financial arrangement has been calculated by a person under this subsection, income or expenditure in respect of that financial arrangement must, except as otherwise allowed under subsection (8), continue to be calculated on that basis by that person until the maturity, remittance, sale, or other transfer of the arrangement.
8: Where a method of calculating income or expenditure in respect of a financial arrangement fails to satisfy the requirements of paragraph (b) of the proviso to subsection (2) or subparagraph (ii) of the proviso to subsection (6)(a) or (7)(b) by virtue of the fact that the method is not or will not be consistently applied by a person in respect of all such financial arrangements for financial reporting purposes, that method is nevertheless deemed to satisfy the relevant one of those provisions where the method—
a: appropriately reflects the dominant purpose for which the person acquired or issued the financial arrangement (or each such arrangement); and
b: has been and will be consistently applied by the person in respect of the particular financial arrangement (or each such financial arrangement) for the purposes of the old financial arrangements rules for every income year during its term (except to the extent that the Commissioner approves or may approve a change in method under the circumstances or conditions specified in a determination under section 90(1)(f)
c: is not adopted for purposes that include the purpose of tax avoidance; and
d: has been approved by the Commissioner for adoption in the circumstances applicable to the taxpayer either by notice to the taxpayer or in a determination issued under section 90
9: Subsections (2) to (7) do not apply—
a: to a cash basis holder; or
b: in relation to a financial arrangement and a person, in any income year where section EZ 35
c: in relation to a financial arrangement where—
i: the financial arrangement is held by a trustee upon trust for the management of compensation paid for personal injury where that compensation is paid under the Workers Compensation Act 1956 Accident Compensation Act 1972 Accident Compensation Act 1982 Accident Rehabilitation and Compensation Insurance Act 1992 Injury Prevention, Rehabilitation, and Compensation Act 2001
ii: the trustee is, or if it were a natural person would be, a cash basis holder in respect of the financial arrangement.
10: For the purposes of this section, the Commissioner may determine whether and to what extent any issuer or class of issuers is not required to comply with this section in relation to expenditure incurred or income derived in respect of any class of financial arrangements, having regard to—
a: the nature and amount of the expenditure incurred or income derived by the issuer or class of issuers in respect of financial arrangements of that class; and
b: the costs of the issuer or class of issuers in complying with this section in relation to the class of financial arrangements; and
c: whether, in respect of that issuer or class of issuers and that class of financial arrangements, the application of the discretion given to the Commissioner under this subsection would result in a material difference in the amount of deductions or income allocated to any income year, in relation to the amount that would have been allocated had the discretion not been exercised.
11: The Commissioner may at any time cancel any determination made in respect of any person or class of persons under subsection (10). 1994 No 164 s EH 1
EZ 33: Excepted financial arrangement that is part of financial arrangement
The amount of the income deemed to be derived or the expenditure deemed to be incurred by a person in respect of a financial arrangement under the old financial arrangements rules does not include the amount of any income, gain or loss, or expenditure, that is solely attributable to an excepted financial arrangement that is part of the financial arrangement. 1994 No 164 s EH 2
EZ 34: Cash basis holder
1: Subject to this section, a natural person is a cash basis holder in respect of financial arrangements held by that person in any income year, where—
a: either—
i: the income derived by that person in that income year in respect of those financial arrangements, calculated in accordance with subpart EW section EZ 32
ii: the total value of financial arrangements held by the person in the income year does not exceed at any time in the income year $600,000 (or such greater amount as the Governor-General may by Order in Council declare), the value in respect of each financial arrangement being,—
A: in the case of a fixed principal financial arrangement, the greater of the acquisition price of the arrangement or the nominal or face value of the arrangement; and
B: in the case of a variable principal debt instrument, the amount of money owing to the person according to the arrangement; and
C: in the case of a financial arrangement to which subpart EW
b: the difference between the following amounts does not exceed $20,000 (or such greater amount as the Governor-General may by Order in Council declare):
i: the amount of income that would be calculated by the person for the income year—
A: using, at the option of the person, either the yield to maturity method or the straightline method referred to in section EZ 32(3) subpart EW
B: under either section EW 31 EZ 35 in respect of financial arrangements held by the person at the end of the income year; and
ii: the amount of income that would be calculated by the person for the income year in respect of financial arrangements held by the person at the end of the income year if the person were a cash basis holder.
2: For the purposes of subsection (1), a person must take into account financial arrangements to which subpart EW
3: Notwithstanding anything in subsection (1), the Commissioner may,—
a: where the Commissioner is satisfied, having regard to the tenor of section EZ 32(2) section EZ 32
b: where the Commissioner is satisfied that a class of financial arrangements has been structured and promoted with the objective of postponing any liability to income tax which would have arisen had those financial arrangements not been so structured, deem natural persons not to be cash basis holders in respect of such financial arrangements.
4: In any income year where a person who was a cash basis holder in the previous income year ceases to be a cash basis holder, the person must take into account, in calculating income or deductions for the income year, an accruals basis adjustment, in respect of every financial arrangement (other than arrangements that are already dealt with according to section EZ 32 a – b – c + d where—
a: is the sum of all amounts which would have been income derived by the person in respect of the financial arrangement from the date it was acquired to the end of the income year if the person had not been a cash basis holder at any time during that period
b: is the sum of all amounts that would have been deductions of the person in respect of the financial arrangement from the date the financial arrangement was acquired to the end of the income year if the person had not been a cash basis holder at any time during the period
c: is the sum of all amounts of income of the person in respect of the financial arrangement since it was acquired to the end of the previous income year
d: is the sum of all amounts that have been deductions of the person in respect of the financial arrangement since it was acquired to the end of the previous income year;— and the person must not take into account in the income year any other amount in respect of any such financial arrangement except those calculated under the accruals basis adjustment.
5: In any income year where a person who was not a cash basis holder in the previous income year becomes a cash basis holder, that person may take into account, in calculating income or deductions for the income year, a cash basis adjustment, in respect of every financial arrangement (other than arrangements already treated on a cash basis) acquired in a previous income year and held by the person at the end of the income year, equal to an amount calculated in accordance with the following formula: a – b – c + d where—
a: is the sum of all amounts which would have been income derived by the person in respect of the financial arrangement from the date it was acquired to the end of the income year if the person had been a cash basis holder in respect of the financial arrangement for the whole of that period
b: is the sum of all amounts which would have been deductions of the person in respect of the financial arrangement from the date the financial arrangement was acquired to the end of the income year if the person had been a cash basis holder in respect of the financial arrangement for the whole of the period
c: is the sum of all amounts treated as income of the person in respect of the financial arrangement since it was acquired to the end of the previous income year
d: is the sum of all amounts that have been deductions of the person in respect of the financial arrangement since it was acquired to the end of the previous income year;— and, where the cash basis adjustment has been taken into account, the person must not take into account any other amount in respect of any such financial arrangement in the income year except those calculated under the cash basis adjustment: provided that the person is deemed not to be a cash basis holder in relation to any financial arrangement in respect of which the person does not take into account a cash basis adjustment.
6: The amount of the accruals basis adjustment or the cash basis adjustment in respect of any financial arrangement and any income year is,—
a: where it is a positive amount, income deemed to be derived by the holder in the income year; and
b: where it is a negative amount, deemed to be a deduction of the holder in the income year.
7: For the purposes of subsection (1), but subject to subsections (8) and (9),—
a: all income in respect of financial arrangements that is trustee income or beneficiary income under the trust rules is disregarded, as is the value of all such financial arrangements producing such income; and
b: no person who holds such financial arrangements is a cash basis holder in relation to such financial arrangements.
8: Subsection (7) does not apply to financial arrangements held on a bare trust, or to income in respect of such financial arrangements, and the financial arrangements held and the income derived by the trustees is treated as being held or, as the case may be, derived by a beneficiary of the trust to the extent of the beneficiary's share of the beneficial interest in the financial arrangement.
9: Where a deceased person was at the time of his or her death a cash basis holder,—
a: nothing in subsection (7) or in any requirement under this section that a cash basis holder be a natural person, in respect of the income year in which the death occurred and in each of the 4 immediately succeeding income years, applies to prevent the trustee of the estate of the deceased person from being a cash basis holder for the purposes of this Act in respect of financial arrangements issued or held by the estate, where the estate would otherwise qualify as a cash basis holder under this section; but
b: if at any time during those income years the estate ceases to so otherwise qualify as a cash basis holder, it does not again qualify to become a cash basis holder by operation of paragraph (a);— and for the purposes of subsections (4) and (5), any trustee of an estate who is a cash basis holder under this subsection is deemed to be the same person as the deceased cash basis holder.
10: For the purposes of subsection (1),—
a: financial arrangements held; and
b: income required to be returned in respect of those financial arrangements under section 42(1) by a partnership is treated as being held or, as the case may be, derived by each partner to the extent of the partner's share in the financial arrangements held by the partnership or, as the case may be, the income of the partnership in respect of financial arrangements. 1994 No 164 s EH 3
EZ 35: Income and expenditure where financial arrangement redeemed or disposed of
1: Subject to subsection (2), where, in relation to any person, a financial arrangement matures or is remitted (other than by way of being written off as a bad debt), sold, or otherwise transferred by the person in any income year, the amount of the base price adjustment in relation to that income year, that person, and that financial arrangement is an amount calculated in accordance with the following formula: a – (b + c) where—
a: is,—
i: in the case of a holder, the sum of—
A: the amount of all consideration that has been paid, and all further consideration that has or will become payable, to the person; and
B: any amounts that have been remitted by the person and that are not included in subsubparagraph (A):
ii: in the case of an issuer, the sum of—
A: the amount of all consideration that has been paid, and all further consideration that has or will become payable, by the person; and
B: the amount paid by the person associated with the issuer if the issuer is the debtor of a debt to which section EZ 38 in relation to the financial arrangement
b: is the acquisition price of the financial arrangement in relation to the person
c: is,—
i: in the case of a holder, all amounts that are income derived, less the aggregate of amounts of expenditure deemed to be incurred under section EZ 32 EZ 39 section EZ 34
ii: in the case of an issuer, all amounts of expenditure incurred in respect of the financial arrangement in all previous income years since the issue of the financial arrangement, less the aggregate of—
A: all amounts that are income deemed to be derived under section EZ 32 EZ 34 EZ 39
B: all amounts that are dividends derived by the person from the release of the obligation to repay the amount lent; and
C: all amounts that are income of the person under section CF 2
2: Where, in relation to a financial arrangement, a person is a cash basis holder, and the financial arrangement matures or is remitted (other than by way of being written off as a bad debt), sold, or otherwise transferred by that person in any income year, the amount of the cash base price adjustment in relation to that income year, that person, and that financial arrangement is an amount calculated in accordance with the following formula: a – (b + c) where—
a: is the sum of all consideration derived in respect of the financial arrangement by the person, and amounts remitted by the person
b: is the acquisition price of the financial arrangement
c: is the sum of all amounts that are income derived by the person, less the aggregate of amounts of expenditure deemed to be incurred under sections EZ 32 EZ 39 section EZ 34
3: Subject to subsection (5), the amount of the base price adjustment in relation to any financial arrangement and any income year is,—
a: in relation to a holder,—
i: where it is a positive amount, deemed to be income derived by the holder in the income year; and
ii: where it is a negative amount, deemed to be a deduction of the holder in the income year:
b: in relation to an issuer,—
i: where it is a positive amount, deemed to be expenditure incurred by the issuer in the income year; and
ii: where it is a negative amount, deemed to be income derived by the issuer in the income year.
4: Subject to subsection (5), the amount of the cash base price adjustment in relation to any financial arrangement and any income year is,—
a: where it is a positive amount, deemed to be income derived by the cash basis holder in the income year; and
b: where it is a negative amount, deemed to be a deduction of the cash basis holder in the income year.
5: Notwithstanding anything in section EZ 47(3)
a: a decline in the creditworthiness of the issuer between the date of acquisition of the financial arrangement by the holder and the date of sale or other transfer; or
b: an increase in the possibility that the issuer may fail to meet any obligations under the financial arrangement between the date of acquisition of the financial arrangement by the holder and the date of sale or other transfer; or
c: the occurrence of any event reducing or cancelling the obligations of an issuer under the financial arrangement,— all amounts that would have been received but for the factors listed above are deemed, in calculating the base price adjustment or cash base price adjustment, to have become payable to the holder: provided that this subsection does not apply where the business of the holder comprises holding or dealing in financial arrangements of that class, and the issuer of the financial arrangement and the holder are not associated persons.
6: Where—
a: a person has been released from the obligation to make payment of an amount—
i: under a financial arrangement by operation of section 304
ii: under any of the Inland Revenue Acts (and whether the relief arises through remission, waiver, or cancellation); or
iii: under a social assistance suspensory loan by virtue of that person satisfying the conditions referred to in section EZ 35(8)(c)(ii)
b: that amount would, but for this subsection, be taken into account in determining the income derived by or expenditure incurred by that person under the old financial arrangements rules,— that amount is, for the purpose of determining the income derived by or expenditure incurred by that person, and notwithstanding the old financial arrangements rules (other than this subsection), deemed to have been paid under that financial arrangement when the obligation to make payment has been so released.
7: Notwithstanding anything in this Act, where and to the extent that a person (in this subsection called the surety) suffers expenditure or a loss under a security arrangement and the expenditure or loss, in whole or in part, is due to—
a: the actions of; or
b: the occurrence, or failure to occur, of an event that was potentially or actually subject to the influence of— the surety or any person with whom the surety was, during the term of the security arrangement, an associated person, no deduction is allowed to the surety or any person in relation to the expenditure or loss.
8: In this section,—
a: the expression holder, in relation to a financial arrangement, includes a person who ceases to be a holder of the financial arrangement as provided in subsection (1) or (2); and
b: the expression issuer, in relation to a financial arrangement, includes a person who ceases to be an issuer of the financial arrangement as provided in subsection (1); and
c: the expression social assistance suspensory loan means a loan—
i: made by a department or instrument of the Executive Government of New Zealand; and
ii: under whose terms the issuer's liability may be remitted in whole or in part if the issuer satisfies conditions intended to promote a social policy objective of the Government of New Zealand; and
iii: of a kind that is declared by the Governor-General by Order in Council to be a social assistance suspensory loan; and
d: a financial arrangement is deemed to be remitted where—
i: the issuer has been discharged from making all remaining payments under that financial arrangement without fully adequate consideration; or
ii: the issuer has been released from making all remaining payments under that financial arrangement by the operation of the Insolvency Act 2006 Companies Act 1955 Companies Act 1993
iii: all of the remaining payments under the financial arrangement have become irrecoverable or unenforceable by action through the lapse of time; or
iv: the financial arrangement is a debt that is sold at a discount to a person associated with the debtor under the circumstances described in section EZ 38
e: where a person ceases to be a New Zealand resident any financial arrangement in relation to which that person is an issuer or a holder is deemed, in relation to the person, to have been transferred for its market value at that date. 1994 No 164 s EH 4 Section EZ 35(6)(a)(i) amended 3 December 2007 section 445 Insolvency Act 2006 Section EZ 35(8)(d)(ii) amended 3 December 2007 section 445 Insolvency Act 2006
EZ 36: Forgiveness of debt
1: In determining the income or expenditure under the base price adjustment in section EZ 35
a: the creditor is a natural person who forgives the debt, whether in a will or otherwise, because of the natural love and affection the creditor has for the debtor; or
b: the creditor is a natural person who forgives the debt owing by a trust, whether in a will or otherwise, and the trust was established primarily to benefit—
i: a natural person for whom the creditor has natural love and affection; or
ii: an organisation or a trust whose income is exempt under section CW 34 CW 35
iii: a natural person that meets paragraph (b)(i) and an organisation or a trust that meets paragraph (b)(ii).
2: Subsection (3) applies when a trustee makes a distribution, including a distribution of beneficiary income, to a beneficiary that is neither—
a: a natural person for whom the creditor has natural love and affection; nor
b: an organisation or a trust whose income is exempt under section CW 34 CW 35
2A: Subsection (3) does not apply when a trustee of a trust (trust A) to which subsection (1)(b) applies makes a distribution to another trust (trust B) if—
a: trust B is a trust described in subparagraphs (i), (ii), or (iii) of subsection (1)(b); and
b: subsection (1)(b) would apply to trust B if, at the time the distribution is made, the creditor of trust A were a creditor of trust B, and the creditor had forgiven a debt owing by trust B.
3: A distribution to the beneficiary is income derived by the trustee—
a: in the income year in which the distribution is made; and
b: to the extent that the distribution is less than or equal to the total amount of debts forgiven by the creditor.
3A: If subsection (3) applies, the income derived by the trustee is not income for the purposes of the beneficiary income
4: For the purposes of subsection (3), the total amount of debts forgiven by the creditor is reduced by the amount of each distribution that is income derived by the trustee.
5: Subsection (3) applies to a distribution made on or after 20 May 1999. 1994 No 164 s EH 5
EZ 37: Accrued income written off
1: A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a financial arrangement where and to the extent that—
a: the person derives income in respect of the financial arrangement under any of sections EZ 32 EZ 34(4) EZ 35 EZ 39
b: the amount written off is attributable to that income.
2: A deduction is allowed to a person for an amount written off by the person as a bad debt in respect of a financial arrangement (not being an amount allowed as a deduction under subsection (1)) where—
a: the person—
i: carries on a business which comprises holding or dealing in such financial arrangements; and
ii: is not associated with the person owing the amount written off; or
b: the financial arrangement is a trade credit and the person carries on a business of dealing in the goods or services for which the trade credit is a debt.
3: Where a person receives a security payment in relation to a loss and a deduction is denied to the person for the loss other than under this subsection, the person is allowed a deduction for the loss no greater than the amount of the security payment.
4: A deduction for bad debts is allowed under this section only where the requirements of section DB 23(1)
5: A deduction for a share loss (within the meaning of section DB 18 subsection (3) section DB 18 1994 No 164 s EH 6
EZ 38: Sale of debt to associate of debtor
1: This section applies to a financial arrangement that is a debt which is sold at a discount to a person associated with the debtor on or after 20 May 1999.
2: A creditor is treated as having sold a debt at a discount if the debt is sold to a person associated with the debtor for 80% or less of the market value of the debt.
3: Subsection (4) applies to a debt that is sold if its market value was influenced by—
a: the decline in the original debtor's creditworthiness between the date the debt was entered into and the date of sale; or
b: an increase in the possibility that the original debtor would not pay an amount owing under the debt between the date the debt was entered into and the date of sale; or
c: an event that occurred which reduced or cancelled the original debtor's obligations under the debt.
4: For the purposes of subsection (2), a debt's market value is determined as if its market value were not influenced by a factor listed in subsection (3)(a) to (c).
5: For the purposes of subsection (2), associated person has the meaning set out in section OD 8(3)
6: If a debt is sold at a discount to a person associated with the debtor, the associated person is treated as having provided the debtor with an interest free loan for the amount paid for the debt.
7: If the debtor subsequently repays the person associated with the debtor more than the amount the associated person paid for the debt, the excess amount paid by the debtor is—
a: a deduction to the debtor; and
b: income of the person associated with the debtor. 1994 No 164 s EH 7
EZ 39: Post facto adjustment
1: A financial arrangement is subject to the provisions of this section where—
a: any of the amount or amounts payable under the financial arrangement are determined in the terms of the financial arrangement, as to whole or part, at the discretion of either the issuer or the holder, or both of them, or at the discretion of any other person where either the issuer or the holder and the other person are associated persons; and
b: the change in the amount or amounts payable under the financial arrangement upon the exercise of a discretion as provided for in paragraph (a) does not reflect changes in economic, commodity, industrial, or financial indices or banking or general commercial rates; and
c: the making of such financial arrangements is not generally accepted commercial practice; and
d: the effect of the arrangement is to defeat the intent and application of the old financial arrangements rules.
2: Where a financial arrangement is subject to the provisions of this section, both the holder and the issuer of the financial arrangement are required to calculate a post facto adjustment in respect of the following income years:
a: the income year in which the person ceases to be a holder or an issuer, as the case may be, in respect of the financial arrangement; and
b: where the person has not ceased to be a holder or an issuer of the financial arrangement at the end of the fifth income year following the income year of its issue or acquisition by the person, in that fifth income year; and
c: until the person ceases to be an issuer or a holder in respect of the financial arrangement, in every fifth income year succeeding the income year in which the post facto adjustment was last required to be made under this section.
3: In order to calculate the post facto adjustment, a person must,—
a: having regard to all amounts specified in section EZ 32(1) section EZ 32(2)
b: recalculate the income tax liability for each income year using the amounts of income or expenditure calculated under paragraph (a) in substitution for the amounts of income or expenditure previously calculated in respect of the financial arrangement for each income year.
4: Where a person has been required to calculate the post facto adjustment, the person is required to make a special return in respect of the post facto adjustment in the form required by the Commissioner, no later than the time at which that person is required to file an annual return for the income year in which the post facto adjustment is made.
5: Despite the time bar, the Commissioner must amend the person's assessment for the income years to which the post facto adjustment relates in accordance with the alterations to that income or expenditure as calculated by the post facto adjustment. 1994 No 164 s EH 8
EZ 40: Variable principal debt instruments
For the purposes of the old financial arrangements rules, where a person is a party to a variable principal debt instrument on the implementation date, the person is deemed to have acquired or, as the case may be, issued it on that day for a consideration equal to the amount of money that would be payable to the holder on that day if the amount or amounts payable under the financial arrangement were due and payable on that day. 1994 No 164 s EH 9
EZ 41: Relationship with rest of Act
1: Notwithstanding any other provision in this Act, income or expenditure in an income year in respect of a financial arrangement under the old financial arrangements rules is calculated under those rules.
1A: Expenditure incurred under the old financial arrangements rules is not included in—
a: the cost of trading stock, for small taxpayers:
b: the cost of revenue account property:
c: the cost of livestock:
d: the cost of bloodstock:
e: the cost of acquiring a film or a film right:
f: film production expenditure:
g: the cost of timber:
h: petroleum exploration expenditure or petroleum development expenditure.
2: Where—
a: property is transferred under a financial arrangement; and
b: the property or the consideration given for the property is relevant under any provision of this Act other than the old financial arrangements rules for the purpose of determining any amount of income or deduction of a person,— the property is treated for the purpose of that provision as having been transferred under the financial arrangement for an amount equal to the acquisition price of the property. 1994 No 164 s EH 10
EZ 42: Application of old financial arrangements rules
The old financial arrangements rules do not apply—
a: in relation to a person and a financial arrangement, where the financial arrangement was issued or acquired by the person before the implementation date for the financial arrangement; or
b: in relation to a financial arrangement, where the issue, in the case of an issuer, or acquisition, in the case of a holder, of the financial arrangement is under a binding contract in existence before the implementation date in relation to that financial arrangement: provided that this paragraph does not apply in relation to a rollover, extension, or advance provided for before the implementation date in relation to the financial arrangement where the rollover, extension, or advance occurs on or after 1 April 1990; or
c: in relation to a person and a financial arrangement, where the person acquired the financial arrangement in accordance with a relationship agreement
d: in relation to a financial arrangement, where the issue, in the case of an issuer, or acquisition, in the case of a holder, of the financial arrangement is under and in terms of a rollover, extension, or advance provided for before the implementation date in relation to the financial arrangement and the rollover, extension, or advance occurs before 1 April 1990; or
e: to the determination of—
i: income of or expenditure incurred by a person not resident in New Zealand in relation to a financial arrangement where and to the extent that the financial arrangement does not relate to a business carried on by that person through a fixed establishment in New Zealand; or
ii: non-resident withholding income; or
f: in relation to a financial arrangement to the extent that the income or expenditure incurred by a person in respect of the financial arrangement consists of interest payable to or by the Commissioner under Part 7 1994 No 164 s EH 11 Paragraph (c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
EZ 43: Election to treat short term trade credit as financial arrangement
1: For the purposes of the old financial arrangements rules, a taxpayer may elect by notice given in accordance with subsection (2) to treat short term trade credits specified in subsection (4) as financial arrangements.
2: Notice of an election under subsection (1) in relation to an income year must be given to the Commissioner within the time within which a vendor or a purchaser is required under section 37
3: An election by the taxpayer under subsection (1) may be revoked by notice given to the Commissioner during any income year and the revocation applies only to short term trade credits created on or after the commencement of the subsequent income year.
4: An election under subsection (1) may be made in respect of—
a: all short term trade credits of the taxpayer; or
b: 1 or more classes of short term trade credits of the taxpayer that the taxpayer defines by reference either—
i: to the particular currency in which the short term trade credit is denominated; or
ii: to the term of the short term trade credit; or
iii: to both the term and the particular currency in which the short term trade credit is denominated. 1994 No 164 s EH 12
EZ 44: Election to continue to treat certain excepted financial arrangements as financial arrangements
1: A person may elect to continue to treat all excepted financial arrangements under any of paragraphs (p), (q), (r), (s), (t), (u), and (v) excepted financial arrangement
2: A person elects to treat their excepted financial arrangements as financial arrangements by returning income derived and expenditure incurred from the elected arrangements under the old financial arrangements rules in their return of income.
3: A financial arrangement that is an excepted financial arrangement under any of paragraphs (p), (q), (r), (s), (t), (u), and (v) excepted financial arrangement 1994 No 164 s EH 13
EZ 45: Definitions
For the purposes of the old financial arrangements rules, each of the following terms has the meaning given to it, despite any other meaning given to the term in section OB 1 acquisition price
a: in relation to a financial arrangement and a holder of the financial arrangement, means an amount calculated in accordance with the following formula: y – z where—
y: is the core acquisition price of the financial arrangement
z: is the smaller of—
i: the amount of consideration provided in relation to the financial arrangement by the holder that is not contingent on the implementation of the financial arrangement; and
ii: an amount equal to 2% of the core acquisition price of the financial arrangement; and
b: in relation to a financial arrangement and an issuer of the financial arrangement, means an amount calculated in accordance with the following formula: y + z where—
y: is the core acquisition price of the financial arrangement
z: is the smaller of—
i: the amount of consideration provided in relation to the financial arrangement by the issuer that is not contingent on the implementation of the financial arrangement; and
ii: an amount equal to 2% of the core acquisition price of the financial arrangement agreement for the sale and purchase of property amount of all consideration core acquisition price w core acquisition price core acquisition price
a: where section EZ 47
b: where the financial arrangement is a trade credit, an amount calculated in accordance with the following formula: u + v where—
u: is—
i: the cash price of the goods or services to which the trade credit relates (referred to in this item and item v specified goods or services section 5
ii: if subparagraph (i) is not applicable, the lowest price at which the specified goods or services could be purchased under a short term trade credit; or
iii: if subparagraphs (i) and (ii) are not applicable, the discounted value of the amounts payable for the specified goods or services, as determined under a determination made by the Commissioner under section 90(1)(h)
v: is—
i: in relation to a holder of the financial arrangement, the amount of all consideration provided by the holder in relation to the financial arrangement, other than the specified goods or services; or
ii: in relation to an issuer of the financial arrangement, the amount of all consideration provided to the issuer in relation to the financial arrangement, other than the specified goods or services; and
c: where the financial arrangement is an agreement for the sale and purchase of property (not being an agreement for the sale and purchase of property that has lapsed or otherwise does not proceed) or a specified option (not being a specified option that has lapsed or otherwise does not proceed), an amount calculated in accordance with the following formula: w + x where—
w: is—
i: the lowest price (determined in accordance with section EZ 46 x specified property
ii: if subparagraph (i) is not applicable, the discounted value of the amounts payable for the specified property as determined under a determination made by the Commissioner under section 90(1)(h)
x: is—
i: in relation to the holder of the financial arrangement, the amount of all consideration provided by the holder in relation to the financial arrangement other than the specified property; or
ii: in relation to an issuer of the financial arrangement, the amount of all consideration provided to the issuer in relation to the financial arrangement other than the specified property; and
d: where the financial arrangement is a hire purchase agreement and the holder is the first holder in relation to the hire purchase agreement, either—
i: an amount calculated in accordance with the following formula: a + b + c where—
a: is,—
A: the cash price of the hire purchase asset (as cash price section 5
B: if subsubparagraph (A) of this item is not applicable, the lowest price at which the hire purchase asset could be purchased under a short term trade credit at the time of commencement of the hire purchase agreement
b: is the amount of all expenditure or loss incurred by the holder in preparing and installing the hire purchase asset for use to the extent to which any such expenditure or loss is not taken into account in determining the amount of item a
c: is—
A: in relation to the holder, the amount of all consideration provided by the holder in relation to the hire purchase agreement, other than the hire purchase asset and the expenditure or loss referred to in item b
B: in relation to the issuer, the amount of all consideration provided to the issuer in relation to the hire purchase agreement, other than the hire purchase asset and the expenditure or loss referred to in item b
ii: if subparagraph (i) is not applicable, or if either the holder or the issuer in relation to the hire purchase agreement applies to the Commissioner for a specific determination, an amount calculated in accordance with the following formula: d + e where—
d: is—
A: the discounted value of all hire purchase payments payable under the hire purchase agreement, as determined under a determination made by the Commissioner under section 90(1)(i)
B: where either the holder or the issuer in relation to the hire purchase agreement applies to the Commissioner for a specific determination, an amount determined by the Commissioner in relation to that application (and the amount so determined applies for both the holder and the issuer to the exclusion of any determination made in respect of that hire purchase agreement under subsubparagraph (A) of this item)
e: is,—
A: in relation to the holder, the amount of all consideration provided by the holder in relation to the hire purchase agreement, other than the hire purchase asset and any expenditure or loss incurred by the holder in preparing and installing the hire purchase asset for use; or
B: in relation to the issuer, the amount of all consideration provided to the issuer in relation to the hire purchase agreement, other than the hire purchase asset and any expenditure or loss incurred by the holder in preparing and installing the hire purchase asset for use; and
e: where none of paragraphs (a) to (d) applies to a financial arrangement,—
i: in relation to a holder of the financial arrangement, the value of all consideration provided by the holder in relation to the financial arrangement; or
ii: in relation to an issuer of the financial arrangement, the value of all consideration provided to the issuer in relation to the financial arrangement excepted financial arrangement
a: an annuity for a term contingent upon human life or an annuity for a term not contingent on human life to which section EY 8(2)(c)
b: an insurance contract or membership of a superannuation scheme:
c: a debenture to which section FC 1 FC 2
d: a short term trade credit, unless the purchaser or vendor has elected in accordance with section EZ 43
e: a specified preference share to which section FZ 1
f: in relation to a holder or an issuer, shares, other than withdrawable shares, or an option to buy shares, other than withdrawable shares, where those shares were or that option was acquired or issued by the person before 8.00 pm New Zealand Standard Time on 18 June 1987:
g: in relation to a holder or an issuer, shares, other than withdrawable shares, or an option to acquire or to sell or otherwise dispose of shares, other than withdrawable shares, where those shares were or that option was acquired or issued by the person after 8.00 pm New Zealand Standard Time on 18 June 1987:
h: a lease:
i: a bet on any—
i: race (as defined in section 5
ii: sporting event under a sports-betting system administered under Part 6
iii: gambling, including a New Zealand lottery (as those terms are defined in section 4(1)
j: in relation to an issuer or a holder, an option to acquire or to sell or otherwise dispose of property (other than an interest in a financial arrangement) where the option was issued or acquired by the person after 8.00 pm New Zealand Standard Time on 18 June 1987 for private or domestic purposes only:
k: a short term agreement for the sale and purchase of property:
l: a short term option:
m: a private or domestic agreement for the sale and purchase of property:
n: a farm-out arrangement:
o: a hire purchase agreement (as defined in section OB 1
p: a loan that is interest free, repayable on demand, and denominated in New Zealand dollars, for the lender of the loan only:
q: an employment contract:
r: an interest in a group investment fund:
s: an interest in a partnership or a joint venture:
t: travellers' cheques:
u: a warranty for goods or services:
v: a hire purchase agreement for livestock or bloodstock entered into on or after 1 April 1993 financial arrangement
a: any debt or debt instrument; and
b: any arrangement (whether or not such arrangement includes an arrangement that is a debt or debt instrument, or an excepted financial arrangement) whereby a person obtains money in consideration for a promise by any person to provide money to any person at some future time or times, or upon the occurrence or non-occurrence of some future event or events (including the giving of, or failure to give, notice); and
c: any arrangement which is of a substantially similar nature (including, without restricting the generality of the preceding provisions of this subparagraph, sell-back and buy-back arrangements, debt defeasances, and assignments of income);— but does not include any excepted financial arrangement that is not part of a financial arrangement fixed principal financial arrangement forward contract holder implementation date
a: foreign exchange:
b: commodities:
c: financial arrangements:
d: excepted financial arrangements;— but does not include an agreement for the sale and purchase of property or a specified option holder
a: means,—
i: in relation to—
A: an agreement for the sale and purchase of property; or
B: a forward contract or a futures contract,— a person who is a vendor in relation to the financial arrangement:
ii: in relation to an option to purchase or otherwise acquire property, a person who is a grantor of the option:
iii: in relation to an option to sell or otherwise dispose of property, a person who is a grantee of the option:
iv: in relation to a hire purchase agreement, the lessor:
v: in relation to any other financial arrangement, a person who, if the amount or amounts payable under the financial arrangement were due and payable at that time, would be entitled to receive, or would receive a pecuniary benefit from, payment of the amount or amounts so payable or any part of them;— and hold
b: is further defined in section EZ 35(8) implementation date
a: in the case of—
i: forward or future contracts, including, but not limited to, contracts for—
A: foreign exchange:
B: commodities:
C: financial arrangements:
D: excepted financial arrangements; and
ii: futures contracts; and
iii: trade credits; and
iv: annuities; and
v: agreements for the sale and purchase of property; and
vi: convertible notes,— 8.00 pm New Zealand Standard Time on 23 October 1986; and
b: in the case of debt defeasances and assignments of income, 20 December 1986; and
c: in the case of variable principal debt instruments, 1 April 1987; and
d: in the case of a financial arrangement under which—
i: the monetary obligations of the parties are expressed in New Zealand currency; and
ii: it is contemplated that the holder may, upon demand or call, require the return of sums advanced to the issuer; and
iii: it is not contemplated that the holder may advance further sums to the issuer upon demand or call under the financial arrangement,— 1 April 1987; and
e: in every other case, 8.30 pm New Zealand Standard Time on 31 July 1986 issuer
a: in relation to a financial arrangement at any time, means a person who is a party to the financial arrangement and is not a holder in relation to the financial arrangement; and
b: is further defined in section EZ 35(8) maturity section EZ 35 financial arrangement security payment private or domestic agreement for the sale and purchase of property excepted financial arrangement
a: the agreement was entered into by that person or the specified option was granted to or by that person for private or domestic purposes; and
b: the subject-matter of the agreement or specified option is—
i: real property, the purchase price of which is less than $750,000; or
ii: any other property, the purchase price of which is less than $250,000; and
c: settlement is required to take place within 365 days after the day on which the agreement was entered into or the specified option granted property
a: in the definition of specified base cost
b: in paragraph (a) of the definition of holder lease agreement for the sale and purchase of property amount of all consideration core acquisition price excepted financial arrangement private or domestic agreement for the sale and purchase of property right in the specified property short term agreement for the sale and purchase of property short term option specified option
i: any capital asset that is not foreign exchange or a financial arrangement; and
ii: trading stock; and
iii: consumable aids; and
iv: property to be purchased or otherwise acquired or sold or otherwise disposed of for private or domestic purposes only right in the specified property core acquisition price
a: the right to possession of the property; or
b: the right to any income or the right to control or influence the disposition of income derived from the property; or
c: the right, directly or indirectly, to exercise, or to influence any other person in the exercise of, any decisionmaking in respect of the property; or
d: any other right of a substantially similar nature: provided that the mere right to enforce any agreement for the sale and purchase of property or any specified option does not of itself constitute a right in the specified property secured arrangement security arrangement security payment security arrangement security payment security payment short term agreement for the sale and purchase of property
a: the property is real property and settlement is required to take place within 93 days of the day on which the agreement was entered into; or
b: the property is not real property and settlement is required to take place within 63 days of the day on which the agreement was entered into short-term option excepted financial arrangement
a: the subject-matter of the option is real property and settlement is required to take place within 93 days of the day on which the option was granted; or
b: the subject-matter of the option is not real property and settlement is required to take place within 63 days of the day on which the option was granted short term trade credit core acquisition price excepted financial arrangement trade credit
a: within 63 days after the supply of the goods or services; or
b: because the supply of the goods or services is continuous and the vendor renders periodic invoices for the goods or services, within 63 days after the date of an invoice rendered for those goods or services social assistance suspensory loan section EZ 35(8)(c) specified option trade credit core acquisition price implementation date trading stock property
a: any thing acquired for the purposes of manufacture, sale, or exchange:
b: livestock:
c: any other real or personal property where the business of the person by whom it is sold or disposed of comprises dealing in such property or the property was acquired by the person for the purpose of sale or other disposal:
d: any land, any amount derived from the sale or other disposal of which would be income to which any of sections CB 5 to CB 21
e: anything in respect of which expenditure is incurred and which, if possession were taken, would fall within any of paragraphs (a) to (d);— but does not include any financial arrangement variable principal debt instrument
a: advance further sums to the issuer; or
b: where the rights and obligations of the person under the financial arrangement are expressed in a currency other than New Zealand currency, require the return of sums advanced to the issuer— in either case upon demand or call, and where all such sums form part of that bank deposit account or other instrument. 1994 No 164 s EH 14
EZ 46: Determination of core acquisition price where consideration for property denominated in foreign currency
1: For the purposes of paragraph (c) of the definition of core acquisition price section EZ 45
a: the rate, on the day on which the financial arrangement was entered into (in this section referred to as the contract date), available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dollars for that foreign currency on the day on which the first right in the specified property is to be transferred (in this section referred to as the rights date); or
b: if the period between the rights date and the day on which final payment is to be made under the financial arrangement (in this section referred to as the settlement date) is not greater than 5 years, the rate, on the contract date, available to the taxpayer from a New Zealand registered bank for the exchange of New Zealand dollars for that foreign currency on the settlement date; or
c: an exchange rate approved by the Commissioner for adoption under this subsection in the circumstances applicable to the taxpayer in a determination issued under section 90(1)(k)
2: The rate adopted by a taxpayer in relation to a financial arrangement under subsection (1) must be consistently applied by that taxpayer in respect of that particular financial arrangement for the purposes of the old financial arrangements rules for every income year during its term.
3: If the terms of the financial arrangement referred to in subsection (1) are such that the actual rights date is uncertain as at the contract date, then the rights date is for the purposes of subsection (1) the date on which it is reasonably expected by the parties at the time of entering into the financial arrangement that the first right in the specified property will be transferred.
4: If the terms of the financial arrangement referred to in subsection (1) are such that the actual settlement date is uncertain as at the contract date, then the settlement date is for the purposes of subsection (1) the date on which it is reasonably expected by the parties at the time of entering into the financial arrangement that final payment will be made. 1994 No 164 s EH 15
EZ 47: Rules for non-market transactions
1: Where the Commissioner, having regard to any connection between the parties to the issue or transfer of a financial arrangement and to any other relevant circumstances, is satisfied that the parties were dealing with each other in relation to the issue or transfer in a manner that has the effect of defeating the intent and application of the old financial arrangements rules, the Commissioner may, under section EZ 32 EZ 34 EZ 35 EZ 39
2: If at any time a person not resident in New Zealand—
a: commences to hold, whether temporarily or otherwise, a financial arrangement, for the purposes of a business carried on through a fixed establishment in New Zealand, the person is deemed to have acquired the financial arrangement at that time; or
b: ceases to hold, whether temporarily or otherwise, a financial arrangement for the purposes of a business carried on through a fixed establishment in New Zealand, the person is deemed to have disposed of the financial arrangement at that time; or
c: being a holder or an issuer of a financial arrangement, becomes a New Zealand resident, the person is deemed to acquire or to issue the financial arrangement at the time at which the person becomes a New Zealand resident;— and that acquisition or that disposal is deemed to have been made for a consideration equal to the consideration that might reasonably be expected for the acquisition or disposal if the acquisition or disposal had been made at arm's length.
3: A financial arrangement is treated as having been sold and purchased or transferred and realised at its market value on the date of its sale or transfer if the sale or transfer, including a transfer by way of distribution to shareholders, is not for consideration in money or is for a consideration that is less than the market value of the financial arrangement.
5: The market value of a financial arrangement is the market value for both seller and purchaser or transferor and transferee. 1994 No 164 s EH 16
EZ 48: Transitional adjustment when changing to financial arrangements rules
1: A person may elect to apply the financial arrangements rules to a financial arrangement to which the old financial arrangements rules apply.
2: A person who makes an election must apply the financial arrangements rules to all financial arrangements to which the person is a holder or an issuer.
3: Despite subsections (1) and (2), a person must apply section EZ 35
4: Once an election is made, the financial arrangement is subject to the financial arrangements rules and is treated in the same way as a financial arrangement that was entered into on or after 20 May 1999.
5: A person who makes an election must calculate a transitional adjustment for the income year of election and return the resulting income or expenditure.
6: The transitional adjustment is calculated using the formula— income (financial arrangements rules) – expenditure (financial arrangements rules) – income (old financial arrangements rules) + expenditure (old financial arrangements rules) where— income (financial arrangements rules) is the total amount of income that would be derived by the person from the financial arrangement if the financial arrangements rules were applied to the financial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made expenditure (financial arrangements rules) is the total amount of expenditure that would be incurred by the person under the financial arrangement if the financial arrangements rules were applied to the financial arrangement for the period beginning on the date the person acquires the arrangement and ending on the last day of the income year in which this calculation is made income (old financial arrangements rules) is the total amount of income of the person from the financial arrangement in all income years before the income year in which this calculation is made expenditure (old financial arrangements rules) is the total amount of expenditure incurred by the person under the financial arrangement in all income years before the income year in which this calculation is made.
7: The result of the transitional adjustment is,—
a: if a positive amount, income derived by the person in the income year; and
b: if a negative amount, expenditure incurred by the person in the income year.
8: In the income year in which the transitional adjustment is made to a financial arrangement, a person must take into account only the income derived or the expenditure incurred as a result of the adjustment for the financial arrangement.
9: Despite subsections (2) to (8), a person is treated as transferring a financial arrangement at market value at the end of the income year of election and must calculate a base price adjustment under section EZ 35
a: the financial arrangement is an arrangement to which the old financial arrangements rules apply; and
b: the financial arrangement were entered into on or after 20 May 1999 and would not have been subject to the financial arrangements rules; and
c: the person elects to apply the financial arrangements rules to a financial arrangement to which the old financial arrangements rules apply. 1994 No 164 s EH 17
EZ 49: References to new rules include old rules
1: Subsection (2) applies if—
a: the old financial arrangement rules apply to a financial arrangement (old financial arrangement); and
b: a taxation law in this Act (rewritten law) refers only to, or applies only to, a financial arrangement to which the financial arrangements rules apply; and
c: the rewritten law is in neither subpart EW sections EZ 30 to EZ 48
d: the rewritten law corresponds to and replaces, with or without amendments, a taxation law that applied to the old financial arrangement before 20 May 1999.
2: The rewritten law applies to the old financial arrangement as if the rewritten law referred to, or applied to, a financial arrangement to which the old financial arrangements rules apply.
3: Subsection (2) does not apply to—
a: a definition, or parts of a definition, in section OB 1 section EZ 45
b: section GD 11 section EZ 47
4: Section HB 2(1)(a)(v)
a: the reference to section EW 31 section EZ 35
b: the words financial arrangements rules old financial arrangements rules 1994 No 164 s EH 18
EZ 50: Transitional rule for IFRS financial reporting method
When this section applies
1: This section applies for a financial arrangement when—
a: a person starts to use a spreading method for that financial arrangement before the person adopts IFRSs for the purposes of financial reporting; and
b: that spreading method does not comply with whichever is relevant of sections EW 16(2)(d) EW 18(1)(f) EW 20(2)(f)
c: the person is not required by section EW 15B
d: the income year is the 2007–08 income year or an earlier income year. Transitional rule
2: For the financial arrangement, the person is treated as complying with whichever is relevant of sections EW 16(2)(d) EW 18(1)(f) EW 20(2)(f) financial arrangement IFRS IFRS taxpayer method income year Section EZ 50 added 19 December 2007 section 100 Taxation (Business Taxation and Remedial Matters) Act 2007 Section EZ 50(1)(b) amended 6 October 2009 section 801(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section EZ 50(2) amended 6 October 2009 section 801(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EZ 51: Transitional rule for financial reporting method
1: This section applies for a financial arrangement when—
a: the first income year for which a person adopts IFRSs for the purposes of financial reporting is before the 2007–08 income year and the person has not chosen to apply the IFRS taxpayer method in a return of income for any year before the 2008–09 income year; and
b: the income year is that first income year or any subsequent income year that is before the 2008–09 income year.
2: Despite sections EW 21(e) EW 23 financial arrangement IFRS IFRS taxpayer method income year return of income Section EZ 51 added 6 October 2009 section 802 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
EZ 52: Transitional rule for changes from the fair value method
1: This section applies for a financial arrangement when—
a: the person chooses to apply the IFRS taxpayer method in a return of income for the 2005–06 income year; and
b: the person uses the fair value method under the IFRS method described in section EW 15C
2: Despite section EW 26(2) and (7) financial arrangement IFRS taxpayer method income year return of income sound commercial reason Section EZ 52 added 6 October 2009 section 802 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
F: Apportionment and recharacterised transactions
Contents
FB: Apportionment
Contents
FB 2: Apportionment of income derived partly in New Zealand and partly elsewhere
1: For the purposes of this Act generally, if—
a: any business of a taxpayer is carried on partly in New Zealand and partly outside New Zealand; or
b: a contract is made in New Zealand and is wholly or partly performed by a taxpayer outside New Zealand, or is made outside New Zealand and is wholly or partly performed by a taxpayer in New Zealand,— the gross amount of income from the business or contract, and expenditure incurred in deriving that income, is apportioned to New Zealand in such a way and to such an extent as is necessary to produce an amount of net income or net loss for the purposes of this Act in respect of the business or contract which the taxpayer might be expected to have if the taxpayer's activities in New Zealand in respect of the business or contract were carried out by the taxpayer as a separate and wholly independent person undertaking only those activities and dealing at arm's length, and the gross amount of income, so far as so apportioned to New Zealand, is deemed to be derived from New Zealand.
1A: For the purposes of Part L, if—
a: any business of a taxpayer is carried on partly in 1 country and partly in another country; or
b: a contract is made in 1 country and wholly or partly performed by a taxpayer in another country, or is partly performed by a taxpayer in 2 or more countries,— the gross amount of income from the business or contract, and expenditure incurred in deriving that income, is apportioned between the countries in such a way and to such an extent as is necessary to produce an amount of net income or net loss, in respect of each country and the business or contract, which the taxpayer might be expected to have if the taxpayer's activities in that country in respect of the business or contract were carried out by the taxpayer as a separate and wholly independent person undertaking only those activities and dealing at arm's length.
2: This section must not be construed as applying with respect to—
a: income of any of the classes referred to in section OE 4(1)
b: income of any of the classes referred to in section OE 4(1)(a) 1994 No 164 s FB 2 Subsection (2)(a) amended 1 April 2005 section 104(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression section OE 4(1) section OE (1) Subsection (2)(b) amended 1 April 2005 section 104(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression section OE 4(1)(a) section OE (1)(a)
FB 3: Disposal of trading stock
Where in any income year the whole or any part of the assets of a business owned or carried on by any taxpayer is sold or otherwise disposed of (whether by way of exchange, or otherwise, other than by a disposition of property that is not at market value because of the operation of any of sections FI 4 to FI 6 1994 No 164 s FB 3 Section FB 3 amended 1 October 2005 section 50 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting (whether by way of exchange, or otherwise, other than by a disposition of property that is not at market value because of the operation of any of sections FI 4 to FI 6 (whether by way of exchange, or gift, or distribution in terms of a will or on an intestacy, or otherwise
FB 4: Income derived from disposal of trading stock together with other assets of business
1: If trading stock is sold together with other assets of a business, the total consideration must be apportioned, for the purposes of this Act, between the trading stock and the other assets so as to reflect their respective market values, and the amount apportioned to the trading stock is treated as being the price paid for the trading stock by the purchaser.
2: For the purposes of this section, any trading stock which has been disposed of otherwise than by sale and otherwise than by way of a transfer in accordance with a relationship agreement
3: This section, with any necessary modifications, applies in any case where a share or interest in any trading stock is sold or otherwise disposed of together with other assets of a business or with a share or interest in other assets of a business.
4: For the purposes of this section,—
a: the creation or grant of any right to take timber is treated as a sale or other disposition of trading stock of a kind referred to in subsection (5)(d):
b: where there is a sale or other disposition of land with standing timber on the land, that sale or other disposition is deemed to include a sale or other disposition of trading stock of a kind referred to in subsection (5)(d), except to the extent that the timber is—
i: timber comprised in ornamental or incidental trees, as evidenced by a certificate given under section 44C
ii: subject to a forestry right (as defined in section 2 Land Transfer Act 1952
iii: subject to a profit à prendre granted before 1 January 1984.
5: In this section, trading stock
a: anything produced or manufactured:
b: anything acquired or purchased for purposes of manufacture, sale, or exchange:
c: livestock:
d: timber:
e: any right to take timber:
f: any other real or personal property sold or disposed of by the taxpayer where the business of the taxpayer comprises dealing in such property or the property was acquired by the taxpayer for the purpose of sale or other disposal:
g: anything in respect of which expenditure is incurred after 8.30 pm New Zealand Standard Time on 31 July 1986 and which, if possession of that thing were taken, would be trading stock;— but does not include any financial arrangement to which the financial arrangements rules apply. 1994 No 164 s FB 4 Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FB 4A: Land on revenue account
If a person derives income under sections CB 5 to CB 21 1994 No 164 s DJ 14(4)
FB 7: Depreciation: partial income-producing use
1: Subsection (2) applies when—
a: a person has an amount of depreciation loss for an item of depreciable property for an income year, other than an amount arising under section EE 41(2)
b: at a time during the income year, the item is partly used, or is partly available for use, by the person—
i: in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
ii: in a way that is subject to fringe benefit tax; and
c: at the same time, the item is partly used, or is partly available for use, by the person for a use that falls outside both paragraph (b)(i) and (ii); and
d: the item is not a motor vehicle to which subpart DE applies.
2: The deduction the person is allowed for the amount of depreciation loss must not be more than the amount calculated using the formula—
3: In the formula,—
a: depreciation loss
b: qualifying use days
c: all days
4: A unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate apportionment.
5: Subsection (6) applies when—
a: a person has an amount of depreciation loss for an item of depreciable property arising under section EE 41(2)
b: the item was, at any time during the period the person owned it, dealt with in—
i: subsection (2); or
ii: any applicable paragraph in section EZ 10
c: the item is not a motor vehicle to which subpart DE applies.
6: The deduction the person has for the amount of depreciation loss is calculated using the formula—
7: In the formula,—
a: disposal depreciation loss section EE 41(2)
b: all deductions
c: base value sections EE 48 to EE 50
d: adjusted tax value
8: Subsection (9) applies when—
a: a person has an amount of depreciation loss for an item of depreciable property arising under section EE 41(2)
b: in the income year in which the depreciation loss arises, the person starts to use the item, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
c: at a time during the income year, the item is partly used, or is partly available for use, by the person—
i: in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
ii: in a way that is subject to fringe benefit tax; and
d: the item is not a motor vehicle to which subpart DE applies.
9: The deduction the person has for the amount of depreciation loss is calculated using the formula—
10: In the formula,—
a: disposal depreciation loss section EE 41(2)
b: qualifying use days
c: all days
11: Despite subsection (8), a unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate apportionment. 1994 No 164 ss EG 2(1)(e), EG 19(4) Subsections (8) to (11) inserted 18 December 2006 section 84(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
FC: Recharacterisation
Contents
Debentures and notes
FC 1: Floating rate of interest on debentures
1: Where in any debenture issued by a company the rate of interest payable in respect of the debenture is not specifically determined, but is determinable from time to time—
a: by reference to the dividend payable by the company; or
b: by reference to the company's profits, however measured, for debentures issued after 8.00 pm New Zealand Standard Time on 23 October 1986 other than those issued under a binding contract entered into before that time; or
c: in any other manner, for debentures issued before the time specified in paragraph (b),— the company is denied a deduction in respect of any interest payable under the debenture or of any expenditure or loss incurred in connection with the debenture or in borrowing the money secured by or owing under it.
2: Section HK 12
3: This section does not apply if, under the terms of the debenture, the rate of interest payable is determined by a fixed relationship to banking rates or general commercial rates or (in the case of debentures issued after the time specified in subsection (1)(b)) economic, commodity, industrial, or financial indices.
4: This section does not apply to a debenture treated as a share under section FC 2B 1994 No 164 s FC 1 Section FC 1(4) added 6 October 2009 section 803 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
FC 2: Interest on debentures issued in substitution for shares
1: Where a company has issued debentures to its shareholders or to any class of its shareholders, and the amount of the debenture or debentures issued to each shareholder of the company or of that class has been determined by reference to the number or to the available subscribed capital per share calculated under the slice rule of, or by reference otherwise to, the shares in that company or in any other company (whether or not that other company is being or has been liquidated) that were held by or on behalf of the shareholder at the time the debentures were issued or at any earlier time, the company is denied a deduction in respect of any interest payable under any debenture so issued or of any expenditure or loss incurred in connection with any such debenture or in borrowing the money secured by or owing under any such debenture.
2: Section FC 1 section FC 1
3: This section does not apply with respect to any issue of debentures if more than 25% of the debentures (computed by reference to the amount of the debentures) were transferred for a consideration in money or money's worth before 30 August 1940 (being the date of the passing of the Finance Act (No 2) 1940
4: This section does not apply with respect to any debenture that is a convertible note.
4B: This section does not apply to a debenture treated as a share under section FC 2B
5: In this section,— amount of the debenture shareholder 1994 No 164 s FC 2 Section FC 2(4B) inserted 6 October 2009 section 804 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009
FC 2B: Stapled debt securities
1: Stapled debt security
a: the debt security is stapled to a share in the company or to a share in another company; and
b: the share is not a fixed rate share.
2: The stapled debt security is treated as a share issued by the company and—
a: interest payable under the stapled debt security is treated as a dividend; and
b: section DB 8B
3: A stapled debt security and a share to which it is stapled are treated as a single share for the purposes of applying—
a: the definition in section CD 14(9) non-participating redeemable share
b: the definition in section LF 2(3) fixed rate share
c: the definition in section OB 1 fixed rate share
4: In this section, debt security
a: the financial arrangement provides funds to the company; and
b: the financial arrangement gives rise to an amount for which the company would have a deduction but for this section; and
c: the amount does not arise only from either a movement in a currency exchange rate or a non-contingent fee.
5: In this section, a debt security is stapled
a: the debt security can, or ordinarily can, be disposed of only together with the share; and
b: the arrangement that requires the debt security and the share to be disposed of together is an arrangement to which the company that issued the debt security or the company that issued the share is a party. Exclusion: small company shareholder agreements
6: This section does not apply if the debt security is stapled to the share using a shareholder agreement for a company that is not a widely-held company. Exclusion: stapling before 25 February 2008
7: This section does not apply if the debt security was stapled to the share before 25 February 2008. Section FC 2B inserted 6 October 2009 section 805(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Shares
FC 3: Share dealing
1: If a taxpayer holds shares that are revenue account property, a dividend derived by the taxpayer or an associated person from the shares after their acquisition which—
a: constitutes a realisation or recovery of the price at which the taxpayer acquired those shares; and
b: is a dividend the declaration, payment, or distribution of which was in any way—
i: controlled or directed by the taxpayer; or
ii: part of or associated with a scheme which includes the acquisition of those shares and the payment or distribution of the dividend— is deemed to be received by the taxpayer as consideration or part consideration on the sale of the shares, whether or not the shares have been or will be sold, and is income in the tax year in which the dividend is derived: provided that if, in relation to the transaction initiated by the acquisition of those shares in the tax year in which the dividend is derived, the amount that would be the taxpayer's net income if the taxpayer's only income derived in that tax year were in respect of the transaction (including any amount deemed to be consideration under this subsection) is more than zero, the amount of the consideration that is treated as income under this subsection is reduced by the lesser of—
c: the amount that would be the taxpayer's net income so calculated; and
d: the total of any dividends that have been treated as income under subsection (2) and that have not previously been applied in reduction of the amount of consideration under this paragraph.
2: Notwithstanding anything in subsection (1), any dividend that is taken into account under that subsection in any tax year remains and is a dividend derived by the taxpayer in that tax year, and the amount of that dividend is income of the taxpayer in that tax year. 1994 No 164 s FC 3
FC 4: Valuation adjustments where company acquires its shares
Where—
a: a company acquires, redeems, or otherwise cancels a share in the company (referred to in this section as the cancellation
b: the cancellation is not an on-market cancellation; and
c: any consideration derived by the shareholder from the cancellation would be income of the shareholder under any of sections CB 1 to CB 4 subpart CD section HH 1(8)
d: the shareholder continues to hold, after the cancellation, shares of the same class as the share,— then, for the purposes of this Act,—
e: if the whole of the consideration derived by the shareholder is treated as a dividend for the purposes of this Act, the shareholder is deemed not to have disposed of the share (except for the purpose of determining whether the shareholder has derived a dividend) and an amount equal to the cost to the shareholder of the share must be fairly divided amongst and added to the cost to the shareholder of the shareholder's remaining shares of the same class when taking into account, under subpart EB, this section, or otherwise, the cost of those remaining shares of the same class at any time after the cancellation; and
f: in any case where—
i: paragraph (e) does not apply; and
ii: the consideration payable by the company for the cancellation is less than the market value of the share at the time at which notice is first given by the company to the shareholder or, in any case where the cancellation is proposed by the shareholder, by the shareholder to the company proposing the cancellation (for any reason other than that the proposal requires the consideration to be equal to the market value of the share at the time of the cancellation),— section GD 1 where—
a: is the cost to the shareholder of the share
b: is the aggregate cost to the shareholder of all the shareholder's shares of the same class immediately before the cancellation
c: is the consideration derived by the shareholder from the company in respect of the cancellation
d: is the market value of all the shareholder's shares of the same class immediately before the cancellation must be—
iii: fairly divided amongst and added to the cost to the shareholder of the shareholder's remaining shares of the same class when taking into account, under subpart EB, this section, or otherwise, the cost of those remaining shares of the same class at any time after the cancellation; and
iv: in any case where the shares are not trading stock of the shareholder, excluded from the cost of the share acquired, redeemed, or otherwise cancelled, so that the shareholder is denied any deduction for that amount. 1994 No 164 s FC 4 Leases
FC 5: Assets purchased and resold after deduction of payments under lease
1: Where—
a: a taxpayer leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building and the taxpayer has been allowed a deduction for the consideration paid or given in respect of that lease, rental, or hire; and
b: either—
i: that taxpayer at any time purchased or otherwise acquired that asset and sold or otherwise disposed of it for a consideration in excess of the consideration for which the taxpayer purchased or otherwise acquired it; or
ii: any other person, where the taxpayer and that other person are associated persons, at any time purchased or otherwise acquired that asset, not being an acquisition resulting from a relationship agreement an amount equal to the excess or to the total amount of the deductions so allowed, whichever is less, is income of the taxpayer derived in the tax year in which the asset is sold or otherwise disposed of.
2: Subsection (1) applies whether or not there was any clause or condition in the lease, contract, agreement, or arrangement under which the asset was leased, rented, or hired, by which that taxpayer or that other person was required to purchase or otherwise acquire that asset.
3: For the purposes of this section,—
a: if an asset to which this section relates has been purchased or otherwise acquired, or sold or otherwise disposed of, together with other assets, the total consideration must be apportioned between the asset and the other assets so as to reflect their respective market values, and the amount apportioned to the asset is treated as being the consideration for which the asset was purchased, acquired, sold, or disposed of:
b: where any asset to which this section relates has been sold or otherwise disposed of, not being a disposition in accordance with a relationship agreement 1994 No 164 s FC 5 Subsection (1)(b)(ii) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (3)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FC 6: Effect of specified lease on lessor and lessee
1: This section applies notwithstanding anything in this Act.
2: The leasing of any personal property lease asset under any specified lease is deemed to be a sale of that asset, made at the commencement of the term of the lease, by the lessor to the lessee, and the lessee is deemed to have incurred, pursuant to that sale, capital expenditure of an amount equal to the cost price of that asset.
3: The lessor in any specified lease is deemed to have advanced to the lessee in that specified lease a loan of an amount equal to the cost price of the personal property lease asset and the lessee is deemed to have applied that loan in the financing of the acquisition of that asset.
4: In any income year in which the lessor leases, under a specified lease, any personal property lease asset to any lessee, the lessor is denied a deduction for an amount of depreciation loss in respect of that asset.
5: On the expiry of the term of the lease, where the personal property lease asset is not purchased by the lessee under the terms of that lease or on the exercise of any option under that lease, the asset is deemed to have been sold on the expiry of the term of the lease to the lessor for—
a: an amount equal to the guaranteed residual value (if any) specified, in respect of the asset, in the specified lease; or
b: where no guaranteed residual value is so specified, no consideration.
6: In any case where a specified lease is terminated before the expiry of the term of the lease (whether by cancellation, surrender, or otherwise),—
a: the personal property lease asset in relation to that lease is deemed to be sold, on the date of that termination, to the lessor by the lessee at a price equal to the amount by which the amount of the outstanding balance (at the time of that termination) of any loan advanced by the lessor to the lessee exceeds the amount or the sum of the amounts payable by the lessee to the lessor in consideration for the release by the lessor of the lessee from the obligations of the lessee under the lease: provided that where, in relation to the amount of that outstanding balance and to the amount or the sum of the amounts payable by the lessee to the lessor, no such excess arises, that asset is deemed to have been so sold for no consideration:
b: where the value of the consideration payable by the lessee to the lessor in respect of that termination exceeds the amount of the outstanding balance (at the time of that termination) of any loan advanced by the lessor to the lessee, an amount equal to the amount of that excess is deemed to be income derived by the lessor in the income year in which that lease is terminated.
7: Where on or after the expiry of the term of the lease in relation to any specified lease the personal property lease asset in relation to that lease is sold, assigned, or leased under a specified lease by the lessor to another person and the value of the consideration in respect of that sale, or that assignment, or that lease—
a: exceeds the amount determined, in respect of that first-mentioned specified lease, under subsection (5), that amount so determined is increased by such further amount as is equal to such part (if any) of the excess as is paid by the lessor to the lessee:
b: is less than the amount determined, in respect of that first-mentioned specified lease, under subsection (5)(a) and the lessee is required to make a further payment to the lessor equal to the difference between the guaranteed residual value in relation to that lease value and that value of that consideration, that amount so determined is reduced by the amount of that further payment: provided that in any case where the value of the consideration in respect of that sale, or that assignment, or that lease exceeds the amount determined under subsection (5), such part (if any) of that excess as is not paid to the lessee is deemed to be income derived by the lessor in the income year in which that term of the lease expires.
8: In any case where the lessee in any specified lease, or any other person where that other person and that lessee are associated persons, at any time purchased or otherwise acquired that personal property lease asset and sold or otherwise disposed of that asset and the value of the consideration for that sale or other disposal exceeds the value of the consideration for which the lessee or the other person purchased or otherwise acquired it, an amount equal to that excess is income derived by the lessee in the income year in which the asset is sold or otherwise disposed of. 1994 No 164 s FC 6
FC 7: Income of lessor under specified lease
1: For the purposes of this Act, the income of any lessor derived under any specified lease is deemed to be interest.
2: The amount of interest so derived by any lessor is deemed to be,—
a: during the term of the lease, derived during the initial period and each instalment period, an amount that either—
i: is calculated, on the outstanding balance in relation to that initial period and each instalment period, at such a rate and in such a manner that the aggregate of all of the amounts so calculated is equal to the amount first mentioned in paragraph (b); or
ii: is calculated, in relation to that initial period and to each instalment period, in accordance with such other method commonly applied in commercial usage as, having regard to the term of the lease and to the frequency of the personal property lease payments, results in the allocation to that initial period and to each instalment period of an amount that is fair and reasonable and results in the sum of all such amounts so allocated being equal to the amount first mentioned in paragraph (b):
b: in relation to the term of the lease, such amount as is equal to the sum of the amounts of the personal property lease payments in relation to the specified lease and the amount of the guaranteed residual value (if any) in relation to the specified lease, reduced by the cost price of the personal property lease asset.
3: The interest so derived by any lessor is, in relation to any income year, deemed to be an amount equal to the sum of such of the amounts (being amounts calculated in accordance with subsection (2)(a)) as are calculated in relation to the initial period (if any) and to each instalment period that ends in that income year. 1994 No 164 s FC 7
FC 8: Deduction to lessee under specified lease
No deduction is allowed for any expenditure incurred by the lessee under a specified lease except to the extent that the expenditure—
a: would be allowed as a deduction to the lessee under section BD 2
b: does not exceed the sum of such of the amounts (being amounts calculated in accordance with section FC 7(2)(a) 1994 No 164 s FC 8 Finance leases
FC 8A: Lease of personal property lease asset treated as sale
1: The leasing of a personal property lease asset under a finance lease is treated as a sale of the asset from the lessor to the lessee on the date that the lease starts, and—
a: the lessor is treated as giving the lessee a loan for the asset; and
b: the lessee is treated as using the loan to purchase the asset.
2: For the lessor, the loan's value is the lessor's disposition value.
3: For the lessee, the loan's value is the lessee's acquisition cost. 1994 No 164 s FC 8A
FC 8B: Rules for personal property lease asset during term of finance lease
1: A lessor is denied a deduction for an amount of depreciation loss for a personal property lease asset in a tax year or a part of a tax year (as the case may be) in which the lessor leases the asset under a finance lease.
2: If the lessee acquires ownership of the personal property lease asset by the date on which the term of the lease section FC 8A
3: Despite section EE 38 by the date on which the term of the lease on which
a: the guaranteed residual value; or
b: no consideration, if there is no guaranteed residual value. 1994 No 164 s FC 8B Subsection (2) amended 1 October 2005 section 198(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting by the date on which the lease term ends on the date that the term of the lease ends or terminates Subsection (2) amended 1 October 2005 section 51(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting term of the lease lease term Subsection (3) amended 1 October 2005 section 198(2)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting by the date on which the lease term ends at the end of the term of the lease Subsection (3) amended 1 October 2005 section 198(2)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting on which that Subsection (3) amended 1 October 2005 section 51(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting term of the lease lease term
FC 8C: Termination of finance lease
1: Despite section EE 38 1994 No 164 s FC 8C
FC 8D: Lessor's use of personal property lease asset after finance lease ends
1: If, on or after the date the term of the lease ends, the personal property lease asset is sold, assigned, or leased by the lessor to another person under another finance lease, and the consideration for the sale, assignment, or lease—
a: is more than the amount determined under section FC 8B(3) section FC 8B(3)
b: is less than the amount determined under section FC 8B(3)(a)
2: If subsection (1)(a) applies, any excess that is not paid by the lessor to the lessee is income derived by the lessor in the tax year in which the original term of the lease ends. 1994 No 164 s FC 8D
FC 8E: Purchase and sale of personal property lease asset by lessee or associated person
If the lessee, or a person who is associated with the lessee, purchases or acquires a personal property lease asset that has been subject to a finance lease and sells or disposes of it for more than the consideration given for the purchase or acquisition, the difference is income of the lessee in the tax year in which the lessee or the person who is associated with the lessee sells the asset. 1994 No 164 s FC 8E
FC 8F: Lessor's income
Income derived by a lessor from the loan under a finance lease is treated as interest. 1994 No 164 s FC 8F
FC 8G: Deduction to lessee
A lessee is denied a deduction for expenditure incurred under a finance lease in a tax year, except to the extent that the lessee would be allowed a deduction for the expenditure under section BD 2 1994 No 164 s FC 8G
FC 8H: Adjustment required if lease becomes finance lease
1: A lessor and a lessee must make an adjustment under this section if—
a: the lease is a consecutive or a successive lease—
i: that is deemed to be 1 lease under the definition of lease
ii: with a term of the lease that the lessor and lessee do not contemplate, at the start of the term, will be more than 75% of the personal property lease asset's estimated useful life; and
iii: with a term of the lease that is more than 75% of the asset's estimated useful life:
b: the lease is an operating lease that becomes a finance lease under paragraph (c) of the definition of finance lease
2: The lessor and lessee must each—
a: calculate an adjustment for the lease; and
b: include the adjustment in a return of income for the tax year corresponding to the income year in which the lease becomes a finance lease.
3: The amount of the adjustment is calculated in relation to the period described in subsection (5) using the formula— finance income - finance expenditure - unadjusted income + unadjusted expenditure.
4: In the formula—
a: finance income
b: finance expenditure
c: unadjusted income
d: unadjusted expenditure
5: The period begins with the start of the term of the lease and ends with the end of the income year in which the lease becomes a finance lease.
6: If the adjustment is positive, the amount is income of the lessor or lessee in the income year in which the lease becomes a finance lease.
7: If the adjustment is negative, the amount is expenditure incurred by the lessor or lessee in the income year in which the lease becomes a finance lease. Section FC 8H substituted 19 December 2007 section 101(1) Taxation (Business Taxation and Remedial Matters) Act 2007
FC 8I: Adjustment required for certain operating leases entered before 20 June 2007
1: A lessor must make an adjustment under this section if the lease is an operating lease—
a: entered before 20 June 2007; and
b: that is or is part of an arrangement meeting on 20 June 2007 the requirements of paragraph (c)(i) to (iii) of the definition of finance lease
c: with a term of the lease ending after the end of the income year including 20 June 2007; and
d: that does not meet the requirements of section FC 8H(1)(a)
2: The lessor must—
a: calculate an adjustment for the lease asset; and
b: include the adjustment in a return of income for the tax year corresponding to the income year after the income year including 20 June 2007.
3: The amount of the adjustment is calculated using the formula— The following table is small in size and contains a formula. total depreciation losses 6.
4: In the formula, total depreciation losses subsection (5)
5: The period begins with the start of the term of the lease and ends with the end of the income year including 20 June 2007.
6: The adjustment is income under the lease of the lessor in the income year after the income year including 20 June 2007.
7: The adjusted tax value of the lease asset at the beginning of the income year after the income year including 20 June 2007 is the total of the adjustment and the adjusted tax value that the lease asset would have in the absence of this section.
8: For an income year beginning after 20 June 2007 in which the lease is an operating lease, the depreciation loss allowed for the lease asset other than under section EE 41(2) Section FC 8I substituted 19 December 2007 section 101(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Hire purchase
FC 9: Purpose
This section and section FC 10 1994 No 164 s FC 9
FC 10: Taxation of hire purchase agreements
1: For the purposes of this Act, except subsections (2), (3), and (6) and section FC 9
a: the lessor is deemed to have sold the hire purchase asset at the commencement of the hire purchase agreement for an amount equal to the lessor's disposition value for the hire purchase asset; and
b: the lessee is deemed to have purchased the hire purchase asset at the commencement of the hire purchase agreement for an amount equal to the lessee's acquisition cost for the hire purchase asset; and
c: the lessee, but no other person, is allowed deductions for amounts of depreciation loss of the hire purchase asset attributable to the period until the hire purchase agreement is terminated.
2: Subject to subsections (3) and (4), for the purposes of this Act, if on or after the termination or expiry of a hire purchase agreement the lessee, or any other person if that person and the lessee are associated persons, does not acquire ownership of the hire purchase asset the subject of the hire purchase agreement,—
a: the lessor is deemed to have acquired ownership of the hire purchase asset from the lessee for an amount equal to the lessor's outstanding balance in relation to the hire purchase agreement; and
b: the lessee is deemed to have disposed of ownership of the hire purchase asset to the lessor for an amount equal to the lessee's outstanding balance in relation to the hire purchase agreement— on the date of the termination or expiry of the hire purchase agreement.
3: If the lessor is a cash basis person, the amount referred to in subsection (2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— accrual income – income where— The following table is small in size and contains a formula. accrual income is the amount of income that would have been derived under 1 of the spreading methods for the hire purchase payments if— (a) the lessor were not a cash basis person; and (b) section EW 31 did not apply to the lessor and the hire purchase agreement in the income year that the hire purchase agreement terminates or expires income is the income of the lessor from hire purchase payments paid.
4: If the lessee is a cash basis person, the amount referred to in subsection (2) is reduced by an amount for accrued but unpaid interest on the hire purchase agreement calculated using the formula— expenditure under the financial arrangements rules – expenditure where— The following table is small in size and contains a formula. expenditure under the financial arrangements rules is the amount of expenditure that would have been incurred under 1 of the spreading methods for the hire purchase payments if— (a) the lessee were not a cash basis person; and (b) section EW 31 did not apply to the lessee and the hire purchase agreement in the income year that the hire purchase agreement terminates or expires expenditure is the expenditure incurred by the lessee from hire purchase payments paid.
5: For the avoidance of doubt, if a lessor is deemed to acquire ownership of a hire purchase asset the subject of a hire purchase agreement from a lessee under subsection (2),—
a: the amount calculated in accordance with subsection (2) and, if applicable, subsection (3) or (4) is taken into account as consideration paid by the lessee to the lessor in relation to the hire purchase agreement for the purposes of section EW 31 section EW 31
b: the costs and expenses referred to in section 31(2)(c)
c: the lessor is denied a deduction under section DB 11 DB 23
i: as the acquisition price of trading stock of the lessor; or
ii: for the purpose of calculating the net income of the lessor for any income year, in any way not referred to in subparagraph (i); and
d: any amount paid at any time in an income year subsequent to the income year in which a hire purchase agreement is terminated or expires on account of any amount that, under the terms of the hire purchase agreement, the lessee or any person associated with the lessee is liable to pay to the lessor or any person associated with the lessor is income of the lessor in the income year it is received by the lessor or associate of the lessor; and
e: any amount—
i: paid at any time in an income year subsequent to the income year in which a hire purchase agreement is terminated or expires by the lessor or any person associated with the lessor to the lessee or any person associated with the lessee under the hire purchase agreement and consequent upon the termination or expiry of the hire purchase agreement; and
ii: that was not taken into account in the computation of the lessor's outstanding balance in relation to that hire purchase agreement— is, in the income year it is paid, deemed to be expenditure incurred by the lessor; and
f: any amount—
i: paid at any time in an income year subsequent to the income year in which a hire purchase agreement is terminated or expires by the lessor or any person associated with the lessor to the lessee or any person associated with the lessee under the hire purchase agreement and consequent upon the termination or expiry of the hire purchase agreement; and
ii: that was not taken into account in the computation of the lessee's outstanding balance in relation to that hire purchase agreement— is, in the income year it is paid, deemed to be income derived by the lessee if the lessee has been allowed a deduction in respect of the hire purchase asset that is the subject of the agreement.
6: For the purposes of this Act, if a lessee acquires ownership of a hire purchase asset on the termination or expiration of a hire purchase agreement and the lessor has been deemed already to have disposed of that ownership under subsection (1), that acquisition does not constitute a further disposition of the hire purchase asset by the lessor or further acquisition of the hire purchase asset by the lessee.
6A: Income derived by a lessor from the loan under a hire purchase agreement is treated as interest.
7: Sections FC 5 FF 14
8: In this section, lessee's acquisition cost
a: the consideration provided to the lessee under the hire purchase agreement consideration
b: the amount of any expenditure or loss incurred by the lessee in preparing and installing the hire purchase asset for use (unless the lessee is allowed a deduction for such expenditure or loss, other than a deduction for an amount of depreciation loss). 1994 No 164 s FC 10 Subsection (8)(a) amended 1 October 2005 section 199 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting consideration provided to the lessee under the hire purchase agreement consideration paid to the lessee for the hire purchase agreement Non-resident general insurers
FC 13: Premiums derived by non-resident general insurers treated as being derived from New Zealand
1: A premium is treated as being derived from New Zealand, for the purposes of sections FC 14 FC 15
a: an insured person pays the premium to an insurer for insurance of any of the kinds described in subsections (2) to (4); and
b: the premium meets all 3 conditions in subsections (5) to (7); and
c: the premium is not excluded from the application of this section by subsection (8).
2: For the purposes of subsection (1)(a), the first kind of insurance is general insurance.
3: For the purposes of subsection (1)(a), the second kind of insurance is a guarantee against risk given by an insurer to an insured person, if—
a: the insured person is liable to pay a premium to the insurer for the guarantee; and
b: the insured person is associated with the insurer.
4: For the purposes of subsection (1)(a), the third kind of insurance is a guarantee against risk given by an insurer to an insured person, if—
a: the insured person is liable to pay a premium to the insurer for the guarantee; and
b: the risk arises from money lent to the insured person; and
c: the amounts the insured person is liable to pay for the money are significantly less than they would otherwise have been because of the guarantee; and
d: the effect of the guarantee on the amounts payable is more than an incidental effect, or comes about as more than an incidental purpose, of the insurer's giving the guarantee.
5: For the purposes of subsection (1)(b), the premium is derived by an insurer who is not resident in New Zealand when the insurer derives it.
6: For the purposes of subsection (1)(b), the premium is not attributable to a fixed establishment of the insurer in New Zealand through which the insurer carries on business in New Zealand.
7: For the purposes of subsection (1)(b), at least 1 of the following applies to the premium:
a: the insured person from whom the premium is derived is resident in New Zealand; or
b: the insurance contract from which the premium is derived is offered or entered into in New Zealand; or
c: the insurance contract from which the premium is derived is entered into for the purposes of a business carried on by the insured person in New Zealand through a fixed establishment in New Zealand.
8: For the purposes of subsection (1)(c), the premium is excluded from the application of this section if—
a: all risk covered by the premium is located outside New Zealand; and
b: the insurer deriving the premium is not associated with the insured person.
9: In this section, and sections FC 14 to FC 17 insurance insured person
a: in relation to insurance of the kind described in subsection (2), a person who is liable to pay a premium to an insurer for the insurance and is entitled by the payment of the premium to make a claim against the insurer:
b: in relation to insurance of the kinds described in subsections (3) and (4), a person who is liable to pay a premium to an insurer for the guarantee, whether or not the payment of the premium entitles the person to make a claim against the insurer insurer
a: in relation to insurance of the kind described in subsection (2), a person who provides the insurance and to whom an insured person is liable to pay a premium:
b: in relation to insurance of the kinds described in subsections (3) and (4), a person who provides the guarantee and to whom an insured person is liable to pay a premium premium
a: in relation to insurance of the kind described in subsection (2), an amount payable in respect of a contract of insurance entered by an insured person:
b: in relation to insurance of the kinds described in subsections (3) and (4), an amount payable in respect of a guarantee of a contract of insurance entered by an insured person.
c: 1994 No 164 ss CN 4(1)(b), (c), OB 1, OE 4(1)(o) Subsection (9) premium substituted 1 October 2005 section 200 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (9) premium repealed 1 October 2005 section 200 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
FC 14: Non-resident general insurers' income
1: This section applies when an insurer derives a premium that, under section FC 13
2: Ten percent of the gross premium derived by the insurer is income of the insurer. 1994 No 164 s CN 4(1)
FC 15: Non-resident general insurers' expenditure
1: This section applies when an insurer derives income under section FC 14
2: The insurer is denied a deduction in relation to an amount to which this section applies.
3: This section overrides the general permission. 1994 No 164 s CN 4(2)
FC 16: Liability to make return and pay income tax
1: This section applies when an insurer derives income under section FC 14
2: To the extent to which the insurer makes a return of income and pays income tax on the income, no other person described in this section is liable to do so.
3: To the extent to which a person on behalf of the insurer, including a broker or other agent who pays the premium on behalf of another person, makes a return and pays income tax on the income, no agent described in any of subsections (4) to (6) is liable to do so.
4: The person who is liable in the first place as an agent of the insurer to make a return of income and pay income tax on the income is—
a: a person, including a broker or agent, who pays the premium to the insurer or to some other person not carrying on a business through a fixed establishment in New Zealand; or
b: a person described in subsection (7)(b).
5: The person who is liable in the second place as an agent of the insurer to make a return of income and pay income tax on the income is a person who pays the premium, whether or not through a broker or agent.
6: The person who is liable in the third place as an agent of the insurer to make a return of income and pay income tax on the income is the insured person.
7: When a bank or other body to whom any of section NF 9(1)(a) and (b)
a: the bank or other body is not an agent of the insurer; and
b: the person who provides the bank or other body with the funds from which the premium is paid is an agent of the insurer. 1994 No 164 s CN 4(3)-(5) Subsection (7) amended 1 April 2005 section 105(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting section NF 9(1)(a) and (b) section NF 9(1)(a) to (c)
FC 17: Premiums paid to residents of Switzerland
1: This section applies when—
a: an insurer derives income under section FC 14
b: an agent of the insurer under section FC 16
c: the insurer or other person is treated as being resident in Switzerland for the purposes of a double tax agreement between the government of New Zealand and the government of Switzerland.
2: The agent must disclose details of the premium payment to the Commissioner in the manner, if any, required by the Commissioner. 1994 No 164 s CN 4(3A) The heading to section FC 17 was amended 1 April 2005 section 52(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by omitting the words and the Netherlands Subsection (1)(c) substituted 1 April 2005 section 52(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Non-resident shippers
FC 18: Non-resident shippers' income
1: This section applies when a ship that belongs to, or is chartered by, a non-resident person carries outside New Zealand cargo, mail, or passengers shipped or embarked in New Zealand. In this section, cargo, mail, or passengers shipped or embarked at a port in New Zealand for carriage outside New Zealand are treated as carried outside New Zealand from that port, even though the ship may call at another port in New Zealand before finally leaving New Zealand.
2: Five percent of the amount payable to the person for the carriage (whether it is payable inside or outside New Zealand) is treated as income of the person derived from New Zealand.
3: This section is subject to an exemption granted by the Commissioner under section FC 19 1994 No 164 s CN 1(1), (3)
FC 19: Non-resident shippers' excluded income
The Commissioner may determine that some or all of an amount that would otherwise be income of a non-resident person under section FC 18 1994 No 164 s CN 1(2)
FC 20: Non-resident shippers' expenditure
1: When a person who is a non-resident is treated by section FC 18
a: the person is denied a deduction in relation to an amount to which this section applies; and
b: the person has no amount of depreciation loss in relation to that income.
2: This section overrides the general permission. 1994 No 164 s CN 1(1A) Non-resident film renters
FC 21: Amounts derived by non-residents from renting films
1: Ten percent of the amounts derived from New Zealand by a non-resident person from the following activities is income of the non-resident person:
a: renting, exhibiting, or issuing a film, or making other arrangements for its exhibition:
b: selling or hiring film containers, cinematographic or photographic materials, or equipment or accessories relating to a film:
c: selling or hiring advertising materials relating to a film.
2: The rest of the amounts derived from activities in subsection (1) are exempt income of the non-resident person.
3: The non-resident person is denied a deduction in relation to an amount to which this section applies.
3B: If the non-resident person is required under an agreement with another non-resident ( person A
4: This section does not apply if the amounts derived by the nonresident person from activities described in subsection (1) are an insignificant proportion of the total amounts derived by them from any business.
5: This section overrides the general permission. 1994 No 164 s CN 2 Subsection (3B) inserted 1 April 2005 section 85(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (4) substituted 1 April 2005 section 85(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Transitional residents This heading was inserted 1 October 2005 section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 106(2)
FC 22: Tax treatment of foreign-sourced amounts derived by transitional resident
The intended effect of this section and sections FC 23 FC 24 Sections FC 22 to FC 24 inserted 1 October 2005 section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 106(2)
FC 23: General requirements for being transitional resident
A person satisfies the general requirements for being a transitional resident if—
a: the person is resident
b: for a continuous period (the non-residence period section OE 1(1)
i: did not satisfy the requirements of section OE 1(1)
ii: was not resident in New Zealand; and.
c: the person was not a transitional resident before the non-residence period; and
d: the person has not ceased to be a transitional resident after the end of the non-residence period. Sections FC 22 to FC 24 inserted 1 October 2005 section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 106(2) Paragraph (a) amended 1 October 2005 section 86(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting is resident has a permanent place of abode Paragraph (b) substituted 1 October 2005 section 86(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Paragraph (c) amended 1 October 2005 section 86(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting period; and period. Paragraph (d) inserted 1 October 2005 section 86(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
FC 24: Transitional resident
Meaning
1: A natural person is a transitional resident
a: satisfies at the time the general requirements of section FC 23
b: does not make an election under subsection (3) for the time. Period
2: The period for which a natural person may be a transitional resident—
a: begins from the first day of the residence required by section FC 23(a)
b: ends on the day that is the earlier of the following:
i: the day before the person ceases to be a New Zealand resident:
ii: the last day of the 48th month after the earliest month in which the person meets the requirements of section OE 1(1) section FC 23(a) Election not to be transitional resident
3: A person who would otherwise be a transitional resident in an income year may choose irrevocably by a notice under subsection (4) or (6) not to be a transitional resident for a period—
a: beginning on or after the beginning of the income year; and
b: ending immediately before the person ceases to meet the requirements for being a transitional resident. Application for tax credit under subpart KD treated as election by person and by spouse or partner in certain circumstances
4: For a person who satisfies the requirements of subsection (5), an application under section 41 subpart KD
a: a notice of an election under subsection (3) by the person, if the person is eligible to be a transitional resident and has not made an election under subsection (3); and
b: a notice of an election under subsection (3) by any spouse, civil union partner or de facto partner of the person who is eligible to be a transitional resident and who has not made an election under subsection (3); and
c: for the period beginning with the first day of the period to which the application relates. Circumstances in which application treated as election
5: Subsection (4) applies to a person making an application under section 41
a: is eligible to receive a credit of tax under subpart KD
b: makes the application—
i: on or after 1 April 2007; or
ii: before 1 April 2007 and does not give to the Commissioner before 1 June 2007 a notice that the person does not wish the application to be treated as a notice of an election under subsection (3). Notice of election
6: A notice under this subsection of an election under subsection (3) by a person must be—
a: in a form acceptable to the Commissioner; and
b: received by the Commissioner on or before the latest of the following:
i: the date by which section 37
ii: the date by which section 37
iii: the date allowed by the Commissioner upon application by or on behalf of the person. Application for extension of time for notice
7: An application under subsection (6)(b)(iii) by a person, or by a tax agent for a person, for an extension of time to make an election is treated as if it were an application under section 37 Sections FC 22 to FC 24 inserted 1 October 2005 section 106(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 106(2) Section FC 24 substituted 1 October 2005 section 87(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 87(2)
FCB: Emigration of resident companies
Subpart FCB inserted 3 April 2006 section 107(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 107(2) section 107(2)(a)(i) Contents
FCB 1: Tax effects of company becoming non-resident to reflect tax effects of liquidation
1: This subpart applies to an emigrating company, which is a company that—
a: is a New Zealand resident; and
b: ceases to be a New Zealand resident.
2: The intended effect of this subpart and related provisions of the Act is that, for the purposes of the Act, the effects on an emigrating company and its shareholders when the emigrating company becomes a non-resident reflect the effects that would have resulted if,—
a: immediately before the emigration time,—
i: the emigrating company disposed of its property at market value; and
ii: the emigrating company went into liquidation; and
iii: the amount available for distribution in the liquidation were distributed as dividends to the shareholders of the emigrating company; and
b: at the emigration time, the emigrating company were reformed as a foreign company that—
i: had the same ownership and business activities as those of the emigrating company immediately before the emigration time; and
ii: had acquired at market value the property of the emigrating company immediately before the emigration time. Subpart FCB inserted 3 April 2006 section 107(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 107(2) section 107(2)(a)(i)
FCB 2: Emigrating company treated as paying distribution to shareholders
Immediately before the emigration time for an emigrating company,—
a: the emigrating company is treated as paying, as dividends, a distribution in money to shareholders of the amount that would be available for distribution to the shareholders if, immediately before the emigration time, the emigrating company—
i: disposed of its property at market value; and
ii: went into liquidation; and
b: each shareholder in the emigrating company is treated as being paid by the emigrating company, as a dividend, a distribution in money of the amount to which the shareholder would be entitled in such a liquidation. Subpart FCB inserted 3 April 2006 section 107(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 107(2) section 107(2)(a)(i) and (ii)
FCB 3: Emigrating company treated as disposing of property and immediately reacquiring property
An emigrating company is treated as, immediately before the emigration time for the emigrating company,—
a: disposing of the property of the emigrating company to another person for consideration equal to the market value of the property at the emigration time; and
b: acquiring the property referred to in paragraph (a) from the other person for consideration equal to the amount referred to in paragraph (a). Subpart FCB inserted 3 April 2006 section 107(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 107(2) section 107(2)(a)(i)
FD: Consolidation of companies
Contents
FD 1: Purpose and application of consolidated grouping provisions
Subject to the express provisions of the consolidation rules, those rules are intended to result in the provisions of this Act applying, except where otherwise expressly provided or where the context otherwise requires, to 2 or more companies which are a wholly-owned group of companies that elect to be treated as a consolidated group of companies as if those companies were a single company, and this Act must be read accordingly. 1994 No 164 s FD 1
FD 2: Interpretation
1: For the purposes of the consolidation rules, any reference in those rules to—
a: income, assessable income, net income, or taxable income of a consolidated group; or
b: an attributed CFC net loss or a FIF net loss, or a net loss of a consolidated group; or
c: tax payable by a consolidated group; or
d: a tax credit available to a consolidated group— is, unless the context otherwise requires, interpreted as a reference to the income, assessable income, net income, taxable income, attributed CFC net loss, FIF net loss, net loss, tax payable, or tax credit available determined in respect of that consolidated group on a single assessment basis in accordance with those rules as if the group were 1 company.
2: For the purposes of the application of those provisions of the consolidation rules that require provisions of this Act to apply to a consolidated group as if it were a single company, the shares or options over shares in respect of that single company are deemed to comprise all shares or options over shares in respect of companies which were at the relevant time members of that consolidated group.
3: Notwithstanding any provisions of the consolidation rules other than any of those provisions that expressly otherwise provide, dividends paid by 1 member of a consolidated group to another member of the group continue to be taken into account for the purposes of—
a: the imputation rules; and
b: the dividend withholding payment rules; and
c: subpart MF
d: sections GC 24 GC 26 HB 2(1)(a)(vi) ME 10 to ME 14 MG 13 to MG 16 NH 5 NH 6
e: sections 73 74
4: For the purposes of sections GC 24 ME 10 to ME 14 ME 25 to ME 28 MF 7 to MF 10 MG 13 to MG 16 NH 5 NH 6 sections 73 74 sections ME 2 MG 1 OB 6(1)(f)
a: to the imputation rules were references to sections ME 10 to ME 14
b: to the dividend withholding payment rules were references to sections MG 13 to MG 16 NH 5 NH 6 1994 No 164 s FD 2
FD 3: Companies which may constitute consolidated group
For the purposes of this Act, any 2 or more eligible companies are entitled to be members of the same consolidated group at any time only where—
a: at that time those companies are a wholly-owned group of companies; and
b: if at that time any of the companies has a non-standard balance date, at that time all the companies have the same non-standard balance date; and
c: if at that time any of the companies is a qualifying company, at that time all the companies are qualifying companies; and
d: if at that time any of the companies is a mining company, at that time all the companies are mining companies; and
e: at that time, no shares in those companies have—
i: been subject to any arrangement or series of related or connected arrangements; or
ii: had any rights attaching to them extinguished or altered, directly or indirectly, by any means whatever,— in either case for the purpose, or for purposes including the purpose, of enabling the companies to be entitled to be members of the same consolidated group so as to defeat the intent and application of the consolidation rules. 1994 No 164 s FD 3
FD 4: Formation of consolidated group
1: Any 2 or more eligible companies that are entitled to be members of the same consolidated group may elect to form and be treated as a consolidated group for the purposes of this Act by giving notice to the Commissioner in such form as the Commissioner may approve.
2: Any notice given under subsection (1) must—
a: nominate 1 of the companies as agent of the consolidated group for the purposes of this Act; and
b: contain an agreement by each company to be jointly and severally liable with other members of the consolidated group for any income tax payable by the consolidated group (which agreement may be expressed as subject to, or in terms of an approval given under, section HB 1(2) to (5)
3: Where any 2 or more companies have elected under this section to form a consolidated group, those companies are treated for the purposes of this Act as members of a consolidated group from—
a: the beginning of the income year immediately succeeding that in which the notice is received by the Commissioner; or
b: if the notice—
i: is received by the Commissioner within 63 working days after the beginning of an income year, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies for that income year,— the beginning of that income year.
4: Notwithstanding subsection (3), where—
a: any 2 or more companies that have elected under this section to form a consolidated group are each incorporated or otherwise formed during the same income year; and
b: the notice of election—
i: is received by the Commissioner within 63 working days after the latest of those incorporations or other formations, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies for the income year in which the incorporations or other formations occurred,— those companies are treated for the purposes of this Act as members of a consolidated group from the first day of that income year.
5: Notwithstanding subsection (3), where—
a: any 2 or more companies have in any income year elected under this section to form a consolidated group during that income year; and
b: the notice of election—
i: is received by the Commissioner within 63 working days after the date the companies first became entitled to so elect, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies from that date of first entitlement,— those companies are treated for the purposes of this Act as members of a consolidated group from that date of first entitlement provided that adequate part income year accounts in respect of each company's net income or net loss for each relevant part income year are furnished to the Commissioner in accordance with section FD 9
6: The Commissioner may in any particular case extend the period of 63 working days specified in any of subsections (3)(b), (4)(b), and (5)(b) where the relevant company or companies satisfy the Commissioner that in all the circumstances the notice of election could not reasonably be expected to be, or to have been, furnished within that period.
7: Nothing in this section applies to treat as members of a consolidated group any 2 companies that have made an election under this section, unless,—
a: in the case of companies to which subsection (3)(a) would apply, the companies remain eligible companies entitled to be members of the same consolidated group at the beginning of the income year referred to in that provision; or
b: in the case of companies to which any of subsections (3)(b), (4), and (5) would apply, the companies (once in existence) are eligible companies entitled to be members of the same consolidated group throughout the period that—
i: commences with the date on which they would, under the relevant one of those provisions, be treated as being members of a consolidated group; and
ii: ends with the date on which the notice of election is received by the Commissioner.
8: Subsection (5) does not apply where it can reasonably be concluded that any arrangement has been entered into for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules. 1994 No 164 s FD 4
FD 5: Company may not be member of more than 1 consolidated group
1: No company may at any time be a member of more than 1 consolidated group.
2: Where any company would, but for this section, be treated at any time as being a member of more than 1 consolidated group, either—
a: the company is treated as being at that time a member only of the group of which it was first a member; or
b: where paragraph (a) does not apply by virtue of a company becoming a member of 2 or more groups simultaneously, the company is treated as being a member only of such one of the consolidated groups as the Commissioner may specify having regard to all the circumstances. 1994 No 164 s FD 5
FD 6: Nominated companies
1: The nominated company for a consolidated group at any time is treated for the purposes of this Act and the Tax Administration Act 1994
2: No company is at any time a nominated company for a consolidated group unless, at that time, that company is a member of that consolidated group.
3: Where any company which is at any time a nominated company for a consolidated group gives notice to the Commissioner in such form as the Commissioner may approve that it is to cease to be the agent for that group and that another company is to become the agent for that group, the notifying company ceases to be the agent for the group, and the other company becomes the agent for the group, from the date of receipt by the Commissioner of the notice or from such later date as may be specified in the notice. 1994 No 164 s FD 6
FD 7: Joining existing consolidated group
1: Where at any time—
a: any 2 or more companies have formed a consolidated group; and
b: at least 1 company remains a member of that consolidated group,— any other eligible company which is at that time entitled to be a member of the same consolidated group may elect to join and be treated as a member of that consolidated group by giving notice to the Commissioner in such form as the Commissioner may allow.
2: Any such notice must contain the agreement of the company to be jointly and severally liable for any income tax payable by the consolidated group (which agreement may be expressed as subject to, or in terms of an approval given under, section HB 1(2) to (5)
3: A company that has elected to join and be treated as a member of a consolidated group is treated for the purposes of this Act as a member of the consolidated group from—
a: the beginning of the income year immediately succeeding the income year in which the notice is received by the Commissioner; or
b: if the notice—
i: is received by the Commissioner within 63 working days after the beginning of an income year, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies for that income year,— the beginning of that income year.
4: Notwithstanding subsection (3), where—
a: an eligible company makes an election to join and be treated as a member of a consolidated group in the income year in which that company is incorporated or otherwise formed; and
b: the notice of election—
i: is received by the Commissioner within 63 working days after the date of that incorporation or other formation, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies for the income year in which the incorporation or other formation occurs,— that company is treated for the purposes of this Act as a member of the consolidated group from the first day of that income year.
5: Notwithstanding subsection (3), where—
a: a company first becomes entitled to be a member of a specified consolidated group at any time during an income year; and
b: the notice of election to join the group—
i: is received by the Commissioner within 63 working days after that date of first entitlement, or within such further period as the Commissioner may allow under subsection (6); and
ii: specifies that the election applies from that date of first entitlement,— the company is treated for the purposes of this Act as a member of the consolidated group from that date of first entitlement provided that adequate part income year accounts in respect of the company's net income or net loss for each relevant part income year are furnished to the Commissioner in accordance with section FD 9
6: The Commissioner may in any particular case extend the period of 63 working days specified in any of subsections (3)(b), (4)(b), and (5)(b) where the company satisfies the Commissioner that in all the circumstances the notice of election could not reasonably be expected to be, or to have been, furnished within that period.
7: Nothing in this section applies to treat a company as a member of a consolidated group, unless,—
a: in the case of a company to which subsection (3)(a) would apply,—
i: the company remains an eligible company entitled to be a member of the consolidated group at the beginning of the income year referred to in that provision; and
ii: at least 1 other company remains a member of the consolidated group until the beginning of that income year; or
b: in the case of a company to which any of subsections (3)(b), (4), and (5) would apply, the company is an eligible company entitled to be a member of the consolidated group throughout the period that—
i: commences with the date on which the company would, under the relevant one of those subsections, be treated as being a member of the consolidated group; and
ii: ends with the date on which the company's notice of election to join the group is received by the Commissioner.
8: Subsection (5) does not apply where it can reasonably be concluded that any arrangement has been entered into for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules. 1994 No 164 s FD 7
FD 8: Leaving consolidated group
1: A company that is a member of a consolidated group ceases to be a member of that group if—
a: the company so elects, by notice to the Commissioner in such form as the Commissioner may approve; or
b: the company ceases to be an eligible company; or
c: the company, not being the nominated company for the consolidated group, ceases to be entitled to be a member of the same consolidated group as the nominated company; or
d: the company is a member of a consolidated group that has ceased to have a nominated company.
2: A company that elects to cease to be a member of a consolidated group is treated as having ceased to be a member of the group with effect from—
a: the beginning of the income year in which the notice of election is received by the Commissioner (or, where appropriate, such later time as the company was first treated as being a member of the group); or
b: if the company so specifies in the notice of election, the beginning of the income year immediately succeeding that in which the notice was furnished to the Commissioner (or, where appropriate, such earlier time as the company is treated under this section as having ceased to be a member of the group).
3: A company that ceases to be an eligible company is treated as having ceased to be a member of the consolidated group with effect from—
a: the beginning of the income year during which the company ceased to be an eligible company (or, where appropriate, such later time as the company was first treated as being a member of the group); or
b: if subsection (6) applies, the beginning of the day on which the company ceased to be an eligible company.
4: Where any company, not being the nominated company for the consolidated group, ceases to be entitled to be a member of the same consolidated group as the nominated company, the company is treated as having ceased to be a member of the group with effect from—
a: the beginning of the income year during which the cessation occurred (or, where appropriate, such later time as the company was first treated as being a member of the group); or
b: if subsection (6) applies in respect of the company, the beginning of the day on which the cessation of entitlement occurred.
5: Where at any time during an income year there is no nominated company for a consolidated group, all the companies in the group are treated as having ceased to be members of the group with effect from the beginning of the income year: provided that neither this subsection nor subsection (1)(d) applies where—
a: the nominated company ceases to be such by reason of being liquidated; and
b: within 20 working days after that liquidation, or within such further period as the Commissioner may allow, the other companies in the group have selected another nominated company and notified the Commissioner accordingly (in which case the selected company is treated as the nominated company with effect from the time of the liquidation).
6: Notwithstanding subsections (3) and (4), where—
a: a company which has at any time been a member of a consolidated group first ceases—
i: to be an eligible company; or
ii: to be entitled to be a member of the same consolidated group as the nominated company of the group— at any time during an income year (such time being referred to in this subsection as the time of cessation); and
b: the company elects, by notice to the Commissioner in such form as the Commissioner may allow, that this subsection applies with respect to the company, the consolidated group, and the income year; and
c: the notice is received by the Commissioner within 20 working days after the time of cessation, or within such further period as the Commissioner may allow as reasonable in all the circumstances,— the company is treated for the purposes of this Act as ceasing to be a member of the consolidated group with effect from the time of cessation provided that adequate part income year accounts in respect of the company's net income or net loss for each relevant part income year are furnished to the Commissioner in accordance with section FD 9
7: Subsection (6) does not apply where it can reasonably be concluded that any arrangement has been entered into for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of that subsection so as to defeat the intent and application of the consolidation rules.
8: Where a company ceases to be a member of a consolidated group by virtue only of being liquidated,—
a: nothing in subsections (2) to (4) applies to treat the company as having so ceased to be a member with effect from the beginning of the income year in which the liquidation occurred; and
b: nothing in subsection (6) applies to require the furnishing of adequate part income year accounts in relation to the company.
9: If at any time a consolidated group ceases to have any member company or companies, that consolidated group is treated as having ceased to exist. 1994 No 164 s FD 8
FD 9: Part income year accounts and part tax year income allocation
1: Where a company joins or leaves a consolidated group part way through an income year, or is or has been a member of a consolidated group that is formed or ceases to exist part way through an income year, any part income year accounts with respect to the company required to be furnished by any of sections FD 4(5) FD 7(5) FD 8(6)
a: be incorporated in the return of income for the income year furnished to the Commissioner—
i: by the company, where such part income year accounts are for a period in which the company is not a member of any consolidated group; or
ii: by the consolidated group, where such part income year accounts are for a period in which the company is a member of the consolidated group; or
iii: by any other consolidated group, where such part income year accounts are for a period in which the company is a member of another consolidated group; and
b: sufficiently detail in accordance with subsection (2) the annual gross income and annual total deduction (and, where required, the income tax liability) of the company in respect of any relevant part of the income year.
2: The annual gross income, annual total deduction, income tax liability, or net loss of a company attributable to a part of an income year referred to in subsection (1) are determined, to the extent fair and reasonable and with any necessary modifications, by treating that part income year as a complete income year for the purposes of applying the provisions of this Act. 1994 No 164 s FD 9
FD 10: Special provisions relating to dispositions of property
1: Where any company (in this subsection referred to as the transferor transferee
a: depreciating property of the transferor; or
b: any property (being neither trading stock for either the transferor or the transferee nor a financial arrangement to which the financial arrangements rules apply) where, if the transferor or transferee were to dispose of that property, the consideration would (but for this section or section HB 2 then, for the purpose of determining income and deductions, in respect of any subsequent disposal of the property or in respect of depreciation or amortisation of the acquisition cost of the property under any of sections EE 1 EZ 5 EZ 6
c: the transferee is deemed to have acquired the property on the day on which it was acquired by the transferor; and
d: the transferee is, where the transferor entered into a binding contract to purchase or construct any depreciable property before 16 December 1991, deemed to have entered into that binding contract on the same date as the transferor; and
e: the transferee is deemed to have acquired the property from the transferor for consideration equal to,—
i: except where the property forms all or part of a pool of property that is depreciated by the transferor in accordance with sections EE 20 to EE 24 sections EE 1 EZ 5 EZ 6
A: the original purchase price of the property; and
B: any expenditure incurred in purchasing or improving the property; and
C: any expenditure incurred in securing or improving the legal rights of the transferor in relation to the property:
ii: where the property forms the whole of a pool of property that is depreciated by the transferor in accordance with sections EE 20 to EE 24
iii: where the property forms part only of any such pool, the lesser of—
A: the market value of the property disposed of to the transferee; and
B: the adjusted tax value of the whole of the pool immediately before the property was disposed of to the transferee.
2: Where any company (in this subsection referred to as the transferor) disposes of any depreciating property (other than pooled property) to another company (in this subsection referred to as the transferee) that is a member of the same consolidated group when the disposition takes place, for the purposes of sections EE 1 EE 39 to EE 44 EZ 5 EZ 6 section EZ 5 EZ 6
3: Where and to the extent that in any income year—
a: a company (in this subsection referred to as the transferor
i: disposes of any land; or
ii: ceases to carry on a business; and
b: but for this subsection, the disposal or cessation would prevent the transferor from being allowed a deduction under any of sections DO 4 DO 4B DO 4C DO 6 DP 3
c: after the disposal or cessation and for the remainder of the income year—
i: the land is held; or
ii: the business is carried on— by another company which is a member of the same consolidated group as the transferor for the whole of the income year,— the transferor is not prevented by the disposal or cessation from being allowed such a deduction.
4: Despite sections EW 38 GD 11 transferor transferee
a: apply subsection (4A) if—
i: the financial arrangements rules apply to the financial arrangement; and
ii: the method of calculating income and expenditure under the financial arrangement remains the same despite the disposition; and
iii: the nominated company of the group so elects by filing the group's return of income for the income year; and
iv: the transferor and the transferee are members of the same consolidated group at all times in the income year; and
v: the transferor and the transferee are not entitled, under section IE 1 IF 1 section IG 6
b: in any other case, apply either subsection (4B) or (4C).
4A: In the income year in which the disposition occurs and in each subsequent income year,—
a: the transferor is treated as if it had never been a party to the financial arrangement prior to the disposition, and section EW 31
b: the transferee is treated as if it had—
i: entered into the financial arrangement on the same date and for the same amount of consideration as the transferor; and
ii: incurred all expenditure and derived all income incurred or derived by the transferor under the financial arrangement before the disposition; and
iii: included in its return of income the same amounts of expenditure and income under the financial arrangement as were included by the transferor.
4B: If the method of calculating the income or expenditure under the financial arrangement remains the same despite the disposition, the consideration for the disposition in the transferor's base price adjustment calculation is a fair and reasonable amount of the income or expenditure that the transferor would have derived or incurred in the income year of disposition had the disposition not taken place.
4C: In any other case, the consideration for the disposition is the market value of the financial arrangement on the date of disposition.
5: Where—
a: any company (in this subsection referred to as the transferor transferee
b: the nominated company has elected that this subsection applies, by notice to the Commissioner in such form as the Commissioner may approve given within the time within which the consolidated group is required to furnish a return of income for that income year or within such further time as the Commissioner may allow; and
ba: the property and its ownership is, at any time, able to be specifically identified,— then, for the purpose of calculation of the net income of the transferor and the transferee, the consideration for which the disposition has taken place is deemed to be,—
c: in any case where the trading stock was held by the transferor at the beginning of the income year, the value of that trading stock as at the beginning of the income year as determined in accordance with subpart EB; and
d: in any other case, the cost to the transferor of that trading stock.
6: For the purpose of bringing into account tax liabilities arising from dispositions of property within a consolidated group to the extent that they have not previously been taken into account by virtue of this section or section HB 2(1)
a: a company ceases to be a member of a consolidated group (other than by virtue only of being liquidated); and
b: the company holds any property (whether that property is held as a separate item of property or is part of some other property) which has at any time been the subject of a disposition between members of that consolidated group to which any of subsections (1), (2), (4)(a), (4)(b), and (5) has applied,— then, for the purposes of this Act, the company is deemed to have disposed of that item of property immediately prior to that time to a person not associated with the company and to have immediately thereafter reacquired it, in each case for a consideration equal to the market value of that property at that time.
7: For the purposes of subsection (6), where—
a: any property to which that subsection applies is, at the time of the disposition deemed to occur under that subsection, part of or absorbed into some other property; and
b: its market value at that time cannot separately be determined,— it is treated as if disposed of and reacquired for a consideration equal to its market value at the time of the disposition to which any of subsections (1), (2), (4)(a), (4)(b), and (5) has applied (or, if there has been more than 1 such disposition between members of the consolidated group, equal to its market value at the time of the latest in time of those dispositions at which its market value can separately be determined), and the treatment under this Act of that other property is adjusted accordingly.
8: Where and to the extent that—
a: any company (in this subsection referred to as the transferor related company
b: if that disposition were by way of sale, the consideration from the sale would be included in the transferor's income (not being income not taken into account by virtue of section HB 2
c: the consideration received by the transferor for that disposition is lower than the consideration that would have been received in an arm's length disposition had not any reduction in the value of the net assets of the related company occurred as a result of any 1 or more dividends, distributions, payments, arrangements, or transactions between the related company and any other company that was at the time of the dividend, distribution, payment, arrangement, or transaction a member of the same consolidated group as the related company,— for the purposes of this Act the consideration received by the transferor is deemed to be equal to the consideration that would have been received in an arm's length disposition had that reduction in value not occurred.
9: Notwithstanding the preceding subsections of this section, where—
a: any company joins a consolidated group; and
b: at the time of joining that consolidated group the company holds any property; and
c: after joining the consolidated group, the company disposes of the property to another member of the consolidated group; and
d: any of subsections (1), (2), (4)(a), (4)(b), and (5) would apply to that disposition but for the application of this subsection; and
e: after the time of that disposition, the company ceases to be a member of the consolidated group (including by virtue of being liquidated); and
f: it can reasonably be concluded that there was an arrangement having a purpose or effect of defeating the intent and application of the consolidation rules which involved that company joining the consolidated group, disposing of the property, and ceasing to be a member of the consolidated group,— the relevant subsection of this section which would have applied to that disposition but for the application of this subsection does not apply to that disposition. 1994 No 164 s FD 10 Subsection (3)(b) amended 1 October 2005 section 201 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the expressions DO 4B, DO 4C, DO 4,
FD 11: Application of international tax rules
The international tax rules apply, with any necessary modifications, as if the consolidated group were a single company, and the income and deductions of the consolidated group are determined accordingly. 1994 No 164 s CG 2
FDA: Imputation group of companies
Contents
FDA 1: Companies that may constitute imputation group
1: A company that is not a member of a consolidated group is eligible at a time to be a member of an imputation group with other companies if, assuming the company and the other companies to be members of the group, at the time,—
a: each member of the group is a company that is resident in New Zealand or Australia and—
i: is not, for a purpose of taxation in New Zealand or Australia, treated by a double tax agreement as being resident in a country that is not New Zealand or Australia; and
ii: is required by section ME 1 section ME 1A
iii: is not a loss attributing qualifying company; and
b: the members of the group are a wholly-owned group of companies; and
c: no member of the group is a qualifying company or all members of the group are qualifying companies; and
d: no member of the group is a mining company or all members of the group are mining companies; and
e:
f: no member of the group has shares that, for purposes including the purpose of enabling a company to be a member of the same imputation group as another member of the group so as to defeat the intent and application of the imputation rules, have—
i: been subject to an arrangement or series of related or connected arrangements:
ii: had rights attaching to them that have been extinguished or altered, directly or indirectly, by any means whatever.
2: A company that is a member of a consolidated group is eligible at a time to be a member of an imputation group with other companies if, at the time,—
a: all the requirements of subsection (1)(a) to (f) are or would be satisfied by the imputation group; and
ab: all members of the consolidated group are or would be members of the imputation group; and
b: for an imputation group that contains or will contain members of more than 1 consolidated group, all the members of the consolidated groups have been members of a single wholly-owned group of companies throughout the period that—
i: began on the earliest date on which there arose a credit that, at the time, remains uncancelled in the imputation credit account of a consolidated group or imputation group, all of whose members are or would be in the imputation group; and
ii: ended at the time. 1994 No 164 s FDB 1 Subsection (1)(e) repealed 1 October 2005 section 202(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (2)(ab) inserted 1 October 2005 section 202(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (2)(b) amended 1 October 2005 section 202(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting for an imputation group that contains or will contain members of more than 1 consolidated group, all the members of the consolidated groups have been members of a single wholly-owned group of companies throughout the period that— the company and the other companies that are each a member of a consolidated group and are, or would be, members of the imputation group have been members of a single wholly-owned group of companies throughout the period that—
FDA 2: Formation, entry, and combination of imputation groups
1: Any 2 or more companies that are not members of a consolidated group and are eligible to be members of an imputation group may give to the Commissioner, in a form that is acceptable to the Commissioner, a notice of election to form the imputation group.
2: A company that is not a member of a consolidated group and is eligible to be a member of an existing imputation group may give to the Commissioner, in a form that is acceptable to the Commissioner, a notice of election to join the imputation group.
3: The nominated company of a consolidated group may give to the Commissioner, in a form that is acceptable to the Commissioner, a notice of election by all the members of the consolidated group to form an imputation group with companies that are not members of the consolidated group, or to join an existing imputation group, if the companies that are to be the members of the proposed imputation group are at the time of the election eligible under section FDA 1
4: A notice of election under subsection (1) or (3) to form an imputation group must nominate 1 of the companies as agent of the imputation group for the purposes of the imputation rules.
5: A notice of election under any of subsections (1) to (3) has effect from the beginning of the imputation year that contains the date on which the Commissioner receives the notice. 1994 No 164 s FDB 2
FDA 3: Membership of groups
1: A resident imputation subgroup is associated with a trans-Tasman imputation group and consists of the members of the trans-Tasman imputation group that are not Australian imputation credit account companies.
2: An imputation group may not be formed with 1 member company but may continue to exist if the number of its members is reduced to 1.
3: A resident imputation subgroup may be formed and continue to exist with 1 member company.
4: If at any time an imputation group or resident imputation subgroup has no member company, that imputation group or resident imputation subgroup ceases to exist. 1994 No 164 s FDB 3
FDA 4: Liability of members of imputation group
A company that is a member of an imputation group is jointly and severally liable, with the other members of the imputation group, for further income tax, civil penalties, and interest under Part 7 1994 No 164 s FDB 4
FDA 5: Nominated company
1: The nominated company for an imputation group at any time must be a member of the imputation group at the time.
2: The nominated company for a trans-Tasman imputation group—
a: must not be an Australian imputation credit account company:
b: is also the nominated company for the resident imputation subgroup that is associated with the trans-Tasman imputation group.
3: For the purpose of the imputation rules, the nominated company for an imputation group at any time is the agent at that time of the imputation group and of each company that is at that time a member of the imputation group.
4: A nominated company for an imputation group may at any time give notice to the Commissioner, in a form acceptable to the Commissioner, that the company is to cease to be the nominated company for the imputation group and that another company is to become the nominated company for the imputation group.
5: A notice under subsection (4) has effect from the date that is 30 days after the date on which the Commissioner receives the notice. 1994 No 164 s FDB 5
FDA 6: Leaving imputation group
1: A company that is a member of an imputation group ceases to be a member of that group if—
a: the company elects to cease to be a member of the group, by notice to the Commissioner in a form acceptable to the Commissioner:
b: the company ceases to be eligible to be a member of the group:
c: the company is not the nominated company for the group and ceases to be eligible to be a member of the same imputation group as the nominated company:
d: the company is a member of an imputation group that ceases to have a nominated company, subject to subsection (6).
2: Subject to subsection (9), a company that elects to cease to be a member of an imputation group ceases to be a member of the group with effect from,—
a: if the notice of election specifies a date on which the election is to take effect and on that date the company would otherwise be a member of the group, the beginning of the day specified in the notice of election:
b: otherwise, the later of—
i: the beginning of the imputation year in which the notice of election is received by the Commissioner:
ii: the time at which the company becomes a member of the group.
3: Subject to subsection (9), a company that ceases to be eligible to be a member of an imputation group ceases to be a member of the group with effect from,—
a: if subsection (7) is satisfied, the beginning of the day on which the company's eligibility ceases:
b: otherwise, the later of—
i: the beginning of the imputation year in which the company's eligibility ceases:
ii: the time at which the company becomes a member of the group.
4: Subject to subsection (9), a company that is not the nominated company for a group and that ceases to be eligible to be a member of the same group as the nominated company ceases to be a member of the group with effect from,—
a: if subsection (7) is satisfied in respect of the company, the beginning of the day on which the company's eligibility ceases:
b: otherwise, the later of—
i: the beginning of the imputation year in which the company's eligibility ceases:
ii: the time at which the company becomes a member of the group.
5: If at any time during an imputation year there is no nominated company for an imputation group and a replacement nominated company is not appointed under subsection (6), the companies in the group cease to be members of the group with effect from the beginning of the imputation year.
6: If the nominated company for an imputation group is liquidated and the other companies of the group select another company as a replacement, the replacement company is the nominated company for the group from the date of the liquidation if the Commissioner is notified of the selection within 30 days after that date, or within such further period as the Commissioner may allow.
7: If a company ceases to be eligible to be a member of an imputation group, or ceases to be eligible to be a member of the same group as the nominated company of an imputation group, and makes a valid election that this subsection apply, the company is treated for the purposes of this Act as ceasing to be a member of the imputation group with effect from the date on which the eligibility ceases.
8: An election under subsection (7) is valid if—
a: the election is made by notice to the Commissioner in a form that is acceptable to the Commissioner and is received by the Commissioner within—
i: 30 days after the date on which the company ceases to be eligible to be a member of the group or ceases to be entitled to be a member of the same group as the nominated company:
ii: such further period as the Commissioner may allow as reasonable in all the circumstances; and
b: the Commissioner cannot reasonably conclude that an arrangement has been entered into for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of subsection (7) so as to defeat the intent and application of the imputation rules.
9: If a company ceases to be a member of an imputation group by virtue only of being liquidated, nothing in subsections (2) to (4) applies to treat the company as having so ceased to be a member with effect from the beginning of the tax year in which the liquidation occurred. 1994 No 164 s FDB 6
FE: Amalgamation
Contents
FE 1: Amalgamation of companies: purpose
1: Subject always to the express provisions of the amalgamation provisions, those provisions are intended—
a: to specify certain taxation consequences of the amalgamation of companies; and
b: in the case of a qualifying amalgamation, to permit certain property to be transferred to an amalgamated company on a concessional taxation basis and an amalgamated company to succeed to the net losses and imputation credit account and other credits of amalgamating companies, subject to tests of continuity and commonality of ownership being met; and
c: to apply notwithstanding anything to the contrary in section 225(d)
2: In this section, amalgamation provisions
a: sections CD 25 CD 32(23) CD 33(8) DB 8(3) to (5) DV 13 FE 2 to FE 10 IF 4 to IF 6 IG 8 IG 9 LC 8 to LC 12 MB 34 MD 2(8) ME 29 MF 16 MG 17 ND 1R ND 3(7) ND 4(7) NH 4(8)
b: sections 75 76 1994 No 164 s FE 1 Subsection (2)(a) amended 1 October 2006 section 108(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression MB 34 MB 11
FE 2: Cancellation of shares held by amalgamating company on amalgamation
Where shares in any amalgamating company are—
a: held by another amalgamating company; and
b: cancelled on the amalgamation,— then, for the purposes of this Act, the shares are deemed to have been disposed of by the shareholder amalgamating company immediately before the amalgamation for a consideration equal to the cost of the shares to the shareholder amalgamating company. 1994 No 164 s FE 2
FE 3: Deduction to amalgamated company for bad debts and expenditure
Where—
a: any amalgamating company ceases to exist on a qualifying amalgamation; and
b: the amalgamated company in any period—
i: writes off as a bad debt any debt acquired from the amalgamating company at the time of the amalgamation; or
ii: incurs any expenditure or loss (including an amount of depreciation loss) by virtue of anything done or not done by the amalgamating company; and
c: the amalgamated company would but for this subsection have been denied a deduction for the amount of the bad debt, expenditure, or loss (including an amount of depreciation loss); and
d: the amalgamating company would have been allowed a deduction for the amount but for the amalgamation,— the amalgamated company is allowed a deduction for the amount for the period. 1994 No 164 s FE 3
FE 4: Amalgamated company to assume unexpired accrual expenditure and profits or gains of amalgamating company
Where any amalgamating company ceases to exist on an amalgamation during any tax year,—
a: the unexpired portion of any amount of accrual expenditure of the amalgamating company for the tax year is deemed to be the unexpired portion of an amount of accrual expenditure of the amalgamated company for the tax year, and not of the amalgamating company; and
b: any amount derived by the amalgamated company at any time after the amalgamation which—
i: is derived by virtue of anything done or not done by the amalgamating company; and
ii: would have been income of the amalgamating company but for the amalgamation,— is income at the time of the amalgamated company. 1994 No 164 s FE 4
FE 5: Transfer of property or obligations under financial arrangements deemed to be at market value
1: Where any amalgamated company, on an amalgamation other than a qualifying amalgamation, acquires any property of an amalgamating company, or succeeds to any obligations of an amalgamating company in respect of a financial arrangement to which the amalgamating company is a party, for the purposes of this Act,—
a: the amalgamating company is treated as having disposed of the property or relieved itself of the obligations immediately before the amalgamation; and
b: the amalgamated company is treated as having acquired the property or assumed the obligations from the amalgamating company immediately after the amalgamation— for a consideration equal to the market value of the property, or market price for assuming such obligations, at the time.
2: This section is overridden by section EE 34(2) 1994 No 164 s FE 5 Subsection (2) substituted 1 April 2005 section 88 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
FE 6: Acquisition of property by amalgamated company on qualifying amalgamation
1: Where any amalgamated company, on a qualifying amalgamation, acquires any property of an amalgamating company, then, for the purposes of this Act with effect from the date of acquisition and except where otherwise provided in the succeeding subsections of this section,—
a: the amalgamated company is deemed to have acquired the property on the date on which it was acquired by the amalgamating company; and
b: the amalgamated company is, where the amalgamating company entered into a binding contract to purchase or construct any depreciable property before 16 December 1991, deemed to have entered into that binding contract on the same date as the amalgamating company; and
c: the amalgamated company is deemed to have acquired the property from the amalgamating company for a consideration equal to,—
i: except where the property forms all or part of a pool of property that is depreciated by the amalgamating company in accordance with sections EE 20 to EE 24 sections EE 1 EZ 5 EZ 6
A: the original purchase price of the property; and
B: any expenditure incurred in purchasing or improving the property; and
C: any expenditure incurred in securing or improving the legal rights of the amalgamating company in relation to the property:
ii: where the property forms the whole of a pool of property that is depreciated by the amalgamating company in accordance with sections EE 20 to EE 24
iii: where the property forms part only of any such pool, the lesser of—
A: the market value of the property acquired by the amalgamated company; and
B: the adjusted tax value of the whole of the pool immediately before the amalgamation.
1A: Where any amalgamated company, on a qualifying amalgamation, acquires any property of an amalgamating company, then, for the purposes of this Act and except where otherwise provided in the succeeding subsections of this section,—
a: the amalgamating company is deemed to have disposed of the property immediately before the amalgamation; and
b: the amalgamating company is deemed not to derive any income or to have any deductions in respect of that disposition under sections EE 37 to EE 44
2: Where an amalgamated company, on a qualifying amalgamation, acquires any property of an amalgamating company which is trading stock for both the amalgamating company and the amalgamated company, for the purposes of this Act the amalgamating company is deemed to have disposed of the trading stock and the amalgamated company is deemed to have acquired the trading stock for a consideration equal to the value of the trading stock under subpart EB to the amalgamating company, at the time of the amalgamation.
3: Where an amalgamated company, on a qualifying amalgamation, acquires any property of an amalgamating company which is revenue account property of the amalgamating company and is not revenue account property of the amalgamated company, for the purposes of this Act the amalgamating company is deemed to have disposed of the property and the amalgamated company is deemed to have acquired the property at the time of the amalgamation for a consideration equal to its market value at that time.
3A: Subsection (3) does not apply where the property is land that is (or may be) revenue account property of the amalgamating company only by virtue of the 10 year rule in any of sections CB 7 to CB 9 CB 12 sections CB 5 to CB 12 sections CB 13 to CB 21
3B: Where an amalgamated company, on a qualifying amalgamation, acquires any land of an amalgamating company which is not revenue account property of the amalgamating company but is (to the extent that its sale or disposition would give rise to income under any of sections CB 5 to CB 12
4: Where an amalgamated company, on a qualifying amalgamation, acquires property from an amalgamating company which was depreciating property (other than pooled property) of the amalgamating company, then, for the purposes of sections EE 1 EE 37 to EE 44 EZ 5 EZ 6 section EZ 5 EZ 6
5: Despite sections EW 43 GD 11
a: apply subsection (6) if—
i: the financial arrangements rules apply to the financial arrangement; and
ii: the amalgamation is a qualifying amalgamation; and
iii: the method of calculating income and expenditure under the financial arrangement remains the same despite the amalgamation; and
iv: the amalgamated company so elects by filing its return of income for the tax year; and
v: the amalgamating company and the amalgamated company were members of the same whollyowned group of companies at all times in the tax year before the amalgamation; and
vi: the amalgamating company is not entitled, under section IE 1 IF 1 section IF 4
b: apply either subsection (7) or (8) for any other qualifying amalgamation.
6: In the tax year of amalgamation and in each subsequent tax year,—
a: the amalgamating company is treated as if it had never been a party to the financial arrangement prior to the amalgamation, and section EW 31
b: the amalgamated company is treated as if it had—
i: entered into the financial arrangement on the same date and for the same consideration as the amalgamating company; and
ii: incurred all expenditure and derived all income incurred or derived by the amalgamating company under the financial arrangement before the amalgamation; and
iii: included in its return of income the same amounts of expenditure and income under the financial arrangement as were included by the amalgamating company.
7: If the method of calculating the income or expenditure under the financial arrangement remains the same despite the amalgamation, the consideration for the disposition in the amalgamating company's base price adjustment calculation is a fair and reasonable amount of the income or expenditure that the amalgamating company would have derived or incurred in the tax year of disposition had the disposition not taken place.
8: In any other case, the consideration for the disposition is the market value of the financial arrangement on the date of disposition. 1994 No 164 s FE 6
FE 6A: Deduction to amalgamating company for depreciable property transferred
In respect of a qualifying amalgamation, an amalgamating company is allowed a deduction for an amount of depreciation loss for property transferred to the amalgamated company for the period beginning on the first day of the income year in which the amalgamation takes place and ending on the day before the date of the amalgamation. 1994 No 164 s FE 6B
FE 7: Succession of obligations of amalgamating company under financial arrangement on amalgamation
1: Despite sections EW 43 GD 11
a: apply subsection (2) if—
i: the amalgamation is a qualifying amalgamation; and
ii: the method of calculating income and expenditure under the financial arrangement remains the same despite the amalgamation; and
iii: the amalgamated company so elects by filing its return of income for the tax year; and
iv: the amalgamating company and the amalgamated company were members of the same whollyowned group of companies at all times in the tax year before the amalgamation; and
v: the amalgamating company is not entitled, under section IE 1 IF 1 section IF 4
b: apply either subsection (3) or (4) for any other qualifying amalgamation.
2: In the tax year of amalgamation and in each subsequent tax year,—
a: the amalgamating company is treated as if it had never been a party to the financial arrangement prior to the amalgamation, and section EW 31
b: the amalgamated company is treated as if it had—
i: entered into the financial arrangement on the same date and for the same consideration as the amalgamating company; and
ii: incurred all expenditure and derived all income incurred or derived by the amalgamating company under the financial arrangement before the succession; and
iii: included in its return of income the same amounts of income and expenditure under the financial arrangement as were included by the amalgamating company.
3: If the method of calculating the income or expenditure under the financial arrangement remains the same despite the amalgamation, the consideration for the disposition in the amalgamating company's base price adjustment calculation is a fair and reasonable amount of the income or expenditure that the amalgamating company would have derived or incurred in the tax year of disposition had the disposition not taken place.
4: In any other case, the consideration for the disposition is the market value of the financial arrangement on the date of disposition. 1994 No 164 s FE 7
FE 8: Amalgamated company to assume rights and obligations of amalgamating company
Where any amalgamating company ceases to exist on an amalgamation, the amalgamated company must, in accordance with section 209G of the Companies Act 1955 section 225 1994 No 164 s FE 8
FE 9: Amalgamation not to result in deemed income or remission of liabilities
Sections CG 2 DB 38 1994 No 164 s FE 9 Section FE 9 amended 1 October 2005 section 203 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression DB 38 IE 1(4)
FE 10: Treatment of financial arrangements between amalgamating companies
1: This section applies if the parties to a financial arrangement are amalgamating companies and the financial arrangement exists on the date of the amalgamation.
2: If immediately before the amalgamation the amalgamating company that is the borrower under the financial arrangement is solvent or likely to meet its obligations under the financial arrangement, the financial arrangement is, for the purposes of section EW 31
a: in the case of a qualifying amalgamation, the amalgamating company's outstanding accrued balance for the financial arrangement:
b: in any other case, the market value of the financial arrangement on the date of the amalgamation.
3: If subsection (2) applies, the other party to the financial arrangement is treated as not having remitted an amount merely by virtue of the discharge.
4: If immediately before the amalgamation the amalgamating company that is the borrower under the financial arrangement is insolvent and unlikely to meet its obligations under the financial arrangement, the financial arrangement is, for the purposes of section EW 31
5: If subsection (4) applies, the other party to the financial arrangement is treated as having remitted the excess (over market value) of the other party's outstanding accrued balance for the financial arrangement.
6: For the purposes of this section,—
a: the amalgamating company's outstanding accrued balance for the financial arrangement is calculated using the formula— consideration + prior expenditure + expenditure accrued in year of amalgamation – income accrued in year of amalgamation – consideration paid before amalgamation where— The following table is small in size and contains a formula. consideration is the consideration paid to the amalgamating company under the financial arrangement prior expenditure is expenditure incurred less income derived by the amalgamating company under the financial arrangement under a spreading method or section EW 53 in all previous tax years since the financial arrangement was entered into expenditure accrued in year of amalgamation is expenditure accrued by the amalgamating company under the financial arrangement for the period beginning on the first day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, calculated,— (i) if the amalgamating company was a party to the financial arrangement in a prior tax year, using the spreading method the amalgamating company used to calculate income and expenditure under the financial arrangement in that tax year; and (ii) in any other case, using a spreading method the amalgamating company chooses, if the method could have been used had the tax year ended immediately before the amalgamation income accrued in year of amalgamation is the income accrued by the amalgamating company under the financial arrangement for the period beginning on the first day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, as calculated under paragraph (i) or (ii) of the item expenditure accrued in year of amalgamation consideration paid before amalgamation is the consideration paid by the amalgamating company for the financial arrangement before the amalgamation:
b: the other party's outstanding accrued balance for the financial arrangement is calculated using the formula— consideration + prior income + income accrued in year of amalgamation – expenditure accrued in year of amalgamation – consideration paid before amalgamation where— This following table is small in size and contains a formula. consideration is the consideration paid by the party under the financial arrangement prior income is income derived less expenditure incurred by the other party to the financial arrangement under a spreading method or section EW 53 in all previous tax years since the financial arrangement was entered into income accrued in year of amalgamation is income accrued by the party for the period beginning on the first day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, calculated,— (i) if the party was a party to the financial arrangement in a prior tax year, using the spreading method the party used to calculate income and expenditure under the financial arrangement in that tax year; and (ii) in any other case, using a spreading method the party chooses, if the method could have been used had the tax year ended immediately before the amalgamation expenditure accrued in year of amalgamation is the expenditure accrued by the party to the financial arrangement for the period beginning on the first day of the tax year in which the amalgamation occurs and ending on the date of the amalgamation, as calculated under paragraph (i) or (ii) of the item income accrued in year of amalgamation consideration paid before amalgamation is the consideration paid to the party under the financial arrangement before the amalgamation :
c: a company is treated as being insolvent if it does not satisfy the solvency test in section 4 1994 No 164 s FE 10
FF: Transfers under relationship agreements
The heading to subpart FF substituted 26 April 2005 section 3(1) Income Tax Amendment Act 2005 Matrimonial transfers Contents
FF 1: Shares or options
1: The provisions of this section apply only to modify the provisions of sections OD 3 OD 4
2: Where any share or option over a share in a company is transferred to any person from a spouse, civil union partner or de facto partner spouse, civil union partner or de facto partner relationship agreement section OD 5 1994 No 164 s FF 1 Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (2) amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
FF 2: Financial arrangements
The financial arrangements rules do not apply in relation to a financial arrangement transferred in accordance with a relationship agreement section EW 10(6) 1994 No 164 s FF 2 Section FF 2 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 3: Business stock in hand
For the purposes of section CB 1 relationship agreement section FF 13 1994 No 164 s FF 3 Section FF 3 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 4: Personal property
For the purposes of sections CB 3 CB 4 relationship agreement
a: the transferor is deemed to have disposed of that personal property or that interest for a consideration equal to the cost of that personal property or that interest to the transferor:
b: the transferee is deemed to have acquired that personal property or that interest at a cost equal to the amount of the consideration determined under paragraph (a):
c: where in any tax year the transferee sells or otherwise disposes of that personal property or that interest, the transferee is, in relation to that personal property or that interest, and to that sale or other disposition, deemed, for the purposes of sections CB 3 CB 4 1994 No 164 s FF 4 Section FF 4 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 5: Commercial bills
For the purposes of section CZ 6 relationship agreement 1994 No 164 s FF 5 Section FF 5 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 6: Land
1: Where any land is transferred in accordance with a relationship agreement
a: for the purposes of sections BD 2 CB 5 to CB 10 CB 12 CB 15 CB 18 CB 21
i: the transferor is deemed to have disposed of that land for a consideration equal to the total amount that would, if that land had been sold by the transferor on the date of the transfer, have been the cost price of the land to the transferor; and
ii: the transferee is deemed to have incurred expenditure, in the acquisition of that land, of an amount equal to the consideration for which that land is, under subparagraph (i), deemed to have been disposed of by the transferor; and
iii: the transferee is deemed to have acquired that land on the day on which it was acquired by the transferor; and
iv: where the transferor and the transferee are not associated persons and the transferee subsequently sells or otherwise disposes of that land, section CB 13(1)
b: for the purposes of sections BD 2 CB 11
i: the transferor is deemed to have disposed of that land for a consideration equal to the sum of—
A: the market value of the land, at the date of the commencement of any undertaking or scheme of the kind referred to in section CB 11
B: expenditure incurred by the transferor prior to the transfer in the carrying on or carrying out, in relation to that land, of any undertaking or scheme of the kind referred to in section CB 11
ii: where the land is acquired from any transferor to whom subparagraph (i) applies, the transferee is—
A: deemed to have incurred expenditure, in the acquisition of that land, of an amount equal to the market value referred to in subparagraph (i)(A); and
B: deemed to have incurred expenditure, in the carrying on or carrying out of the undertaking or scheme which was carried on or carried out by the transferor prior to the transfer, of an amount equal to the expenditure referred to in subparagraph (i)(B):
iii: where the land is acquired from any transferor to whom subparagraph (i) does not apply, the transferee is deemed to have incurred expenditure, in the acquisition of that land, of an amount equal to the consideration for which that land is, under paragraph (a)(i), deemed to have been disposed of by the transferor:
iv: where the transferor and the transferee are not associated persons and the transferee subsequently sells or otherwise disposes of that land, section CB 13(1)
2: Every reference in this section to a sale or other disposition of any land by any person is deemed to include a reference to a sale or other disposition of any land by or on behalf of any other person where that other person is, in relation to a mortgage secured on that land, a mortgagee and that sale or other disposition by or on behalf of that other person is made in consequence of the default of the person under that mortgage. 1994 No 164 s FF 6 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 7: Disposal of timber under
relationship agreement
1: Subsection (2) applies when timber or a right to take timber is transferred under a relationship agreement
2: The transfer of timber or a right to take timber is treated—
a: as if the transferor sold the timber or the right to take timber to the transferee; and
b: as if the transferee gave the transferor consideration; and
c: as if the amount of the consideration equalled the costs of timber to the transferor or the costs of the right to take timber to the transferor. The costs are worked out as at the date of transfer.
3: Subsection (4) applies when—
a: land with standing timber on it is transferred under a relationship agreement
b: the standing timber does not consist of ornamental or incidental trees, as evidenced by a certificate given under section 44C
4: A transfer of land with standing timber on it is treated, so far as the standing timber is concerned,—
a: as if the transferor sold the timber to the transferee; and
b: as if the transferee gave the transferor consideration; and
c: as if the amount of the consideration equalled the costs of timber to the transferor. The costs are worked out as at the date of transfer.
5: The amount treated as consideration is,—
a: as far as the transferor is concerned, income; and
b: as far as the transferee is concerned, the cost of acquiring the timber or the cost of acquiring the right to take timber. 1994 No 164 s FF 7 The heading to section FF 7 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (3)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 8: Patent applications and patent rights
For the purposes of sections CB 26 DB 29 to DB 31 patent applications with complete specifications or patent rights relationship agreement
a: the transferor is deemed to have sold those patent applications with complete specifications or patent rights section DB 29 section DB 30
b: the transferor is denied a deduction of the amount first mentioned in paragraph (a) in any tax year; and
c: the transferee is deemed to have incurred expenditure, in the acquisition of those patent applications with complete specifications or patent rights 1994 No 164 s FF 8 The heading to section FF 8 was substituted 21 June 2005 section 53(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section FF 8 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Section FF 8 amended 21 June 2005 section 53(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting patent applications with complete specifications or patent rights patent rights
FF 9: Specified livestock
For the purposes of subpart EC section EZ 4 relationship agreement
a: that livestock was used by the transferor in any business carried on by the transferor, and was held by the transferor at the beginning of the income year of transfer; and
b: its value at the end of the preceding income year was determined by the transferor under the herd scheme; and
c: its value at the end of the income year in which the transfer occurred is determined by the transferee under the herd scheme,— then, notwithstanding section FF 13 1994 No 164 s FF 9 Section FF 9 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 10: Non-specified livestock
1: For the purposes of sections EC 28 to EC 31
a: where in any income year—
i: any non-specified livestock is transferred in accordance with a relationship agreement
ii: by virtue of that transfer the transferee commences or recommences to derive income from non-specified livestock in that income year,— the transferee is, except for the purpose of determining whether any subsequent acquisition of livestock by the transferee constitutes the commencement or recommencement by the transferee of the deriving of income from non-specified livestock, deemed not to have so commenced or recommenced to derive income from non-specified livestock by virtue of that transfer:
b: where any land is transferred in accordance with a relationship agreement
2: Where—
a: any non-specified livestock is transferred in accordance with a relationship agreement
b: the transferee was not, immediately before the transfer, deriving income from non-specified livestock; and
c: if the livestock had been retained by the transferor and had not been so transferred, section EC 31(2)(a) then the value to be taken into account under section EC 31 section EC 31(2)
d: for the income year of transfer, by an amount equal to either—
i: the amount that would have been the transferor's amount of two-thirds of the difference between the cost price of the livestock and the standard value in relation to that livestock and the income year of transfer, where that income year is the income year in which section EC 31(2)(a)
ii: one-third of the amount that would have been the transferor's amount of two-thirds of the difference between the cost price of the livestock and the standard value in relation to that livestock and the income year of transfer where that income year is the income year in which section EC 31(2)(b)
e: for the income year following the income year of transfer, by an amount equal to one-third of the amount (if any) that would have been the transferor's amount of two-thirds of the difference between the cost price of the livestock and the standard value in relation to that livestock and that following income year if, had the transferor retained the livestock, section EC 31(2)(b) 1994 No 164 s FF 10 Subsection (1)(a)(i) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (1)(b) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (2)(a) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 11: High-priced livestock
For the purposes of sections EC 32 to EC 37 relationship agreement
a: the transferee is deemed to have acquired the livestock—
i: on the day on which it was acquired by the transferor; and
ii: at a cost equal to the cost of the livestock to that transferor; and
b: the value of the high-priced livestock to be taken into account at the end of the income year of transfer by the transferee is, notwithstanding section EC 34(1) section FF 13
c: where the transferor had elected under section 86I(7) of the Income Tax Act 1976 section EC 34(3)
d: where the transferor had not so elected to adopt a specified writedown based on diminishing value, or had not chosen to apply section EC 34(3) section EC 34(2)
3: unless the high-priced livestock was acquired by the transferor in the income year of transfer. 1994 No 164 s FF 11 Section FF 11 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 12: Bloodstock
For the purposes of sections EC 38 to EC 45 relationship agreement 1994 No 164 s FF 12 Section FF 12 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 13: Trading stock
1: Where any trading stock is transferred in accordance with a relationship agreement
a: where that trading stock was used by the transferor in any business carried on by that person and was held by that person at the commencement of the tax year, an amount equal to,—
i: in relation to any trading stock that is specified livestock other than livestock used in dealing operations, the value taken into account by the transferor in respect of that trading stock, under subpart EC, at the end of the last preceding tax year:
ii: in relation to any trading stock other than trading stock to which subparagraph (i) applies, the greater of—
A: the value taken into account by the transferor in respect of that trading stock, under subpart EB, at the end of the last preceding tax year:
B: the value of that trading stock to be taken into account by the transferee at the end of the income year of transfer, determined under subpart EB or, as the case may be, subpart EC; and
b: where that trading stock was used by the transferor in any business carried on by the transferor and was acquired by the transferor during the tax year of transfer, an amount equal to the price at which that trading stock was so acquired; and
c: where that trading stock was not used by the transferor in any business carried on by the transferor, an amount equal to the cost price at which that trading stock was acquired by the transferor,— and for the purposes of this Act that trading stock is deemed to have been purchased by the transferee, during the tax year of transfer, at a price equal to the amount which that trading stock is so deemed to have realised.
2: Where any trading stock to which subsection (1)(a) or (b) applies is not used by the transferee in the carrying on by the transferee of any business and is in any tax year sold or otherwise disposed of by the transferee, that sale or other disposal is, for the purposes of this Act, deemed to be a sale of trading stock used by the transferee in the carrying on by the transferee of a business.
3: Section GD 1 relationship agreement 1994 No 164 s FF 13 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (3) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 14: Leased assets
Where—
a: any person has leased, rented, or hired any asset, being any plant or machinery (including a motor vehicle) or other equipment or a temporary building, and that person has been allowed a deduction in any tax year for the consideration paid or given in respect of that lease, rental, or hire; and
b: that person, or any other person where that person and that other person are associated persons, at any time purchases or otherwise acquires that asset; and
c: that person or that other person who so purchases or otherwise acquires that asset transfers that asset to any further person in accordance with a relationship agreement
d: the transferee sells or otherwise disposes of that asset for a consideration in excess of an amount equal to the value to which, at the commencement of the income year of transfer, the asset has been reduced by deductions for amounts of depreciation loss of that asset or, where the asset was purchased or otherwise acquired by the transferor during the tax year of transfer, an amount equal to the consideration for which the transferor purchased or otherwise acquired that asset,— the income under section FC 5 1994 No 164 s FF 14 Paragraph (c) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 15: Amount of depreciation loss for qualifying assets
1: This section applies when a qualifying asset or an item to which a qualifying improvement has been made is transferred under a relationship agreement
2: After the transfer, the transferee has an amount of depreciation loss under section EZ 16
3: The amount of the transferee's depreciation loss for the asset or item for the income year in which it is transferred is the amount of depreciation loss for the asset or item for the income year under section EZ 16 1994 No 164 s FF 15 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 16: Depreciable property
1: This section applies when a transferor who has an amount of depreciation loss for an item transfers the item under a relationship agreement
2: Whether or not the transferor has in fact had an amount of depreciation loss, the transferee has an amount of depreciation loss for the item from the time of the transfer.
3: The transferee is treated as having incurred, in acquiring the item, expenditure of the amount of the consideration for which the transferor is treated as having disposed of the item. The consideration is described in subsection (4) or section FF 19
4: The transferor is treated as having disposed of the item for consideration, as follows:
a: if the transferor acquired the item in the income year of transfer, a consideration equal to the item's cost:
b: in any other case, a consideration equal to the item's adjusted tax value at the start of the income year of transfer.
5: The depreciation loss that the transferee has when the item is a building must be determined having regard to its cost to the transferor originally.
6: In addition to the amount of depreciation loss that the transferee in fact has for the item, the transferee is treated as having had an amount of depreciation loss equal to all the amounts of depreciation loss that the transferor had for the item.
7: The transferee does not have a greater amount of depreciation loss than that which the transferor would have had if the transferor had kept the item.
8: An item acquired, erected, installed, altered, extended, improved, or attached by the transferor in the income year in which the item is transferred is treated as if it were acquired, erected, installed, altered, extended, improved, or attached by the transferee in the income year.
9: If any of the following conditions applied to the item when the transferor acquired or erected it, the condition is treated as applying to the item at the time it is transferred:
a: the item had not previously been used by any person or acquired or held by a person for their use; and
b: if the item is a building or part of a building, it had not previously been occupied. 1994 No 164 s FF 16 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 17: Pensions
1: For the purposes of section DC 2 section 21 section 25 section DC 2(1)
2: Subsection (3) applies if part of the pension, otherwise payable by a partnership or a taxpayer to a former partner, is paid by the partnership or the taxpayer to a person other than the former partner in accordance with an agreement made between the former partner and the person under section 21 section 25
3: Section DC 3 1994 No 164 s FF 17
FF 18: Land used in specified activity
1: For the purpose of the definition of established activity in section IE 2(8) relationship agreement
2: For the purposes of section IE 2(2) relationship agreement 1994 No 164 s FF 18 Subsection (1) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement Subsection (2) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FF 19: Mining assets
For the purposes of this section and sections CU 12 DU 9 IH 5 relationship agreement
a: where the transferor is a resident mining operator and that asset is an asset that was used by the transferor immediately before that transfer, in deriving assessable income from mining, the transferor is deemed to have sold or otherwise disposed of that asset on the date of transfer for a consideration equal to the lesser of—
i: the amount of the expenditure incurred by the transferor in the acquisition of that asset:
ii: where the transferor has been allowed a deduction for an amount of depreciation loss in respect of that asset, an amount equal to the value to which, at the commencement of the tax year of transfer, that asset has been reduced by all such deductions:
iii: where that asset is an asset acquired as a result of mining exploration expenditure or mining development expenditure incurred by the transferor in respect of which the transferor has been allowed a deduction under sections DU 1 DU 9(1)
b: in any case where paragraph (a) applies, the transferee is deemed to have incurred expenditure in the acquisition of that asset, when so transferred to the transferee, of an amount equal to the amount of the consideration for which the transferor is, under paragraph (a), deemed to have sold or otherwise disposed of that asset:
c: where, in any case where paragraph (a) applies, the transferor is deemed to have sold or otherwise disposed of that asset for a consideration equal to the amount calculated in accordance with paragraph (a)(iii), and the transferee, being a transferee who, immediately after that transfer, is not a resident mining operator, at any time sells or otherwise disposes of that asset,—
i: the transferee is, in relation to that sale or other disposal, deemed to be a resident mining operator; and
ii: that sale or other disposal is deemed to be a sale or other disposal to which, in relation to sections CU 3 DU 2 CU 12(1) DU 9(1)
iii: the value of the consideration received or receivable by the transferee for that sale or other disposal is, for the purposes of sections CU 1 to CU 11 DU 1 to DU 8 IH 4
d: where the transferee is, immediately after the date of transfer, a resident mining operator, the transferee is deemed to have incurred expenditure in the acquisition of that asset, when so transferred, of an amount equal to the lesser of—
i: the amount of the expenditure incurred by the transferor in the acquisition of that asset:
ii: where the transferor has been allowed a deduction for an amount of depreciation loss in respect of that asset, an amount equal to the value to which, at the commencement of the tax year of transfer, that asset has been reduced by all such deductions:
iii: where that asset is an asset acquired as a result of mining exploration expenditure or mining development expenditure incurred by the transferor in respect of which the transferor has been allowed any deduction under sections DU 1 DU 9(1)
e: where, in any case where paragraph (d) applies, the transferee is deemed to have incurred expenditure in the acquisition of that asset of an amount calculated in accordance with paragraph (d)(iii), the transferee is, for the purposes of sections CU 3 CU 10 DU 2 DU 6 1994 No 164 s FF 19 Section FF 19 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting relationship agreement matrimonial agreement
FG: Apportionment of interest costs
Contents
FG 1: Purpose of this subpart
Subject always to the express provisions of this subpart, the purpose of this subpart is to ensure, in the case of a New Zealand taxpayer controlled by a single non-resident and which has a disproportionately high level of New Zealand group debt funding, an appropriate apportionment to the New Zealand taxpayer of the worldwide interest expenditure of the group of entities of which the New Zealand taxpayer is a part. 1994 No 164 s FG 1
FG 2: Entities to which interest deduction rules potentially apply
1: A taxpayer is not subject for a tax year to the interest apportionment rule in section FG 8 section FG 8B
a: is a non-resident who is not a company:
b: is a company that is a non-resident in which—
i: no person who is resident in New Zealand has a direct ownership interest that is equal to or greater than 50%:
ii: a non-resident has a direct ownership interest that, when aggregated with the direct ownership interests of persons associated with the non-resident, is equal to or greater than 50%:
c: is a company that is resident in New Zealand—
i: in which a non-resident has an ownership interest that is equal to or greater than 50%:
ii: of which a non-resident has control by any other means:
d: is the trustee of a non-qualifying trust for which 50% or more in value of the settlements on the trust is settled by—
i: a non-resident:
ii: persons who are associated with the non-resident.
2: A person's ownership interest in a company is equal to the sum of—
a: any direct ownership interest held by the person in the company; and
b: any direct ownership interest or interests held in the company by persons associated with the person; and
c: any indirect ownership interest or interests held by the person in the company; and
d: any indirect ownership interest or interests held in the company by persons associated with the person.
3: A person's direct ownership interest in a company is equal to the highest percentage held by the person out of the categories listed in section EX 5(1)
4: If a person has a direct ownership interest in a company (referred to in this subsection as the upper company lower company
a: if the person's direct ownership interest in the upper company (when aggregated with the direct ownership interests of persons associated with the person) is less than 50%, the person is deemed to hold an indirect ownership interest in the lower company calculated by multiplying the person's direct ownership interest in the upper company by the upper company's ownership interest in the lower company; and
b: if the person's direct ownership interest in the upper company (when aggregated with the direct ownership interests of persons associated with the person) is equal to or greater than 50%, the person is deemed to hold an indirect ownership interest in the lower company equal to the upper company's ownership interest in the lower company.
5: If the application of subsection (2) or (4) to require a person's ownership interest in a company to be calculated on a basis of aggregation with associated persons results in the same percentage shares or rights in respect of the company being counted more than once, the person's ownership interest in the company is adjusted to the extent necessary to avoid multiple counting.
6: For the purposes of subsections (1)(a)(ii) and (2), a person not resident in New Zealand who does not hold any direct or indirect ownership interests in the company and any relative of that person resident in New Zealand are not associated persons in respect of that company.
7:
8: For the purposes of this section, a foreign company is treated as not being resident in New Zealand. 1994 No 164 s FG 2 The heading to section FG 2 was substituted 1 July 2005 section 54(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1) substituted 1 July 2005 section 54(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (7) repealed 1 July 2005 section 54(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 3: When interest apportioned under section FG 8 or annual total deduction adjusted under section FG 8B
1: A taxpayer who is not excluded by section FG 2 section FG 8 section FG 8
a: at no time in the income year—
i: is a reporting bank for a New Zealand banking group:
ii: is part of a New Zealand banking group for the purpose of section FG 8C
b: has a New Zealand group debt percentage for the income year that—
i: is greater than 75%; and
ii: if the taxpayer is a company or a trustee, exceeds the number obtained by multiplying the worldwide group debt percentage of the taxpayer by 1.1.
2: A taxpayer who is not excluded by section FG 2 section FG 8B section FG 8B
a: at a time in the taxpayer's corresponding income year the taxpayer is the reporting bank for a New Zealand banking group; and
b: the New Zealand banking group has a New Zealand net equity, as defined in section FG 8G section FG 8H section FG 8E Section FG 3 substituted 1 July 2005 section 55 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 4: Rules for calculating New Zealand group debt percentage
1: The New Zealand group debt percentage is the percentage which the amount of total debt represents of the amount of total assets for the taxpayer's New Zealand group for the income year, and must be calculated under the rules in this section.
2: Total debt
a: the financial arrangement provides funds to the taxpayer (or another group member); and
b: the financial arrangement—
i: gives rise to an amount for which the taxpayer, or another group member, would be allowed a deduction, other than an amount that arises only from movement in currency exchange rates:
ii: is a stapled debt security that is held by a person resident in New Zealand and is stapled to shares other than shares of a company that is a proportional-stapling company.
3: Total assets for the income year
a: the values shown in the financial accounts of the taxpayer's New Zealand group; or
b: the net current value of the assets; or
c: in the case of trading stock which is valued at market selling value in calculating the taxpayer's (or group member's) income tax liability for the income year, market selling value; or
ca: in the case of a specified lease or a finance lease that is not recognised as an asset under generally accepted accounting practice, the adjusted tax value of the personal property lease asset; or
d: if permitted under generally accepted accounting practice, a combination of the financial account values and net current values.
4: Except where either subsection (3)(c) or (ca) applies, the amount of total assets must be calculated under generally accepted accounting practice.
5: The amount of total debt and total assets for the income year must be measured, at the election of the taxpayer, on the basis of—
a: an average of the figures for the amount of total debt and total assets, respectively, calculated at the end of each day of the income year; or
b: an average of the figures for the amount of total debt and total assets, respectively, calculated at the end of each complete consecutive 3 month period during the income year; or
c: the amount of total debt and total assets, respectively, at the end of the income year.
6: Notwithstanding subsection (5), if members of the taxpayer's New Zealand group have different income tax balance dates, the election made by the taxpayer under subsection (5) applies as if the taxpayer's income year were the same as that of the New Zealand parent (as defined in subsection (10)).
7: The amount of total debt and the amount of total assets calculated must be in New Zealand currency and, subject to section FG 7
8: Any temporary—
a: reduction in the outstanding balance of a financial arrangement; or
b: increase in the value of an asset— must be excluded from the calculations if the reduction or increase has a purpose or effect of defeating the intent and application of this subpart.
9: If the taxpayer is a company, the amount of total debt and the amount of total assets must be calculated, on a consolidated basis for elimination of intra-group balances used under generally accepted accounting practice for consolidation of a group of companies, for the group identified under subsections (10) to (13).
10: If the taxpayer is a company, the members of the group are determined in accordance with subsection (12) by—
a: the taxpayer, if the taxpayer is—
i: not resident in New Zealand; or
ii: a company in which—
A: persons not resident in New Zealand have, under the rules set out in section FG 2
B: no single person not resident in New Zealand and carrying on business in New Zealand through a fixed establishment in New Zealand has a 50% or greater ownership interest:
b: if paragraph (a) does not apply, the company—
i: that is either—
A: resident in New Zealand; or
B: not resident in New Zealand but carrying on business in New Zealand through a fixed establishment in New Zealand; and
ii: that has, under the rules set out in section FG 2 section FG 2(2)(b)
iii: in which a person not resident in New Zealand has, under those rules, a direct ownership interest; and
iv: in which, if paragraph (b)(i)(A) applies, a person not resident in New Zealand (being a person who has, under those rules, a 50% or greater ownership interest in the taxpayer) has a 50% or greater ownership interest; and
v: in which no company satisfying the conditions of subparagraphs (i) to (iv) has, under those rules set out in section FG 2
c: the taxpayer, if paragraph (a) does not apply and no company can be identified under paragraph (b):
d: if more than 1 company is identified under paragraph (b), the company out of that set of companies where the highest figure is produced by multiplying—
i: the aggregate direct ownership interests held in that company by persons not resident in New Zealand who also have a 50% or greater ownership interest in the taxpayer; and
ii: the ownership interest of that company in the taxpayer calculated under the rules set out in section FG 2 section FG 2(2)(b)
e: if more than 1 company is identified under paragraph (d), the company out of that set of companies that was incorporated at the earliest time— (the party identified under paragraphs (a) to (e) being referred to in subsections (12) to (14D) as the New Zealand parent
11: If a taxpayer is subject to the interest apportionment rule in section FG 8 section FG 2(1)(b)(ii) section FG 4(10)(b)
iv: in which, if paragraph (b)(i)(A)
12: Subject to subsections (14C) and (14D), the taxpayer's New Zealand group comprises the taxpayer, the New Zealand parent (if different from the taxpayer), and all companies that—
a: are resident in New Zealand or carrying on business in New Zealand through a fixed establishment in New Zealand; and
b: are identified under subsection (13) or (14) as being controlled by the New Zealand parent; and
c: are not members of the New Zealand banking group of a registered bank.
13: If the New Zealand parent elects that the relevant control percentage is any percentage greater than 50%, the companies treated as being controlled by the New Zealand parent and to be included in the New Zealand group are those in which greater than 50% direct ownership interests are held collectively by any combination of—
a: the New Zealand parent; and
b: companies already included in the group as a result of paragraph (a) or this paragraph.
14: If the New Zealand parent elects that the relevant control percentage is 66% or any greater percentage, the companies treated as being controlled by the New Zealand parent and to be included in the New Zealand group are those in which 66% or greater direct ownership interests are held collectively by any combination of—
a: the New Zealand parent; and
b: a person not resident in New Zealand if—
i: the person has a 50% or greater ownership interest in both the taxpayer and the New Zealand parent; and
ii: the company included in the New Zealand group as a result would have been included in the New Zealand group under subsection (13) if the New Zealand parent had elected that subsection (13) applied; and
c: companies already included in the group, as a result of any or all of paragraph (a), (b), and this paragraph.
14A: If the New Zealand parent fails to elect that either subsection (13) or (14) applies, the New Zealand parent is deemed to have elected that subsection (14) applies.
14B: The New Zealand parent must and is deemed to make the same election whether subsection (13) or (14) applies for the income year with respect to any other taxpayer in respect of which it is determined to be the New Zealand parent.
14C: Notwithstanding subsections (12) to (14), if the taxpayer is not a company identified under subsection (13) or (14) as being controlled by the New Zealand parent, the taxpayer's New Zealand group comprises only the taxpayer and all companies that—
a: are resident in New Zealand or carrying on business in New Zealand through a fixed establishment in New Zealand; and
b: are companies that—
i: would be identified under subsection (13) or (14) as being controlled by the taxpayer if the taxpayer were treated as being the New Zealand parent; or
ii: would result in the taxpayer being identified under subsection (13) or (14) as being controlled by the other company being included in the group under this subparagraph if the other company were treated as being the New Zealand parent; or
iii: would be identified under subsection (13) or (14) as being controlled by a company included in the taxpayer's New Zealand group under subparagraph (ii) if that other company were treated as being the New Zealand parent; and
c: are not members of the New Zealand banking group of a registered bank.
14D: Notwithstanding subsections (12) to (14C), the taxpayer's New Zealand group also includes 1 or more other companies resident in New Zealand or carrying on business in New Zealand through a fixed establishment in New Zealand if—
aa: none of the taxpayer and the other companies is a member of a New Zealand banking group; and
a: the New Zealand parent so elects; and
b: the same person who is not resident in New Zealand holds an ownership interest of 50% or more in the taxpayer and each of those companies; and
c: any necessary elections are made under this subsection to ensure that the New Zealand group of—
i: each of those other companies; and
ii: each company which is a member of the taxpayer's New Zealand group other than under this subsection— comprises the same companies as the taxpayer's New Zealand group; and
d: the other company is not a company in which, under the rules set out in section FG 2 possible group member
i: the possible group member is not included in the taxpayer's New Zealand group; and
ii: the possible group member could have been included in the taxpayer's New Zealand group had the New Zealand parent made an appropriate election under subsection (13) or this subsection.
14E: Notwithstanding subsections (12) to (14D), a company is a member of the taxpayer's New Zealand group if it is—
a: a conduit tax relief holding company, on the date on which the measurement is made under subsection (5), in respect of a conduit tax relief company in which it holds a direct ownership interest of more than 50%, and the conduit tax relief company is a member of the taxpayer's New Zealand group; or
b: a member of the New Zealand group of any company identified under paragraph (a) (determined under this section before applying this subsection).
14F: Subsection (14E) does not apply to the income year if, at the end of the income year, the total of all dividends to the extent fully conduit tax relief credited and previously derived by the conduit tax relief holding company does not exceed the total of all dividends to the extent fully conduit tax relief credited and previously paid by the conduit tax relief holding company.
15: If the taxpayer is a trustee, the amount of total debt and the amount of total assets must be calculated, on a consolidated basis for elimination of intra-group balances equivalent to that used for consolidation of a group of companies under generally accepted accounting practice, for the group comprising the taxpayer and all associated persons which are—
a: resident in New Zealand; or
b: carrying on business in New Zealand through a fixed establishment in New Zealand.
16: If the taxpayer is an individual who is not a trustee—
a: the only person in the group is the taxpayer; and
b: total assets do not include any private or domestic assets.
17: In any case where a group member required to be included in the consolidated calculation under subsection (9), (12), (15), or (16) is not resident in New Zealand, the amount of total debt and amount of total assets only includes the total debt and total assets of that group member to the extent that that group member is carrying on business in New Zealand through a fixed establishment in New Zealand. 1994 No 164 s FG 4 Section FG 4(2)(b) substituted 6 October 2009 section 806 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (12)(b) amended 1 July 2005 section 56(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting New Zealand parent; and New Zealand parent. Subsection (12)(c) inserted 1 July 2005 section 56(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (14)(b)(iii) amended 1 July 2005 section 56(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by substituting New Zealand parent; and New Zealand parent. Subsection (14)(c) inserted 1 July 2005 section 56(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (14D)(aa) inserted 1 July 2005 section 56(3) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 5: Rules for calculating worldwide group debt percentage
1: The worldwide group debt percentage is the percentage which the amount of total debt represents of the amount of total assets for the taxpayer's worldwide group for the accounting year of the group ending most immediately prior to the start of the income year, and must be calculated under the rules in this section.
2: Subject to the following subsections, either or both the amount of total debt and the amount of total assets can be taken from the financial accounts of the taxpayer's worldwide group.
3: The amount of total debt and amount of total assets for the income year are measured at the end of the relevant accounting year.
4: The amount of total debt and amount of total assets must be calculated—
a: under a standard for financial reporting in a consistent and non-distorting manner which is equivalent to generally accepted accounting practice; and
b: in accordance with the financial reporting standards of the country which are applied in the preparation of that group's consolidated financial accounts.
5: Notwithstanding subsections (3) and (4), the taxpayer may elect either or both—
a: to measure total debt applying the definition of total debt in section FG 4(2)
b: to measure total debt and total assets on 1 of the bases listed in section FG 4(5)(a)
6: The amount of total debt and total assets calculated must be in New Zealand currency and, subject to section FG 7
7: Any temporary increase in the amount of total debt and any temporary decrease in the amount of total assets must be excluded from the calculations if the increase or decrease has a purpose or effect of defeating the intent and application of this subpart.
8: If the taxpayer is a company, the amount of total debt and total assets must be calculated for the group (referred to in this section as the taxpayer's worldwide group
a: the taxpayer; and
b: all persons included in the taxpayer's New Zealand group for the income year under section FG 4
c: all persons not resident in New Zealand required to be included in consolidated group accounts with the taxpayer under, at the election of the taxpayer,—
i: the generally accepted accounting practice; or
ii: an equivalent standard for financial reporting in a consistent and non-distorting manner of the country in which is resident the company (referred to in this section as the ultimate non-resident parent
A: which has, under section FG 2
B: is not excluded from the taxpayer's worldwide group under subsection (9); and
C: in which no other company, which has under the section FG 2
iii: an equivalent standard for financial reporting in a consistent and non-distorting manner which is in fact applied when preparing the consolidated group accounts of the international group of which the taxpayer is part; and
d: the ultimate non-resident parent and all persons not resident in New Zealand required to be included in consolidated group accounts with the ultimate non-resident parent under,—
i: if an accounting standard of the ultimate non-resident parent's country applies under subsection (8)(c)(ii), that standard; and
ii: in any other case, under generally accepted accounting practice; and
e: any person not resident in New Zealand who—
i: is not a company; and
ii: has a 50% or greater ownership interest in the company; and
f: any person associated with any person included in the taxpayer's worldwide group under paragraph (e).
9: Notwithstanding subsection (8), if in a joint venture ownership situation of a taxpayer which is a company—
a: a person, under the rules set out in section FG 2
b: the taxpayer elects to exclude the person (referred to in this subsection as the excluded joint venturer
c: there is still included in the taxpayer's worldwide group—
i: 1 other person (referred to in this subsection as the included joint venturer
ii: all other persons who have an ownership interest equal to 50% in the taxpayer and—
A: who have an ownership interest in the included joint venturer; or
B: in whom the included joint venturer has an ownership interest,— the excluded joint venturer is excluded from the taxpayer's worldwide group for the income year in respect of which the election is made.
10: If the taxpayer is a company, the amount of total debt and total assets must be calculated, for the group identified under subsections (8) and (9), on a consolidated basis for elimination of intra-group balances, under,—
a: if an accounting standard of the ultimate non-resident parent's country applies under subsection (8)(c)(ii), that standard; and
b: in any other case, under generally accepted accounting practice.
11: If the taxpayer is a trustee, the amount of total debt and total assets must be calculated, on a consolidated basis for elimination of intra-group balances equivalent to that used for consolidation of companies under generally accepted accounting practice, for the group comprising the taxpayer and all associated persons.
12: If it is impractical for the taxpayer to calculate the taxpayer's worldwide group debt percentage for an income year due to an inability to comply with all or any of these rules,—
a: the taxpayer may elect that the Commissioner must estimate the percentage in accordance with the intent of this subpart and, if the Commissioner then makes an estimate, the estimate is treated as being the percentage for the purposes of this subpart; and
b: if the Commissioner is not asked to or cannot reasonably make an estimate, this subpart applies as if the percentage were 68.1818.
13: If there is no person in the taxpayer's worldwide group who is not resident in New Zealand (other than the taxpayer), the taxpayer's worldwide group debt percentage is 68.1818 notwithstanding the calculation rules in this section. 1994 No 164 s FG 5
FG 6: Concession for on-lending
1: When a taxpayer calculates their New Zealand group debt percentage, the amount of total debt and total assets is reduced by the outstanding balance of a financial arrangement if—
a: the taxpayer (or another group member) enters into the financial arrangement with a person who is—
i: neither resident in New Zealand nor carrying on a business in New Zealand through a fixed establishment; or
ii: not associated with the taxpayer; or
iii: associated with the taxpayer if section FG 8 section FG 2
b: the financial arrangement provides funds to the other party; and
c: the consideration given for the financial arrangement is an arm's length amount.
2: When a taxpayer calculates their worldwide group debt percentage, the amount of total debt and total assets is reduced by the outstanding balance of a financial arrangement if—
a: the taxpayer (or another group member) enters into the financial arrangement with a person not associated with the taxpayer; and
b: the financial arrangement provides funds to the other party. 1994 No 164 s FG 6
FG 7: Concession for exchange rate fluctuations
The taxpayer may elect, when calculating the taxpayer's New Zealand or worldwide group debt percentage for the income year, to calculate the outstanding balance of any 1 or more financial arrangements, or the value of any 1 or more assets, denominated in a currency other than New Zealand currency using the forward exchange rate, for the relevant measurement date specified in section FG 4 FG 5 1994 No 164 s FG 7
FG 8: Apportionment of interest deductions
—taxpayer not in New Zealand banking group
1: Notwithstanding anything in section DB 6 DB 7 DB 8 taxpayer is not in a New Zealand banking group and the section FG 3 section DB 6 DB 7 DB 8 where—
I: is the sum of all deductions for which the taxpayer would be allowed a deduction under section DB 6 DB 7 DB 8
GI: is the sum of all deductions which the taxpayer would be allowed under section DB 6 DB 7 DB 8 IFD section FG 4(12)
IFD: is the sum of all deductions which the taxpayer would be allowed under section DB 6 DB 7 DB 8 section FG 4(2)
TNZD: is the total debt of the taxpayer's New Zealand group for the income year, calculated under section FG 4 section FG 6
NZDA: is the amount, if any, deducted under section FG 6 section FG 4(5)(a)
NZDP: is the taxpayer's New Zealand group debt percentage for the income year
TDP: is,—
a: if the taxpayer is a company or a trustee, the greater of—
i: 75%; and
ii: the taxpayer's worldwide group debt percentage multiplied by 1.1; and
b: if the taxpayer is an individual who is not a trustee, 75%.
2: Notwithstanding subsection (1), if and to the extent that another member of the same wholly-owned group of companies—
a: elects that this subsection apply; and
b: would, in the absence of an election under paragraph (a) and after allowing for any other reductions under this subsection, be allowed a deduction under section DB 6 DB 7 DB 8 section DB 6 DB 7 DB 8 the reduction is made to the amount for which the other group member would otherwise be allowed a deduction under section DB 6 DB 7 DB 8 1994 No 164 s FG 8 The heading to section FG 8 was amended 1 July 2005 section 57(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words —taxpayer not in New Zealand banking group deductions Subsection (1) amended 1 July 2005 section 57(2) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting the words taxpayer is not in a New Zealand banking group and the if a
FG 8B: Adjustment of annual total deduction—reporting bank
1: For a taxpayer that is a reporting bank and under section FG 3(2)
a: if the New Zealand banking group of the reporting bank has a group funding debt for the tax year that is not zero, the amount calculated using the formula— unadjusted annual total deduction – adjustments:
b: if the New Zealand banking group of the reporting bank has a group funding debt for the tax year of zero, the annual total deduction for the tax year that the taxpayer would have had in the absence of this section and section FG 3(2)
2: In the formula in subsection (1)(a),—
a: unadjusted annual total deduction section FG 3(2)
b: adjustments
3: The group funding debt for a tax year for the New Zealand banking group of a reporting bank means the amount calculated using the formula— where—
SFI: is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group of interest-bearing debt calculated under generally accepted accounting practice for a group quarter day
FID: is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group, on a group quarter day, of financial arrangements—
a: for which the consolidated financial statements of the New Zealand banking group would show, in the corresponding income year of the reporting bank, a deduction—
i: under 1 or more of sections DB 6 to DB 8
ii: other than as a consequence of a fluctuation in the value of a currency of a country relative to the value of a currency of another country; and
b: that do not contribute to item SFI
FTE: is the sum of the amounts for the tax year, each of which is the financial value for the New Zealand banking group, on a group quarter day, of shares that contribute to item SFI
NQ: is the number of group quarter days in the corresponding income year of the registered bank.
4: For a measurement day in an income year of a reporting bank, the adjustment amount for a reporting bank is the amount calculated using the formula— where—
NET: is the net equity threshold for the New Zealand banking group for the measurement day
NZE: is the lesser of—
a: the net equity threshold for the New Zealand banking group for the measurement day:
b: the New Zealand net equity for the New Zealand banking group for the measurement day
I: is the financial value for the New Zealand banking group, on the last day of the income year, of expenditure that—
a: is incurred by a member of the New Zealand banking group in the income year; and
b: is an interest expense under generally accepted accounting practice, incurred other than in relation to a share that contributes to item SFI, or is a deduction referred to in paragraph (a) of the definition of item FID in subclause (3)
GFD: is the group funding debt for the tax year for the New Zealand banking group
PD: is the number of days in the measurement period that corresponds to the measurement day
YD: is the number of days in the income year.
5: If this Act requires that the annual total deduction for a reporting bank for an income year be apportioned between 2 or more parts of the income year, the adjustment amount under subsection (4) for a measurement day in the income year is attributed to the part containing the measurement day.
6: In this section, group quarter day
a: that is the last day of a quarter in the corresponding income year of the registered bank; and
b: on which the registered bank is a reporting bank. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8C: New Zealand banking group of registered bank
1: The New Zealand banking group
a: a member under subsection (2) or a potential member under subsection (3) or (4); and
b: not excluded by an election under subsection (8).
2: If the registered bank—
a: is resident in New Zealand, the registered bank is a member:
b: is not resident in New Zealand, a fixed establishment in New Zealand of the registered bank is treated as being a person who is—
i: separate from the registered bank; and
ii: a member.
3: A person who is a New Zealand resident is a potential member if—
a: the person satisfies subsection (5) and—
i: the registered bank is resident in New Zealand; and
ii: there is no non-resident who is an ultimate parent of the registered bank under subsection (9):
b: the person satisfies subsection (6) and—
i: the registered bank is a non-resident; and
ii: there is no non-resident who is an ultimate parent of the registered bank under subsection (9):
c: the person satisfies subsection (7) and there is a non-resident who is an ultimate parent of the registered bank under subsection (9).
4: A fixed establishment in New Zealand of a non-resident is treated as being a person who is separate from the non-resident and a potential member if—
a: the fixed establishment satisfies subsection (6) and—
i: the registered bank is a non-resident; and
ii: there is no non-resident who is an ultimate parent of the registered bank under subsection (9):
b: the fixed establishment satisfies subsection (7) and there is a non-resident who is an ultimate parent of the registered bank under subsection (9).
5: A person satisfies this subsection if,—
a: under generally accepted accounting practice, consolidated group accounts—
i: are required to include the person and the registered bank:
ii: would be required to include the person and the registered bank but for relevant materiality thresholds:
b: the person is in the same group of companies as the registered bank under section IG 1(2)
6: A person or fixed establishment satisfies this subsection if,—
a: under generally accepted accounting practice, the person or fixed establishment would be required to be included in consolidated group accounts with the registered bank if—
i: the registered bank were resident in New Zealand; and
ii: the relevant materiality thresholds were satisfied:
b: the person is in the same group of companies as the registered bank under section IG 1(2)
7: A person or fixed establishment satisfies this subsection if,—
a: under generally accepted accounting practice, the person or fixed establishment would be required to be included in consolidated group accounts with the ultimate parent of the registered bank if—
i: the ultimate parent were resident in New Zealand; and
ii: the relevant materiality thresholds were satisfied:
b: the person is in the same group of companies as the ultimate parent under section IG 1(2)
8: A reporting bank may elect under this subsection to exclude from the New Zealand banking group of the reporting bank—
a: a person or a fixed establishment, whose main activity is the providing of life insurance:
b: a person who—
i: is resident in New Zealand; and
ii: has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and
iii: does not have a main activity that is banking, financing or leasing; and
iv: does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing:
c: a fixed establishment of a non-resident, if—
i: the non-resident has a voting interest of 100% in a person who is excluded by an election under paragraph (a); and
ii: the fixed establishment has a main activity of financing the person who is excluded by the election under paragraph (a); and
iii: the fixed establishment does not have a main activity that is banking, financing or leasing, other than the activity referred to in subparagraph (ii); and
iv: the fixed establishment does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing:
d: a person who—
i: is resident in New Zealand; and
ii: under generally accepted accounting practice is required for the making of financial reports to be included in consolidated group accounts with a person or fixed establishment who is excluded by an election under paragraph (a) or (b); and
iii: does not have a main activity that is banking, financing or leasing; and
iv: does not have a main activity that involves the ownership or control of entities having a main activity of banking, financing or leasing.
9: For the purposes of this section, the ultimate parent of a registered bank is a company—
a: that has an ownership interest in the registered bank, calculated under section FG 2
b: in which no ownership interest, as calculated under section FG 2 section FG 2
10: For the purposes of this section, the ultimate parent of a fixed establishment in New Zealand of a registered bank is the registered bank. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8D: Reporting bank for New Zealand banking group
1: For a New Zealand banking group that on a day includes a single registered bank, or includes no registered bank but includes a fixed establishment of a single registered bank, the reporting bank for the day is the registered bank.
2: For a New Zealand banking group that on a day includes more than 1 registered bank, the reporting bank for the day is—
a: the registered bank that first gives notice to the Commissioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs:
b: the registered bank chosen by the Commissioner, if paragraph (a) does not apply.
3: For a New Zealand banking group that on a day includes no registered bank but includes fixed establishments of more than 1 registered bank, the reporting bank for the day is—
a: the registered bank that first gives notice to the Commissioner of an election to be the reporting bank, if the Commissioner receives such a notice by the day that is 6 months after the end of the tax year in which the day occurs:
b: the registered bank chosen by the Commissioner, if paragraph (a) does not apply. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8E: Measurement periods and measurement days
1: For the New Zealand banking group and income year of a reporting bank, the measurement periods
a: the quarters in the income year, if the reporting bank does not make an election under paragraph (b) or (c):
b: each calendar month of the income year, if the reporting bank elects that the New Zealand banking group have such measurement periods:
c: each day of the income year, if the reporting bank elects that the New Zealand banking group have such measurement periods.
2: For the New Zealand banking group and income year of a reporting bank, the measurement days
3: If there is a change in the identity of the reporting bank for a New Zealand banking group, the measurement period corresponding to the first measurement day for the new reporting bank begins on the day after the last measurement day for the former reporting bank. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8F: Financial value and regulatory value
1: In sections FG 8B to FG 8J financial value
a: related to the time; and
b: were prepared for external reporting purposes; and
c: were produced consistently with generally accepted accounting practice at the time by—
i: consolidating the financial statements for the members of the New Zealand banking group that are in the same group of companies; and
ii: if more than 1 consolidation is required under subparagraph (i), combining the consolidated financial statements so as to eliminate inter-group transactions.
2: In sections FG 8B to FG 8J regulatory value Reserve Bank of New Zealand Act 1989 Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8G: New Zealand net equity of New Zealand banking group
1: The New Zealand net equity EQV – FRS – SDS – EID – UPB – INTG – CGA – REV – TXB – CEFA – NAFA – EOI – NOIA – AEQ – AEQI where—
EQV: is the sum of the following amounts for the New Zealand banking group:
a: the financial value for the measurement day of—
i: the shareholders' equity for the New Zealand banking group; and
ii: the branch equity relating to fixed establishments of the New Zealand banking group:
b: the financial value for the measurement day of shares, each of which—
i: is issued by a member of the taxpayer's New Zealand banking group; and
ii: does not contribute to the amount referred to in paragraph (a):
c: the financial value for the measurement day of financial arrangements, each of which is a loan, or the provision of funds by a non-resident to its fixed establishment that—
i: is not taken into account in the calculation of the group funding debt of the New Zealand banking group; and
ii: is made by a non-resident who is not a member of the New Zealand banking group and is associated with a member of the New Zealand banking group under section OD 7 OD 8(3)
iii: is made to a member of the New Zealand banking group; and
iv: does not contribute to the amount referred to in paragraph (a); and
v: does not give rise to interest expenditure other than as a result of a fluctuation in the value of a currency of a country relative to the value of a currency of another country; and
vi: does not relate to a supply of goods or services
FRS: is the financial value for the measurement day of fixed rate shares, each of which is—
a: issued by a member of the New Zealand banking group; and
b: owned by a person who is resident in New Zealand; and
c: included in the value of item EQV; and
d: issued by the member—
i: on or after 1 January 2005:
ii: before 1 January 2005, if the measurement period begins on or after 1 January 2010
SDS: is the financial value for the measurement day of stapled debt securities, each of which is—
a: owned by a person resident in New Zealand; and
b: included in the value of item EQV
c: stapled to shares other than shares of a company that is a proportional-stapling company
EID: is the financial value for the measurement day of financial arrangements, each of which—
a: is taken into account under paragraph (a) or (b) of the definition of item EQV in calculating the value of that item; and
b: gives rise to a deduction for the tax year under 1 or more of sections DB 6 to DB 8
UPB: is the financial value for the measurement day of unvested policyholder benefit liabilities and policy-holder retained profits that contribute to the value of item EQV
INTG: is the financial value for the measurement day of intangible assets, other than—
a: goodwill relating to a business that is not banking, financing, leasing, or life insurance and that—
i: is acquired from a person who, at the time of acquisition, is not associated under section OD 7 OD 8(3)
ii: relates to an entity that is acquired from a person who is not associated under section OD 7 OD 8(3)
b: a film or film right:
c: property that is depreciable property or is expected to become depreciable property
CGA: is the sum for the measurement day of capital gain amounts, each of which arises for the 2004-05 or a later tax year from a transfer of an intangible asset between a member of the New Zealand banking group and a person who—
a: is not a member of the New Zealand banking group; and
b: is associated with a member of the New Zealand banking group under section OD 7 OD 8(3)
REV: is the financial value for the measurement day of revaluation reserves that contribute to the value of item EQV
TXB: is the financial value for the measurement day of net future tax benefits that are taken into account in determining the value of item EQV and arise from—
a: net losses for the tax year:
b: losses carried forward from an earlier tax year:
c: timing or temporary differences to the extent that the items giving rise to the timing or temporary differences would contribute to a net loss for the tax year if the items were deductible in the tax year
CEFA: is the financial value for the measurement day of the credit enhancements provided by members of the New Zealand banking group, each of which is, for the purpose of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand,—
a: a credit enhancement that is provided to an associated funds management and securitisation scheme of a non-member:
b: a credit enhancement that is provided to an affiliated insurance group that is a non-member and has not been expensed
NAFA: is the financial value for the measurement day of advances by members of the New Zealand banking group, each of which is, for the purpose of the Capital Adequacy Framework that is issued by the Reserve Bank of New Zealand, an advance of a capital nature to a connected person who is not a member of the New Zealand banking group
EOI: is the amount that would, if the New Zealand banking group included the potential members of the New Zealand banking group and before any set-off allowed under generally accepted accounting practice, be the financial value for the measurement day of shares in non-residents that—
a: are held by—
i: a member or potential member of the New Zealand banking group:
ii: a company resident in New Zealand in which a member or potential member of the New Zealand banking group holds a direct voting interest of 10% or more and that, in the income year, pays to the member or potential member a dividend to which a conduit tax relief credit is attached; and
b: are not interests in foreign investment funds for which the FIF income or loss is calculated using the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method
c: are not shares in a grey list company that—
i: are listed on the official list of a recognised exchange; and
ii: are revenue account property; and
iii: would not be a sufficient interest in the offshore company if the class of the shares were the only class of share issued by the offshore company
NOIA: is the notional offshore investment amount for the New Zealand banking group for the income year of the reporting bank, as defined in subsection (4)
AEQ: is the financial value for the measurement day of interests, each of which is taken into account in calculating item EQV and is held by a person who—
a: is not a member of the New Zealand banking group; and
b: is not a member of the New Zealand banking group because of an election under section FG 8C(8)
c: is resident in New Zealand or holds the interest through a fixed establishment in New Zealand
AEQI: is the financial value for the measurement day of—
a: shares in persons who are not members of the New Zealand banking group because of an election under section FG 8C(8)
b: loans, other than on arm's-length terms, to persons who are not members of the New Zealand banking group because of an election under section FG 8C(8)
2: Subsection (3) applies if a component of an item, other than the item NOIA, that is subtracted from the item EQV under subsection (1)
3: The value of the component is included in a single item for which the value of the component is not less than the value of the component for each of the other items.
4: The notional offshore investment amount where—
FTC: is the total for the tax year of foreign tax credits each of which—
a: is claimed as a credit against the income tax liability for the tax year of—
i: a member of the New Zealand banking group:
ii: a person who is excluded from the New Zealand banking group by an election under section FG 8C(7)
b: does not arise from attributed CFC income or from FIF income; and
c: does not arise from income derived before 1 July 2005
DMT: is the amount—
a: set by the Governor-General by Order in Council as the threshold amount for the application of this subsection; or
b: equal to $5,000,000, if no threshold amount is set under paragraph (a) and paragraph (c) does not apply; or
c: equal to $416,667 multiplied by the number of months beginning on or after 1 July 2005 in the corresponding income year for the reporting bank, if the corresponding income year includes that date and no threshold amount is set under paragraph (a)
CRT: is the rate of tax for companies referred to in schedule 1, part A
IRR: is the amount—
a: set by the Governor-General by Order in Council as the interest rate of return for the purposes of this subsection; or
b: of 7% per year, if no interest rate of return is set under paragraph (a)
NM: is the number of months beginning on or after 1 July 2005 in the income year of the reporting bank for the New Zealand banking group.
5: The Governor-General may, from time to time by Order in Council,—
a: specify a type of instrument that is included in item EQV for the purposes of subsection (1):
b: specify a type of instrument that is not included in item EQV for the purposes of subsection (1):
c: set, replace, or repeal a figure for a threshold amount for a value of an instrument, or aggregate value of a type of instrument, held by a person or group of persons for the purposes of a specification under paragraph (a) or (b):
d: amend or delete a specification under paragraph (a) to (c):
e: set, replace, or repeal a figure for the threshold amount for the purposes of paragraph (a) of the definition of item DMT in subsection (4):
f: set, replace, or repeal a figure for the interest rate of return for the purposes of paragraph (a) of the definition of item IRR in subsection (4).
6: An Order in Council under subsection (5) may—
a: come into effect on or after 1 July 2005:
b: apply for measurement periods and quarters that—
i: are in the 2005-06 or a subsequent income year; and
ii: commence on or after 1 July 2005. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section FG 8G(1) formula amended 6 October 2009 section 807(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section FG 8G(1) formula item SDS inserted 6 October 2009 section 807(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Subsection (1) the definition of item EOI paragraph (b) amended 1 April 2007 section 89(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method comparative value method or the deemed rate of return method See section 89(2)
FG 8H: Net equity threshold
1: The net equity threshold 0.04 x (RWE – DEQ) where—
RWE: is the sum of the following values for the measurement day:
a: for an asset that is included in a balance sheet, the regulatory value of the asset:
b: for an exposure that is not included in a balance sheet, the regulatory value of the exposure:
c: for goodwill that is not taken into account in calculating item INTG in determining the New Zealand net equity of the New Zealand banking group, the financial value of the goodwill
DEQ: is the total of the regulatory values for the measurement day of items, other than item NOIA, that are deducted from item EQV in determining the New Zealand net equity of the New Zealand banking group.
2: For the purposes of subsection (1), the assets of a fixed establishment include the assets that are treated as being the assets of the fixed establishment under generally accepted accounting practice. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8I: Valuation of debt and risk-weighted exposures
For the purposes of sections FG 8B to FG 8H
a: in New Zealand currency; and
b: using the close of trading spot exchange rate for the foreign currency on the day. Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 8J: Treatment of temporary change in New Zealand net equity or net equity threshold
A change in a quantity that, but for this subsection, would produce a temporary change in the New Zealand net equity or net equity threshold of the New Zealand banking group of a registered bank does not affect the value of the New Zealand net equity or net equity threshold if the change is produced by an arrangement that has an effect of defeating the intent and application of sections FG 8B to FG 8I Sections FG 8B to FG 8J inserted 1 October 2005 section 58 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FG 9: Treatment of specified leases and interest expense
In this subpart,—
a: a deemed loan under section FC 6(3)
b: expenditure incurred by the lessee in respect of specified leases for which a deduction is allowed must be treated as an amount of interest under section DB 6 DB 7 DB 8
c: interest that is allowed as a deduction under section DP 1(1)(b) DV 10(1)(a) section DB 6 DB 7 DB 8 section DB 6 DB 7 DB 8 1994 No 164 s FG 9
FG 10: Mode of elections
1: Any election available to a person under this subpart must be exercised by the person filing the person's return of income for the income year completed in a manner which reflects the election.
2: Notwithstanding subsection (1), any election under section FG 4(5) FG 5(5)(b)
3: Notwithstanding subsection (1), an election made under section FG 4(11) 1994 No 164 s FG 10
FH: Foreign attributed income excess interest allocation
Contents
FH 1: Circumstances in which group excess interest allocation required
1: Subject to subsection (2), the group excess interest allocation rules in sections FH 5 to FH 8
a: for the imputation year that corresponds with the tax year—
i: is a dividend withholding payment account company or a conduit tax relief company; and
ii: is not a member of a New Zealand banking group for a registered bank; and
b: in the corresponding income year—
i: derives foreign attributed income:
ii: is paid a dividend from which the company must deduct an amount of dividend withholding payment or would have to deduct such an amount but for section NH 7
2: The group excess interest allocation rules do not apply for a tax year to—
a: a company, if the total of the rebates in the following subparagraphs is less than $50,000, calculated as if item EIA section KH 1(2)
i: income tax rebates under section KH 1 section NH 7
ii: income tax rebates under section KH 1 section NH 7
iii: income tax rebates under section KH 1 section NH 7
b: a company whose New Zealand foreign attributed income group debt percentage for the tax year is 66% or less. 1994 No 164 s FH 1 Subsection (1) substituted 1 July 2005 section 59 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FH 2: Rules for determining company's foreign attributed income group
1: If the thin capitalisation interest apportionment rule in section FG 8 section FG 2 section FG 4(10) to (14D)
2: If subsection (1) does not apply, the company's foreign attributed income group consists of—
a: the company; and
b: every other company that is—
i: in the same group of companies as the company; and
ii: resident in New Zealand or carrying on business in New Zealand through a fixed establishment in New Zealand. 1994 No 164 s FH 2
FH 3: Rules for determining New Zealand foreign attributed income group debt percentage
1: Subject to subsections (2) and (3), the New Zealand foreign attributed income group debt percentage of a company for a tax year is calculated under section FG 4 sections FG 6 FG 7 FG 9
2: If a company and each company in the same New Zealand tax group are the company's foreign attributed income group under section FH 2(2)
a: section FG 4(10) to (14F)
b: the group of companies referred to in section FG 4(9) section FH 2(2)
c: section FG 4(6)
3: The total assets of the group are reduced by the total of the amounts calculated for each member of the group as follows: NRS x (CFC + FIF) where—
NRS: is either—
a: if the group member receives conduit tax relief by way of an income tax rebate under section KH 1 section KH 1(2)
b: if the group member receives conduit tax relief by reducing its dividend withholding payment under section NH 7 section NH 7(1)
CFC: is the total value, at the relevant measurement time and determined under section FG 4(3)
FIF: is the total value, at the relevant time and measured under section FG 4(3) 1994 No 164 s FH 3
FH 4: Rules for determining consolidated foreign attributed income group debt percentage
1: A company may choose to calculate its consolidated foreign attributed income group debt percentage for the tax year under this section if its New Zealand foreign attributed income group debt percentage for the tax year is more than 66%.
2: Subject to subsections (3) to (8), the consolidated foreign attributed income group debt percentage is calculated under the rules set out in section FH 3
3: A controlled foreign company or foreign investment fund of the type referred to in item CFC FIF section FH 3(3)
a: has a total income interest of 40% or more in the controlled foreign company for the accounting period in which the relevant measurement date under section FG 4(5)
b: would be treated, under section EX 8 section FG 4(5)
4: A controlled foreign company or foreign investment fund of the type referred to in item CFC FIF section FH 3(3)
a: has a total income interest of 5% or more but less than 40% in the controlled foreign company for the accounting period in which the relevant measurement date under section FG 4(5)
b: would be treated, under section EX 8 section FG 4(5)
5: A controlled foreign company's or foreign investment fund's consolidation with a foreign attributed income group under subsection (4) applies only to the extent that the percentage of the controlled foreign company's or foreign investment fund's debts and assets equal the total percentage income interest of the foreign attributed income group in the controlled foreign company or foreign investment fund.
6: The consolidation required under subsections (3) and (4) is made—
a: as if the controlled foreign company or foreign investment fund were a member of the company's foreign attributed income group; and
b: on a basis for eliminating intra-group balances used under generally accepted accounting practice for consolidation of a group of companies; and
c: by calculating the amount of debts and assets of the controlled foreign company or foreign investment fund using the values shown in the financial accounts for the accounting period and to a financial reporting standard that is equivalent to generally accepted accounting practice.
7: No reduction from the amount of total assets is to be made under section FH 3(3)
8: A reduction is to be made equal to the total value of assets (determined under section FG 4(3)
a: referred to in items CFC FIF section FH 3(3)
b: not consolidated under subsection (3) or (4). 1994 No 164 s FH 4
FH 5: Rule for calculating group excess interest allocation amount
The group excess interest allocation amount for a company for a tax year is calculated under the following formula (but cannot be less than nil): where—
GI: is the total of deductions that companies are allowed for the tax year if they are members of the company's foreign attributed income group at the end of the tax year under—
a: section DB 6 DB 7 DB 8 section FG 8
b: sections FC 6 to FC 8
IGI: is the total of amounts included in item GI GIFD
GIFD: is the total of amounts included in item GI sections FH 3 FH 4 section FG 4(2)
NCGDP: is the New Zealand foreign attributed income group debt percentage of the company for the tax year calculated under section FH 3
CGDP: is the greatest of—
a: 66%; or
b: the New Zealand foreign attributed income group debt percentage that would be calculated for the company if section FH 3(3)
c: the consolidated foreign attributed income group debt percentage of the company for the tax year, calculated under section FH 4 1994 No 164 s FH 5
FH 6: Rule for calculating company's excess interest allocation percentage
If a company has a group excess interest allocation amount for a tax year, the company's excess interest allocation percentage is the lesser of 1 and the amount calculated as follows: where—
GEIA: is the group excess interest allocation amount for the tax year
GFAI: is the total of the foreign attributed income for the tax year of all companies (including the company) which are in the company's foreign attributed income group at the end of the tax year
GFALO: is the total of the foreign attributed loss offsets for the tax year of all companies (including the company) that are in the company's foreign attributed income group at the end of the tax year
GBC: is the total of the amounts able to be credited against the income tax liability for the tax year under section MF 5(4) section KH 1
TR: is the rate of income tax stated in schedule 1, part A, clause 5 1994 No 164 s FH 6
FH 7: Rule for calculating individual excess interest allocation amount
The individual excess interest allocation for the company for the tax year to be included in the formula in section KH 1(2) where—
BC: is the total of—
a: the amount able to be credited by the company against its income tax liability for the tax year under section MF 5(4) section KH 1
b: the amount credited by another company in the same group of companies against the company's income tax liability for the tax year under section MF 5(4) section KH 1
TR: is the rate of income tax stated in schedule 1, part A, clause 5
FAI: is the company's foreign attributed income for the tax year
FALO: is the company's foreign attributed loss offsets for the tax year
EIAP: is the company's excess interest allocation percentage calculated under section FH 6 1994 No 164 s FH 7
FH 8: Rules for applying surplus group excess interest allocation amount to increase income tax and dividend withholding payment
1: If the total of individual excess interest allocations calculated under section FH 7 section FH 5
2: The company's surplus group excess interest allocation percentage for the tax year is the lesser of 1 and the percentage calculated as follows: where—
SGEIA: is the surplus group excess interest allocation amount for the tax year
TR: is the rate of income tax stated in schedule 1, part A, clause 5
GDWP: is the total of dividend withholding payments (calculated after loss offsets are claimed under section NH 3 section NH 7
3: The company is deemed to derive, on the last day of the tax year, an amount of income equal to the foreign dividend adjustment amount.
4: The company's foreign dividend adjustment amount is calculated as follows: where—
DWP: is the total of dividend withholding payments (calculated after loss offsets are claimed under section NH 3 section NH 7
SGEIP: is the surplus group excess interest allocation percentage calculated under subsection (2) for the company and the tax year
TR: is the rate of income tax stated in schedule 1, part A, clause 5
5: A conduit tax relief company has a conduit tax relief account adjustment of an amount calculated as follows: FDAA x TR where—
FDAA: is the company's foreign dividend adjustment amount for the tax year
TR: is the rate of income tax stated in schedule 1, part A, clause 5
6: A membership change that has only a temporary effect on the company's foreign attributed income group is disregarded when making calculations under this section, if a purpose or effect of the change is to defeat the intent and application of this section. 1994 No 164 s FH 8
I: Effect of certain disposals and resulting acquisitions
Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Contents
FI 1: Disposals and resulting acquisitions to which subpart FI applies
1: The purpose of this subpart is to provide a disposal value in respect of the disposals and a cost price in respect of the resulting acquisitions of property for transactions to which subsections (2) and (3) refer.
2: This subpart applies to a transaction that is of a type referred to in subsection (3).
3: This subpart applies to a transaction that is—
a: a distribution of property made by a trustee of a trust to a beneficiary of that trust:
b: a distribution in kind made by a company—
i: to a shareholder of that company, or to a person in a shareholding relationship with that company; and
ii: to which section CD 5
iii: that is a transfer of value to which section CD 3(1)(a)
c: a gift made by one person to another person:
d: a transfer of an estate of a deceased person to an administrator or executor of the estate occurring as a result of the death of a person:
e: a distribution of property made by an administrator, executor, or trustee of the estate of a deceased person to a person who is beneficially entitled to receive the property under a will or an intestacy:
f: a settlement of property by one trust on another trust, if authorised—
i: under a trust instrument as a power of advancement or resettlement:
ii: under section 41 Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 2: Disposal and resulting acquisition of property treated as occurring at market value
1: A transaction to which this subpart applies is to be treated as—
a: a disposal at market value by the person who disposes of the property; and
b: an acquisition at market value by the recipient of the property.
2: In this Act, the market value of property that a person receives from a transaction to which this subpart applies is the market value of the property for the person from whom the property was received. Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 3: Date on which disposal and resulting acquisition treated as occurring
1: Unless subsection (2) applies, the person who disposes of property in a transaction to which section FI 1
2: On the happening of a transaction to which section FI 1(3)(d) Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 4: Disposal and resulting acquisition of property by
spouse, civil union partner, or de facto partner On the death of a person, a disposal under the terms of a will or intestacy in a transaction to which section FI 1(3)(d)
a: a person who is not within the second degree of relationship to the deceased is beneficially entitled under the will or intestacy to other property (the other property
b: the other property
i: revenue account property:
ii: an interest in a FIF:
iii: a financial arrangement other than a financial arrangement in respect of which the deceased person or a trustee of the deceased person was a cash basis person:
iv: an item in respect of which a person has an amount of depreciation loss under section EE 1(2) Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 The heading to section FI 4 amended 1 October 2005 section 90(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting spouse, civil union partner, or de facto partner spouse or de facto partner Section FI 4 amended 1 October 2005 section 90(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting in a transaction to which section FI 1(3)(d) or (e) to the surviving spouse or de facto partner of the deceased person of property to which section FI 1(3)(d) or (e) Paragraph (a) amended 1 October 2005 section 90(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting under the will or intestacy to other property (the other property to property Paragraph (b) amended 1 October 2005 section 90(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting the other property the property
FI 5: Distributions of property to close relatives and others
1: This section applies to a transaction to which section FI 1(3)(e) section CW 36
a: the sole beneficiaries of the property of the deceased person:
b: beneficiaries of the deceased person and the sole beneficiaries of property of the deceased person that is—
i: revenue account property:
ii: an interest in a FIF:
iii: a financial arrangement other than a financial arrangement in respect of which the deceased person or a trustee of the deceased person was a cash basis person:
iv: an item in respect of which a person has an amount of depreciation loss under section EE 1(2)
2: A disposal and acquisition of property to which this section applies is treated as a transaction to which subpart FF applies, if—
a: the terms of the testamentary instrument or intestacy of the deceased person establish no life interest; and
b: other than for the period in which the property is subject to administration or executorship, the terms of the testamentary instrument or intestacy of the deceased person require that no property of the deceased person be held in trust; and
c: in a tax year during which the property is subject to administration or executorship or in which the property is held in trust, the net income of the estate is distributed beneficially to the maximum extent that is allowable under the terms of the will or intestacy and that is consistent with the legal obligations of the trustee. Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 6: Disposal and resulting acquisition of timber
If a transaction to which section FI 1(3)(d) subpart FF Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Section FI 6 substituted 1 October 2005 section 91 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006
FI 7: Relationship of section FI 2(2) to subpart CB
1: This section applies to a transaction to which section FI 1(3)(d)
a: the transaction involves an interest in property that is land; and
ab: persons who are related within the second degree of relationship to the deceased person receive the land as beneficiaries—
i: under the transaction (the original transaction), section FI 1(3)(e)
ii: under a transaction to which section FI 1(3)(e) section FI 1(3)(d)
b: the sale of the interest in the land, if sold by the deceased person, would result in income to the deceased person under any of sections CB 7 CB 8 CB 9 CB 12
2: When this section applies, sections CB 7 CB 8 CB 9 CB 12 section FI 1(3)(d)
3: If a disposal of an interest in land by an administrator or executor or beneficiary of the estate of a deceased person within 10 years of its acquisition by the deceased person results in income under any of sections CB 7 CB 8 CB 9 CB 12 Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Subsection (1)(a) substituted 1 October 2005 section 92(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1)(ab) inserted 1 October 2005 section 92(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 Subsection (1)(b) amended 1 October 2005 section 92(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting CB 10, or CB 12 or CB 10 Subsection (1)(b) amended 17 May 2006 section 92(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting or CB 12 CB 10, or CB 12 Subsection (2) amended 1 October 2005 section 92(4) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting CB 10, and CB 12 and CB 10 Subsection (2) amended 17 May 2006 section 92(5) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting and CB 12 CB 10, and CB 12 Subsection (3) amended 1 October 2005 section 92(6) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting CB 10, or CB 12 or CB 10 Subsection (3) amended 17 May 2006 section 92(7) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting or CB 12 CB 10, or CB 12
FI 8: Relationship of subpart FI to unexpired prepayments
If property subject to section EA 3 section FI 1(3)(d) section FI 2 section EA 3(4) to (7) Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 9: Death occurring before 1 October 2005
1: This section applies to a transaction to which section FI 1
a: the death occurred before 1 October 2005; and
b: in the year in which the transaction occurred,—
i: each beneficiary of the deceased person is a New Zealand resident; and
ii: no amount of the income of the beneficiary is exempt income under section CW 36
c: the tax returns of the deceased person and of the resulting estate that are provided to the Commissioner in respect of the income year in which the death occurred are calculated on the basis that all the property of the deceased person was disposed of immediately before death—
i: at market values; or
ii: at the values given by subpart FF for property of that type; or
iii: at a combination of the values in subparagraphs (i) and (ii); and
d: the administrator or executor adopted for taxation purposes the value referred to in paragraph (c) for the property.
2: For the purposes of the Income Tax Act 1994
3: Despite subsection (2), if an enactment contained in the Income Tax Act 1994 Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 10: Value of property acquired by beneficiary of trust before 1 October 2005
1: This section applies to a transaction to which section FI 1
a: the transaction occurred before 1 October 2005; and
b: the beneficiary was a New Zealand resident when the beneficiary acquired the property; and
c: no amount of the income of the beneficiary is exempt income under section CW 36
d: the tax returns of the estate and of the beneficiary provided to the Commissioner in respect of the income year in which the transaction occurred are calculated on the basis that—
i: the distributed property was disposed of at market value; or
ii: the disposition of the estate was a disposition and acquisition of the property at values given by subpart FF for property of that type; or
iii: the value of the property was a combination of the values given by paragraphs (d)(i) or (ii); and
e: the beneficiary adopted for taxation purposes the value referred to in paragraph (d) for the property.
2: For the purposes of the Income Tax Act 1994
3: Despite subsection (2), if an enactment contained in the Income Tax Act 1994 Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FI 11: Disposal of certain financial arrangements on death
If property is disposed of in a transaction to which section FI 1(3)(d) section EW 60(1) section FI 2 Subpart I inserted 1 October 2005 section 60 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
FZ: Terminating provisions
Contents
FZ 1: Deduction for dividends paid on certain preference shares
1: This section does not apply to the extent that any specified preference shares in any close company are to be issued to or are held by—
a: any holder of any other class or classes of shares in the capital of the company; or
b: any person where that person and any holder of any other class or classes of shares in the capital of the company are associated persons,— unless the Commissioner has approved the terms of issue of the specified preference shares as being ordinary commercial conditions consistent with those applying between parties at arm's length, and those terms as approved are continued.
2: This section does not apply to any company which is under the control of persons who are not deemed to be resident in New Zealand.
3: For the purposes of subsection (2), section OD 1 50% 25%
4: Subject to this section, a company to which this section applies is allowed a deduction in any income year of an amount equal to the dividends paid by the company in that income year in respect of specified preference shares of that company in any case where at all times in that income year the aggregate amount of the available subscribed capital per share calculated under the slice rule of all the preference shares, including specified preference shares, of the company does not exceed 50% of the aggregate amount of the available subscribed capital per share calculated under the slice rule of all the ordinary shares of the company.
5: In this section, specified preference shares
a: that have been issued and subscribed for in cash on or after 22 May 1975, in accordance with a binding contract entered into before 8.00 pm New Zealand Standard Time on 23 October 1986; and
b: that are preferential as to dividends; and
c: that are fully paid up in cash; and
d: that are entitled to a fixed rate of dividend without a further right to participate in profits; and
e: that are issued at par value only; and
f: that are—
i: redeemable in cash at that par value; or
ii: convertible into, or redeemable by the issue of, shares or stock in the capital of the company or in the capital of any other company not earlier than 5 years after the date of allotment. 1994 No 164 s FZ 1
FZ 2: Amounts owing under convertible notes deemed to be share capital and holders deemed to be shareholders
1: Where, under the terms of any issue of convertible notes, any person becomes entitled to have a convertible note issued or given to the person by a company, the company is, for the purposes of this section, deemed to have issued or given the convertible note at the time when that person first became entitled to have the convertible note issued or given to the person.
2: Where a company has issued or given a convertible note in accordance with an offer made by or to the company after 8 September 1960,—
a: the company is denied a deduction in respect of any interest payable under the convertible note or of any expenditure or loss incurred in connection with the convertible note or in borrowing any money in respect of which the convertible note is issued or given; and
b: for the purposes of this Act,—
i: the amount in respect of which the convertible note is issued or given is deemed to be share capital in the capital of the company; and
ii: that amount is deemed to be the amount paid up in respect of shares of which the holder of the convertible note is deemed to be the holder; and
iii: the holder of the convertible note is deemed to be a shareholder in the company,— and this Act applies accordingly.
3: Subsection (2) does not apply with respect to any convertible note that is issued or given by a New Zealand company on or after 11 June 1971, if the total amount in respect of which the convertible note has been issued or given is required, not later than 5 years after the date on which the company has issued or given the convertible note, to be, under the terms of issue of the convertible note, converted into, or redeemed or paid by the issue of, shares or stock in the capital of the company.
4: A company is denied a deduction in respect of—
a: any interest payable on the whole or any part of the amount in respect of which the company has issued or given a convertible note to which subsection (3) applies, after—
i: the date on which, under the terms of issue of the convertible note, the amount in respect of which the convertible note has been issued or given is required to be converted into, or to be redeemed or paid by the issue of, shares or stock in the capital of the company; or
ii: the expiration of 5 years after the date on which the company has issued or given the convertible note,— whichever is the earlier; or
b: any expenditure or loss incurred at any time in connection with a convertible note to which subsection (3)
5: Notwithstanding anything in subsection (1), the period of 5 years referred to in subsections (3) and (4)(a)(ii) is deemed not to include any interval between the time when the person entitled first became entitled to have the convertible note issued or given to the person and the commencement of the period for which interest under the convertible note commences to become payable, if and to the extent that that interval is, in the opinion of the Commissioner, necessary for the completion of formalities preliminary to the issue of the convertible note.
6: This section does not apply to any convertible note issued after 8.00 pm New Zealand Standard Time on 23 October 1986, other than a convertible note issued in accordance with a binding contract entered into before that time. 1994 No 164 s FZ 2
G: Avoidance and non-market transactions
Contents
GB: Avoidance: general
Contents
GB 1: Agreements purporting to alter incidence of tax to be void
1: Where an arrangement is void in accordance with section BG 1
a: such amounts of assessable income, deductions, and available net losses as, in the Commissioner's opinion, that person would have, or might be expected to have, or would in all likelihood have, had if that arrangement had not been made or entered into; or
b: such amounts of assessable income and deductions as, in the Commissioner's opinion, that person would have had if that person had been allowed the benefit of all amounts of assessable income, or of such part of the assessable income, as the Commissioner considers proper, derived by any other person or persons as a result of that arrangement.
2: Where any amount of assessable income or deduction is included in the calculation of taxable income of any person under subsection (1), then, for the purposes of this Act, that amount is not included in the calculation of the taxable income of any other person.
2A: Without limiting the generality of the preceding subsections, if an arrangement is void in accordance with section BG 1
a: disallow the credit in whole or in part; and
b: allow in whole or in part the benefit of the credit of tax for any other taxpayer.
2B: For the purposes of subsection (2A), the Commissioner may have regard to the credits of tax which the taxpayer or another taxpayer would have had, or might have been expected to have had, if the arrangement had not been made or entered into.
2C: In this section, credit of tax
a: credit has been allowed for a payment of any kind, whether of tax or otherwise, made by a person; or
b: of a credit, benefit, entitlement, or state of affairs.
3: Without limiting the generality of subsections (1) and (2), section BG 1 arrangement liability tax avoidance tax avoidance arrangement section OB 1 1994 No 164 s GB 1
GC: Avoidance: specific
Contents
GC 1: Arrangement to defeat application of cross-border arrangement provision
Notwithstanding section GD 13(2) section GD 13 1994 No 164 s GC 1
GC 2: Arrangements to defeat application of net loss carry forward provisions
Where any company (in this section referred to as the loss company) claims to carry forward the whole or any part of any net loss for any income year to any later income year and—
a: any shares in the loss company or in any other company have been subject to any arrangement or series of related or connected arrangements; or
b: any shares in the loss company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly by any means,— in each case for the purpose, or for purposes including the purpose, of enabling the loss company to meet the requirements of section IF 1(1) sections IE 1 IF 1 1994 No 164 s GC 2
GC 3: Effect on continuity provisions of change in beneficiaries of trust
1: The provisions of this section apply only to modify the provisions of sections OD 3 OD 4
2: Where at any time—
a: any share in a company or option over a share in a company is held by a trustee; and
b: there is a change in the beneficiaries of the trust under an arrangement which has a purpose or effect of defeating the intent and application of any of the continuity provisions,— the trustee is treated as having disposed of the share or option at that time to an unrelated third party and to have reacquired the share or option immediately thereafter. 1994 No 164 s GC 3
GC 4: Arrangement to defeat application of net loss offset provisions
No offset is allowed under section IG 2(2)
a: have been subject to any arrangement or series of related or connected arrangements; or
b: have had any rights attaching to them extinguished or altered, directly or indirectly, by any means,— in either case for the purpose, or for purposes including the purpose, of enabling that first-mentioned company to meet the requirements of that subsection so as to defeat the intent and application of section IG 2 1994 No 164 s GC 4
GC 5: Arrangement to defeat application of qualifying company provisions
Where the Commissioner is of the opinion that at any time any shares in a company have been subject to any arrangement or series of related or connected arrangements for the purpose, or for purposes including the purpose, of making the company or any other company (the relevant company being in this section referred to as the specified company) a qualifying company so as to defeat the intent and application of subpart HG, the specified company is deemed not to be a qualifying company at that time. 1994 No 164 s GC 5
GC 6: Arrangement to defeat application of depreciation provisions
If specified taxpayer a deduction for an amount of depreciation loss so 1994 No 164 s GC 6 Section GC 6 amended 3 April 2006 section 109(1)(a) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the word If For the purposes of sections EZ 16 to EZ 18 and FF 15 Section GC 6 amended 3 April 2006 section 109(1)(b) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the words a deduction for an amount of depreciation loss so a deduction so
GC 7: Arrangements in respect of CFCs
Where in relation to any foreign company any 2 or more persons resident in New Zealand have entered into an arrangement by which any control interests in that foreign company are held by any other person or persons, which arrangement has the purpose or a purpose of preventing the foreign company from being a controlled foreign company, those control interests are deemed to be held by those persons resident in New Zealand divided equally among them. 1994 No 164 s GC 7
GC 8: Arrangement to defeat application of CFC attributed repatriation provisions
For the purposes of sections CD 34 to CD 41
a: any controlled foreign company enters into any loan or other arrangement (including a security arrangement) with any other person; and
b: the arrangement does not directly result in any person having any attributed repatriation in respect of the controlled foreign company; and
c: where, having regard to any connection between the parties to the loan or arrangement or to any other relevant circumstances, the parties were dealing with each other in relation to the loan or arrangement in a manner that has the purpose or effect of—
i: directly or indirectly enabling any person (whether or not the person referred to in paragraph (a), and referred to in this paragraph as the investor
ii: defeating the intent and application of sections CD 34 to CD 41 the related arrangement 1994 No 164 s GC 8
GC 9: Variations in control or income interests in foreign companies
1: Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or income interests that is attributable to an acquisition of control or income interests or a disposal of control or income interests by the person (in this subsection referred to as the variation) the subsequent variation
a: the variation reduces the person's control interest or income interest in the foreign company and the subsequent variation increases that person's control interest or income interest in the foreign company; or
b: the variation increases the person's control interest or income interest in the foreign company and the subsequent variation reduces that person's control interest or income interest in the foreign company,— and, if it were not for the application of this subsection the effect of the variation would be that a greater amount of attributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrangement the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the variation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person's control interest or income interest in the foreign company at the end of the quarter.
2: Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or income interests that is attributable to a reduction or increase in any of the foreign company aggregates (in this subsection referred to as the variation subsequent variation
a: the variation reduces the person's control interest or income interest in the foreign company and the subsequent variation increases that person's control interest or income interest in the foreign company; or
b: the variation increases the person's control interest or income interest in the foreign company and the subsequent variation reduces that person's control interest or income interest in the foreign company,— and if it were not for the application of this subsection the effect of the variation would be that a greater amount of attributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrangement the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the variation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person's control interest or income interest in the foreign company at the end of the quarter.
3: Where before the end of a quarter there is, in relation to any person and any foreign company, a variation in control or income interests (in this subsection referred to as the variation
a: an acquisition of control or income interests or a disposal of control or income interests by the person; or
b: a reduction in any of the foreign company aggregates or an increase in any of the foreign company aggregates,— and within a period of 365 days after the variation there is a further variation in control or income interests (in this subsection referred to as the subsequent variation
c: in any case where the variation was of the type specified in paragraph (a), to an increase in the foreign company aggregates or a reduction in the foreign company aggregates; or
d: in any case where the variation was of the type specified in paragraph (b), to an acquisition of control or income interests or a disposal of control or income interests by the person,— and if it were not for the application of this subsection, the effect of the variation would be that a greater amount of attributed CFC loss or a lesser amount of attributed CFC income or attributed repatriation would be attributed to the person, or to any person associated with the person, or, where the person is a controlled foreign company, to any person holding an income interest in the controlled foreign company, then if the variation and the subsequent variation are part of an arrangement the effect, or 1 of the effects, of which is to defeat the intent and application of the international tax rules, the variation, to the extent it was reversed by the subsequent variation, is deemed not to have occurred when calculating that person's control interest or income interest in the foreign company at the end of the quarter.
4: Subsections (1) and (3) do not apply where the person first mentioned in each of those subsections acquired a control interest or an income interest in a controlled foreign company from, or disposes of a control interest or income interest in a controlled foreign company to, a person who—
a: is at the time of the acquisition or disposal resident in New Zealand; and
b: is required to include as assessable income any attributed CFC income which that person might derive; and
c: has immediately prior to the acquisition or immediately after the disposition (as the case may be) an income interest of 10% or greater in that controlled foreign company under sections EX 14 to EX 17
5: Nothing in this section is to be construed as limiting the circumstances in which a person is regarded as being entitled to acquire anything under section EX 6
6: For the purposes of the international tax rules, where a company resident in New Zealand becomes a foreign company and subsequently within 183 days becomes a company resident in New Zealand, that company is deemed to have been resident in New Zealand at all times during that period.
7: In this section,— acquisition of control or income interests section EX 5(1) EX 9(1) disposal of control or income interests section EX 5(1) EX 9(1) foreign company aggregates
a: the available subscribed capital per share calculated under the slice rule of shares in the foreign company; or
b: the rights to vote or participate in any decision-making concerning the distributions to be made by that foreign company (not being decision-making undertaken by directors acting only in their capacity as directors), the constitution of that foreign company, any variation in the issued capital of the foreign company, or the appointment or election of directors of the foreign company; or
c: the rights to receive or have dealt with the income of the foreign company, if distributed; or
d: the rights to receive or have dealt with the net assets of the foreign company, if distributed variation in control or income interests
a: an acquisition of control or income interests; or
b: a disposal of control or income interests; or
c: a reduction in any of the foreign company aggregates; or
d: an increase in any of the foreign company aggregates. 1994 No 164 s GC 9 Section GC 9(4)(c) amended 19 December 2007 section 102(1) Taxation (Business Taxation and Remedial Matters) Act 2007
GC 10: Attributed CFC income and FIF income: arrangements in respect of elections
Notwithstanding sections EX 27(3) EX 42(5)
a: an income interest in a controlled foreign company or an attributing interest in a foreign investment fund is transferred from 1 person to an associated person on or more occasions; and
b: the associated persons enter into an arrangement with respect to making or not making—
i: the election referred to in section EX 27(3)
ii: the election referred to in section EX 42(5)
iii: any combination of 2 or more such elections; and
c: the arrangement has an effect of defeating the intent and application of the international tax rules,— the Commissioner may deem any 1 or more of such elections to have been made or not made to the extent appropriate to prevent the arrangement having such effect. 1994 No 164 s GC 10
GC 11A: Non-market transactions to acquire film rights
1: A person must reduce the deduction allowed to them under section DS 1
a: the Commissioner considers that the person ( person A person B
b: the amount of the expenditure incurred by person A in acquiring the film right is more than the market value of the film right at the time it was acquired by person A.
2: If subsection (1) applies, the deduction must be reduced to an amount equal to the market value of the film right at the time it was acquired by person A.
3: If person A acquires only a share of a film right, this section applies only to the part of the total market value of the film right that is attributable to that share. 1994 No 164 s GC 11(3)
GC 11B: Manipulation of arrangements to acquire film rights
If the Commissioner considers that 2 persons have made arrangements so that section DS 1 EJ 4 EJ 5
a: the deduction allowed to the person under section DS 1
b: the deduction allocated under section EJ 4 EJ 5 1994 No 164 s GC 11(4)
GC 12: Petroleum mining
1: Without limiting the provisions of sections BG 1 GB 1 GZ 1
a: a disposal of any petroleum mining asset on or after 1 July 1992, together with any related arrangements (if any); or
b: the incurring of petroleum exploration expenditure on or after 1 July 1992, together with any related arrangements (if any); or
c: a farm-out arrangement entered into on or after 16 December 1991, together with any related arrangements (if any),— has the effect or has been entered into for a purpose of tax avoidance, the Commissioner may, in accordance with section GB 1
2: Without limiting the generality of subsection (1), and for the purposes of that subsection, an arrangement having the effect of tax avoidance includes—
a: an arrangement involving the disposal, on or after 1 July 1992, of any petroleum mining asset where it is probable at the time the arrangement is entered into that the person acquiring the petroleum mining asset—
i: will through a related arrangement, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the expenditure of acquiring the petroleum mining asset; or
ii: will be (or has been or is) effectively compensated in some way for the whole or part of that expenditure:
b: an arrangement involving the incurring, on or after 1 July 1992, of petroleum exploration expenditure where it is probable at the time the arrangement is entered into that the person who is to incur the petroleum exploration expenditure—
i: will through a related arrangement, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the petroleum exploration expenditure; or
ii: will be (or has been or is) effectively compensated in some way for whole or part of the petroleum exploration expenditure:
c: an arrangement, involving a farm-out arrangement entered into on or after 16 December 1991, where it is probable at the time the arrangement is entered into that—
i: the farm-in party will through a related arrangement, whether in relation to an associated person or otherwise, not have to suffer the whole or part of the farm-in expenditure attributable to the proportionate interest acquired by the farm-in party under the farm-out arrangement; or
ii: the farm-in party or an associated person will be (or has been or is) effectively compensated in some way for the whole or part of that farm-in expenditure:
d: an arrangement by which a petroleum miner disposes of a petroleum mining asset to an associated person on or after 1 July 1992 for the purpose, or for purposes including the purpose, of ensuring that the associated person secures the benefit of a greater deduction than that which would have been allowed if the asset had been disposed of for its market value:
e: an arrangement by which a petroleum miner enters into a farm-out arrangement with an associated person on or after 16 December 1991 for the purpose, or for purposes including the purpose, of ensuring that the associated person receives the benefit of a greater deduction than would have been allowed if the farm-out arrangement had been entered into on substantially the same terms as those on which it would have been entered into with a person not associated with the petroleum miner.
3: This section applies with any necessary modifications to a petroleum miner who undertakes petroleum mining operations that are—
a: outside New Zealand and undertaken through a branch or a controlled foreign company; and
b: substantially the same as the petroleum mining activities governed by this Act.
4: For the purposes of this section, a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their income interest in the partnership.
5: For the purposes of this section, references to the disposal of an asset apply equally to the disposal of part of an asset. 1994 No 164 ss DM 7, DM 9, DM 10, GC 12
GC 14: Income of beneficiaries
1: Where, in relation to any trust and any beneficiary, any arrangement has been entered into under which property is transferred, or services or other benefits are provided by the trustee to a person other than that beneficiary, which arrangement has the effect in relation to that beneficiary of defeating the intent and application of section HH 3
2: This section does not apply to a Maori authority. 1994 No 164 s GC 14
GC 14A: Sale or transfer of commercial bill to New Zealand resident
1: A person who redeems a commercial bill derives income from the redemption payment if—
a: a non-resident, not being a person who has become a party to a commercial bill for the purpose of carrying on business through a fixed establishment in New Zealand, sells or transfers the commercial bill to the person; and
b: the person is a resident or a non-resident who has become a party to the commercial bill for the purpose of carrying on business through a fixed establishment in New Zealand; and
c: the sale or transfer has the purpose of avoiding non-resident withholding tax or the approved issuer levy.
2: A person who does not redeem the commercial bill but otherwise satisfies subsection (1) is treated as having redeemed the bill.
3: Subsection (1) does not apply to a commercial bill issued by—
a: a person who is resident in New Zealand, if the money lent for the bill is used by the person in a business carried on through a fixed establishment outside New Zealand; or
b: a person who is not resident in New Zealand, unless the money lent for the bill is used by the person in a business carried on through a fixed establishment in New Zealand. 1994 No 164 s GC 14A
GC 14B: Attribution rule for personal services
1: If, during a tax year, a person ( person A person B person C section GC 14D
2: Subsection (1) applies if—
a: 80% or more of person B's total assessable income from personal services during the tax year is derived from the sale of services to person A or a person associated with person A; and
b: 80% or more of person B's total assessable income from personal services during the tax year is derived through services personally performed by person C or a relative of person C; and
c: person C's net income for the tax year in which an attribution would be made is more than $60,000; and
d: substantial business assets are not a necessary part of the business structure that is used to derive the total assessable income referred to in paragraph (a).
3: Subsection (1) does not apply—
a: if person B and person C are both non-residents during all of person B's tax year:
ab: if person B is a natural person and is not a partner of a partnership:
b: to the extent that the services personally performed by person C are essential support for a product supplied by person B. 1994 No 164 s GC 14B
GC 14C: Definitions for use in section GC 14B
1: This section applies for the purposes of section GC 14B
2: A person is treated as being associated with another person if the person would be treated as being associated under section OD 7 OD 8(3)
3: A person is not treated as being associated with another person under subsection (2) if—
a: both persons are public authorities:
b: person C cannot be reasonably expected to know that a particular person A is associated with another person A, other than by making a specific enquiry.
4: For the purposes of section GC 14B(2)(b)
5: For the purposes of section GC 14B(2)(c)
6: Substantial business assets
a: on person B's balance date, costs more than $75,000, or 25% or more of person B's total assessable income from services for the tax year; and
b: is not for private use or enjoyment.
7: For the purposes of subsection (6)(a), the cost of depreciable property includes the cost price of property subject to a specified lease or the lessee's acquisition cost of property subject to a finance lease or a hire purchase agreement.
8: Subsection (6)(b) does not apply to depreciable property if 20% or less of the property's use is for private use or enjoyment.
9: For the purposes of subsection (8), 20% of a property's use is calculated according to—
a: the proportion that the number of days for which fringe benefit tax is payable in respect of the property bears to the total number of days in the tax year in which the property is owned or is subject to a specified lease, finance lease, or a hire purchase agreement, if the property is subject to the FBT rules:
b: the proportion that the expenditure incurred in respect of the property, for which a deduction is denied, bears to all expenditure incurred in respect of the property in the tax year if the property is not subject to the FBT rules. 1994 No 164 s GC 14C
GC 14D: Attribution rule: calculation
1: Person B must attribute to person C in a tax year the lesser of the following amounts:
a: person B's net income for the tax year, calculated as if their only income were derived from personal services; and
b: person B's net income for the tax year; and
c: if person B is a company or a trust that has a net loss available for carry forward under section IE 1 section IE 1
2: For the purpose of calculating person B's net income for the tax year under subsection (1),—
a: if person B is a trustee of a trust, the trustees are treated as not having made a distribution to a beneficiary during the tax year or before the end of 6 months after the end of the tax year:
b: if person B is a partnership, person B is treated as a taxpayer and section HD 1(1)(b)
3: For the purpose of calculating person B's net income for the tax year under subsection (1)(a),—
a: person B is allowed a deduction for employment income paid to person C during the tax year:
b: person B is allowed a deduction for the taxable value of a fringe benefit provided or granted by person B to person C during the tax year and the fringe benefit tax payable on the fringe benefit.
4: Person B's net income for the tax year, as calculated after applying subsections (2) and (3), is reduced by,—
a: in the case of a trustee of a trust, the amount of beneficiary income derived by person C from the trust in the tax year:
b: in the case of a partnership, the share of profits allocated by the partnership to person C:
c: in the case of a company, any dividends paid—
i: by person B to person C during the tax year or before the end of 6 months after the end of the tax year; and
ii: from income derived in the tax year.
5: If person B is a partnership that receives administrative services from another person related to their income from personal services and has not paid for the administrative services, the amount to be attributed to person C must be reduced by the market value of the administrative services provided by the other person.
6: If a reduction required under subsection (4) results in a negative amount, an amount is not attributable.
7: If person B is a trust and the amount attributable would cause the trust to have a net loss for the tax year, the trust's beneficiary income for the tax year must be reduced so that the trust's taxable income for the tax year is zero, and the amount of beneficiary income distributed to beneficiaries other than person C must be reduced—
a: according to proportions determined by the trust's trustees:
b: if paragraph (a) does not apply, by the amount of the reduction, according to the proportion the beneficiary income distributed bears to total beneficiary income.
8: If the amount attributable is to be attributed to more than 1 person C, the amount attributed to each person C must reflect the value of the services personally performed by each person C respectively. 1994 No 164 s GC 14D
GC 14E: Attribution rule: exception
1: Sections GC 14B GC 14D
2: If there is more than 1 person selling the services that are personally performed by the same person C, subsection (1) may be applied in respect of person C once only. 1994 No 164 s GC 14E
GC 14EB: Treatment of dividends as if from qualifying company
Section GC 14EB repealed 6 October 2009 section 808 Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section GC 14EB inserted 19 December 2007 section 103 Taxation (Business Taxation and Remedial Matters) Act 2007
GC 14F: Arrangement to avoid application of restrictive covenant rule
1: If a person enters into an arrangement that has an effect of avoiding section CE 9
a: an amount, or part of an amount, under the arrangement as an amount to which section CE 9
b: a person affected by the arrangement as the person who gave the undertaking referred to in section CE 9(1)
2: In this section, a collateral arrangement to dispose of property may be part of an arrangement. 1994 No 164 s GC 14F
GC 14G: Arrangement to avoid application of rules for returning share transfers
If a person enters into an arrangement that has an effect of avoiding a requirement of the definition of returning share transfer section OB 1
a: the arrangement as a returning share transfer; and
b: a person affected by the arrangement as a share user or a share supplier, under the returning share transfer. Section GC 14G inserted 1 July 2006 section 110 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Fringe benefit tax
GC 15: Benefit given to associated person of employee
1: For the purposes of the FBT rules, where any benefit which, if it were provided for or granted to an employee would be a fringe benefit, is provided or granted by the employer of the employee, or is provided or granted by another person with whom the employer of the employee has entered into an arrangement for the providing or granting of that benefit, for or to a person other than the employee of the employer, the employee of the employer and the other person being associated persons, that benefit is deemed to be a benefit provided for or granted to the employee by the employer of the employee.
2: Subsection (1) does not apply to deem a benefit provided or granted by an employer (being a company) to an associated person of any employee to be a benefit provided or granted to the employee where and to the extent that—
a: the employee is also a shareholder in the company; and
b: the associated person is a company; and
c: the Commissioner is satisfied that the benefit is not provided or granted under an arrangement which has a purpose of providing or granting a benefit to the employee—
i: in lieu of employment income; or
ii: free from the application of fringe benefit tax.
3: For the purposes of the FBT rules and notwithstanding section CX 4
a: the employer is a company; and
b: the employer provides or grants a benefit, or has entered into an arrangement with another person for the providing or granting of that benefit, for or to an associated person of an employee; and
c: the person associated with the employee is also an associated person of a shareholder in the company; and
d: the associated person is not a company; and
e: the associated person is not an employee or shareholder in the company except to the extent this section deems otherwise; and
f: the benefit is of a kind that would be a fringe benefit under the FBT rules were it provided or granted for or to the employee; and
g: the benefit is of a kind that would be a dividend were it provided or granted for or to the shareholder.
4: Subsection (3) does not apply for the purposes of sections ND 5 ND 6 1994 No 164 s GC 15
GC 16: Value of motor vehicle acquired from associated person
For the purposes of schedule 2
a: in any case where, in any quarter, or (where fringe benefit tax is payable on an income year basis under section ND 14 specified acquisition
b: subject to paragraph (a), where, in relation to any motor vehicle and to any acquisition of the vehicle by any person,—
i: the motor vehicle was acquired by that person at no cost; or
ii: the cost price of the motor vehicle to that person was, in the opinion of the Commissioner, less than the amount of the market value of the motor vehicle on the date of the acquisition of it by that person, and the Commissioner is satisfied that the cost price would not have been so less but for an arrangement entered into, for the purpose of defeating the intent and application of the FBT rules, between that person and any other person (that person and that other person being associated persons); or
iii: the cost price in relation to that acquisition is for any reason unable to be established by that person to the satisfaction of the Commissioner,— the cost price, in relation to that acquisition, is deemed to be an amount equal to the amount which the Commissioner is satisfied was the market value of the motor vehicle on the date of that acquisition. 1994 No 164 s GC 16
GC 17: Fringe benefit tax: general
Where the Commissioner is satisfied that an arrangement has been entered into between persons and a purpose or effect of the arrangement (not being a merely incidental purpose or effect) is to defeat the intent and application of the FBT rules, or of any provision of the FBT rules, the Commissioner may, notwithstanding the arrangement, deem—
a: a person who is a party to that arrangement (that person being referred to in this section as the participant
b: any person so specified to be, in relation to the participant, an employee (that person being referred to in this section as the deemed employee
c: any benefit that—
i: is obtained by the deemed employee and is provided or granted by the participant; or
ii: the deemed employee would have, or might be expected to have, or would in all likelihood have, obtained if that arrangement had not been made or entered into,— to be a benefit provided or granted by the participant to the deemed employee by virtue of the employment of the deemed employee,— for the purposes of the FBT rules; and the FBT rules apply accordingly throughout such period or periods (each being a period during which that arrangement is in force) as the Commissioner determines. 1994 No 164 s GC 17
GC 17B: Fringe benefit tax: arrangement void
1: If an arrangement is void under section BG 1 section CX 3
a: the amount of excluded income as, in the Commissioner's opinion, the person would have, or might be expected to have, or would in all likelihood have, had if the arrangement had not been made or entered into; or
b: the amount of excluded income as, in the Commissioner's opinion, the person would have had if they had been allowed the benefit of some or all of the excluded income, as the Commissioner considers proper, derived by any other person or persons as a result of the arrangement.
2: If an amount of excluded income is included in the income of a person under subsection (1), then, for the purposes of this Act, that amount is not included in the income of any other person. Section GC 17B inserted 1 April 2006 section 111(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 111(2) subpart ND Deductions
GC 18: Agreements not to make tax deductions to be void
Where a tax deduction or combined tax and earner premium deduction or combined tax and earner levy deduction is required to be made under the PAYE rules and, where applicable, section 115 of the Accident Rehabilitation and Compensation Insurance Act 1992 section 285 of the Accident Insurance Act 1998 section 221 of the Injury Prevention, Rehabilitation, and Compensation Act 2001 section 115 section 285 section 221 1994 No 164 s GC 18
GC 19: Resident withholding tax
Without limiting the generality of section NF 13 section GB 1(1)
a: the words amounts of assessable income, deductions, and available net losses included in calculating the taxable income liability to resident withholding tax
b: the words assessable income, deductions, and available net losses resident withholding income
c: the words assessable income and deductions as, in the Commissioner's opinion, that person would have had if that person had been allowed the benefit of all amounts of assessable income, or of such part of the assessable income resident withholding income as, in the Commissioner's opinion, that person would have had, if that person had been allowed the benefit of all amounts of resident withholding income, or such part of the resident withholding income 1994 No 164 s GC 19
GC 20: Agreements not to make resident withholding tax deductions to be void
Where a resident withholding tax deduction is required to be made under the RWT rules, any agreement not to make the tax deduction in accordance with those rules is void. 1994 No 164 s GC 20 Imputation
GC 21: Imputation continuity requirements
For the purposes of section ME 5(1)(i)
a: any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or
b: any shares in the company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly, by any means,— in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of section ME 5(1)(i) 1994 No 164 s GC 21
GC 22: Imputation: arrangement to obtain tax advantage
1: For the purposes of this section, there is an arrangement to obtain a tax advantage where—
a: there is an arrangement for the sale or other disposition of shares or issue of shares where—
i: any person who is a party to the arrangement might reasonably have anticipated that a dividend would be paid in respect of the shares in any income year; and
ii: any person who is a party to the arrangement might reasonably have anticipated that an imputation credit or a dividend withholding payment credit would be attached to the dividend; and
iii: any person who is a party to the arrangement might reasonably expect—
A: that a party to the arrangement will be able to obtain a tax advantage in relation to any such imputation credit or dividend withholding payment credit; or
B: that a party to the arrangement will not be able to obtain a tax advantage in relation to any such imputation credit or dividend withholding payment credit; and
iv: the purpose, not being an incidental purpose, of the arrangement is that a party to the arrangement would obtain any such tax advantage; or
b: in respect of any 1 or more distributions (including bonus issues) by a company, whether occurring in the same imputation year or over more than 1 imputation year, the company streams the payment of dividends, or the attachment of imputation credits or dividend withholding payment credits or both to any dividends, in such a way as will give higher credit values to persons who will obtain a tax advantage from them than to persons who will not so obtain a tax advantage or who may reasonably be expected to derive a lesser benefit from any tax advantage.
2: For the purposes of subsection (1)(b), a dividend paid by a company is deemed to have a higher credit value than another dividend where any of the following applies:
a: the dividend has an imputation credit attached to it, and the other dividend does not:
b: the imputation ratio of the dividend is higher than that of the other dividend:
c: the dividend has a dividend withholding payment credit attached to it, and the other dividend does not:
d: the dividend withholding payment ratio of the dividend is higher than that of the other dividend:
e: the dividend has both an imputation credit and a dividend withholding payment credit attached to it, and the other dividend has no such credit or only 1 such type of credit attached:
f: the combined imputation and dividend withholding payment ratio of the dividend is greater than that of the other dividend.
3: Where the Commissioner determines that there is an arrangement to obtain a tax advantage, the Commissioner may—
a: determine whether the arrangement gives rise to an account advantage, a tax credit advantage, or both:
b: determine, in the case of any arrangement within the meaning of subsection (1)(b) to which any person (other than the company referred to in that paragraph) is a party, which of subsections (4) and (5) should apply:
c: determine the amount of the imputation credit or dividend withholding payment credit the subject of the arrangement:
d: determine the imputation year in which the arrangement occurred or commenced (being the year in which the Commissioner considers that the first reasonably identifiable step towards implementation of the arrangement occurred).
4: Where the Commissioner determines that there is an arrangement within the meaning of subsection (1)(a), or determines that there is an arrangement within the meaning of subsection (1)(b) and that this subsection should apply to that arrangement, the following provisions apply:
a: any person who, but for this paragraph, would obtain a tax credit advantage from the arrangement is not entitled in respect of the arrangement to a credit of tax under section LB 2 LD 8 section LD 9
b: there arises a debit to the imputation credit account or the dividend withholding payment credit account (as the case may be) of any company that, but for this paragraph, would obtain
c: the amount of the credit of tax or refund to which the person referred to in paragraph (a) is not entitled and the amount which arises as the debit referred to in paragraph (b) is in each case an amount equal to the amount of the imputation credit or the dividend withholding payment credit determined under subsection (3)(c) to be the subject of the arrangement; and
d: any debit arising under paragraph (b) is a debit that arises in the imputation year determined under subsection (3)(d) to be that in which the arrangement occurred or commenced.
5: Where there is an arrangement within the meaning of subsection (1)(b) to which no person other than the company referred to in that paragraph is a party, or where the Commissioner determines that there is an arrangement within the meaning of that paragraph and that this subsection should apply in respect of that arrangement, the following provisions apply:
a: there arises a further debit to the imputation credit account or the dividend withholding payment account of the company referred to in subsection (1)(b); and
b: the amount of that further debit is an amount equal to the amount of the imputation credit or the dividend withholding payment credit determined under subsection (3)(c) to be the subject of the arrangement; and
c: the further debit is a debit that arises in the imputation year determined under subsection (3)(d) to be that in which the arrangement occurred or commenced; and
d: to the extent to which this subsection applies to the arrangement, subsection (4) does not apply to the arrangement.
6: As soon as is convenient after a determination is made in relation to a company under subsection (3) (in this section referred to as a determination of tax advantage arrangement debit
7: A notice may be included in a notice of assessment made under section 111(1) section ME 40 MG 12
8: An omission to give the notice referred to in subsection (6) does not invalidate the determination of tax advantage arrangement debit.
9: In this section,— account advantage
a: the arising of a credit to an imputation credit account in accordance with section ME 4
b: the arising of a credit to a dividend withholding payment account in accordance with section MG 4 tax credit advantage
a: the allowance, in whole or in part, of a credit of tax in accordance with section LB 2
b: the allowance, in whole or in part, of a credit of tax in accordance with section LD 8 section LD 9 1994 No 164 s GC 22 Subsection (4)(b) amended 1 October 2005 section 61(1) Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by omitting the words both a tax credit advantage and
GC 23: Imputation: dividend paid by another company
1: Where, in relation to a company and a shareholder of the company, there is an arrangement entered into for the purpose, or for purposes including the purpose, that—
a: the shareholder or, where the shareholder is a trustee in relation to the share or shares held, any beneficiary of that trust, or any person associated with either the shareholder or any such beneficiary, may be paid a dividend by another company, whether directly or indirectly by any means whatever; or
b: the shareholder or, where the shareholder is a trustee in relation to the share or shares held, any beneficiary of that trust, or any person associated with either the shareholder or any such beneficiary, may acquire any shares in another company so that the other company may pay a dividend to the shareholder or the beneficiary or the associated person, whether directly or indirectly by any means whatever,— any dividend paid to the shareholder or, as the case may be, the beneficiary or associated person by that other company under the arrangement is, for the purposes of the imputation rules, deemed to be a dividend paid by the company.
2: For the purposes of the imputation rules, the amount of any imputation credit attached to a dividend to which subsection (1) applies—
a: does not constitute income of the shareholder or, as the case may be, the beneficiary or associated person:
b: is not treated as an imputation credit for the purposes of section LB 2
c: notwithstanding anything in subsection (1), is a debit in accordance with section ME 5(1)(a) 1994 No 164 s GC 23
GC 24: Application of specific imputation provisions to consolidated groups
1: Section GC 23(2) section GC 23(1) section ME 5(1)(a) section ME 12(1)(a)
2: Section GC 22
a: the consolidated group were a single company; and
b: references to provisions of this Act were references to the equivalent provisions applicable to such equivalent accounts. 1994 No 164 s GC 24
GC 25: Avoidance of dividend withholding payments
Where the Commissioner is satisfied that an arrangement has been entered into between persons for the purpose of, or for purposes including the purpose of, avoiding the application of the dividend withholding payment rules or of any provision of those rules, the Commissioner may, notwithstanding the arrangement, deem a payment or part of a payment that is the subject of the arrangement to be a foreign withholding payment dividend for the purposes of those rules. 1994 No 164 s GC 25
GC 26: Arrangement to defeat application of branch equivalent tax account provisions
For the purposes of section MF 4(1)(e)
a: any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or
b: any shares in the company or in any other company have had any rights attached to them extinguished or altered, directly or indirectly, by any means whatever,— in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of either section MF 4(1)(e) 1994 No 164 s GC 26
GC 27: Arrangement to defeat application of dividend withholding payment account provisions
For the purposes of section MG 5(1)(i)
a: any shares in the company or in any other company have been subject to any arrangement or series of related or connected arrangements; or
b: any shares in the company or in any other company have had any rights attaching to them extinguished or altered, directly or indirectly, by any means whatsoever,— in each case for the purpose, or for purposes including the purpose, of enabling the company to meet the requirements of section MG 5(1)(i) 1994 No 164 s GC 27
GC 27A: Arrangement to obtain tax advantage with respect to Maori authority credit account provisions (subpart MK)
1: For the purposes of this section, there is an arrangement to obtain a tax advantage if the arrangement is for the sale or other disposition of shares or the issue of shares in a Maori authority that is a company and—
a: a party to the arrangement might reasonably have anticipated that a taxable Maori authority distribution would be made in respect of the shares in an income year; and
b: a party to the arrangement might reasonably have anticipated that a Maori authority credit would be attached to the distribution; and
c: a party to the arrangement might reasonably expect that the party will, or will not, be able to obtain a tax advantage in relation to the Maori authority credit; and
d: the purpose, not being an incidental purpose, of the arrangement is that a party to the arrangement would obtain a tax advantage.
2: For the purposes of this section, there is an arrangement to obtain a tax advantage if in respect of any 1 or more taxable Maori authority distributions by a Maori authority, whether occurring in the same imputation year or over more than imputation year, the Maori authority streams the distributions, or the attachment of Maori authority credits to distributions, in such a way as will give higher credit values to members who will obtain a tax advantage from them than to members who will not so obtain a tax advantage or who may reasonably be expected to derive a lesser benefit from any tax advantage.
3: For the purposes of subsection (2), a taxable Maori authority distribution by a Maori authority is treated as having a higher credit value than another distribution if—
a: the taxable Maori authority distribution has a Maori authority credit attached to it, and the other distribution does not; or
b: the base ratio of the taxable Maori authority distribution is higher than that of the other distribution.
4: If the Commissioner determines that there is an arrangement to obtain a tax advantage, the Commissioner may—
a: determine whether the arrangement gives rise to an account advantage, a tax credit advantage, or both; or
b: in the case of an arrangement described in subsection (2) to which a person, other than the Maori authority, is a party, determine whether subsection (5) or (6) should apply; or
c: determine the amount of the Maori authority credit that is the subject of the arrangement; or
d: determine the imputation year in which the arrangement occurred or commenced, being the year in which the Commissioner considers that the first reasonably identifiable step towards implementation of the arrangement occurred.
5: If the Commissioner determines that there is an arrangement to obtain a tax advantage and that this subsection should apply, the following provisions apply:
a: a member who, but for this paragraph, would obtain a tax credit advantage from the arrangement is not entitled to a credit of tax under section LD 3A
b: a debit arises to the Maori authority credit account of a Maori authority that, but for this paragraph, would obtain both a tax credit advantage and an account advantage from the arrangement; and
c: the amount of the credit of tax or refund to which the member is not entitled and the debit that arises must both be the same amount as the Maori authority credit determined under subsection (4)(c) to be the subject of the arrangement; and
d: the debit arises in the imputation year determined under subsection (4)(d) to be that in which the arrangement occurred or commenced.
6: If the Commissioner determines that there is an arrangement to obtain a tax advantage to which subsection (2) applies and to which only the Maori authority referred to in that subsection is a party, or if the Commissioner determines that there is an arrangement within the meaning of that subsection and that this subsection should apply in respect of the arrangement, the following provisions apply:
a: a further debit arises to the Maori authority's Maori authority credit account; and
b: the further debit is equal to the amount of the Maori authority credit determined under subsection (4)(c) to be the subject of the arrangement; and
c: the further debit arises in the imputation year determined under subsection (4)(d) to be that in which the arrangement occurred or commenced; and
d: to the extent to which this subsection applies to the arrangement, subsection (5) does not apply to the arrangement.
7: As soon as is convenient after a determination is made, the Commissioner must give notice of the determination to the Maori authority in respect of whose Maori authority credit account the determination is made.
8: A notice may be included in a notice of assessment under section 111(1) section MK 9
9: Failure to give notice does not invalidate the Commissioner's determination.
10: In this section,— account advantage section MK 4 tax credit advantage section LD 3A 1994 No 164 s GC 27B Tax credits for families Heading substituted 19 December 2007 section 104(1) Taxation (Business Taxation and Remedial Matters) Act 2007
GC 28: Tax credits for families
If the Commissioner is satisfied that arrangements have been made between a person and another person with a view to the affairs of those persons being arranged or conducted so that subpart KD 1994 No 164 s GC 28 Section GC 28 heading substituted 19 December 2007 section 104(2) Taxation (Business Taxation and Remedial Matters) Act 2007 Arrangements involving money not at risk
GC 29: Application of sections GC 29 to GC 31
1: This section and sections GC 30 GC 31 participant
a: there is a person who sells or issues, or promotes the selling or issuing of, the arrangement, whether or not for remuneration; and
b: the participant and any affected associates of the participant, considered together, have for a period—
i: deductions
A: deductions arising under this section and sections GC 30 GC 31
B: net losses of a loss attributing qualifying company, to the extent that shareholders with effective interests in the company are deemed under section HG 16
ii: assessable assessable sections GC 30 GC 31 subparagraph (i)
c: the period referred to in paragraph (b) for a participant, or a group consisting of a participant and the affected associates of the participant, is—
i: the earliest income year in which an interest in the arrangement was acquired by the participant or an affected associate of the participant; or
ii: the income year referred to in subparagraph (i) together with the next following income year; or
iii: the income year referred to in subparagraph (i) together with the next following income year and the second following income year; and
d: as part of or for the purposes of the arrangement, the participant or an affected associate of the participant borrows a limited-recourse amount under a limited recourse loan; and
e: on the balance date, or the latest balance date, of the participant and affected associates of the participant that ends a period referred to in paragraph (c)(i) to (iii) for which paragraph (b) is satisfied, the participant and the affected associates of the participant hold, as part of the arrangement, property with a total cost that is—
i: less than twice the total of the limited-recourse amounts referred to in paragraph (d) that the participant and the affected associates of the participant borrowed on or before the balance date; and
ii: more than 142.85% of the total cost of the part of that property that is—
A: land:
B: buildings:
C: plant:
D: machinery:
E: shares in a listed company that in total represent a direct voting interest of 10% or less in the listed company:
F: shares and options that are acquired or created with an intention that the shares or options will produce income that is monetary remuneration of a participant under sections CE 2 to CE 4 :
G: shares in a foreign company, if the proceeds of a disposal of the shares would not be assessable income of the holder other than under the FIF rules.
2: The assessable income and deductions subsection (1)(b) and section GC 31
3: If a group of persons consists of persons who are a partnership and the partners in a partnership, a joint venture and the partners in the joint venture, or a loss attributing qualifying company and the shareholders in the loss attributing qualifying company, the assessable income and deductions subsection (1)(b) and section GC 31 1994 No 164 s ES 1 Subsection (1)(b) amended 1 October 2005 section 204(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by omitting the words or losses Subsection (1)(b)(i)(B) substituted 1 October 2005 section 204(1)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (1)(b)(ii) amended 1 October 2005 section 204(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by omitting the words or losses Subsection (1)(b)(ii) amended 1 October 2005 section 204(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word assessable income Subsection (1)(e)(i) amended 1 October 2005 section 204(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the words date; and date: Subsection (1)(e)(ii)(F) amended 1 October 2005 section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the expression CE 4: CE 4. Subsection (1)(e)(ii)(G) inserted 1 October 2005 section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (2) amended 1 October 2005 section 204(5) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the words assessable income and deductions income, deductions, and losses Subsection (3) amended 1 October 2005 section 204(6) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the words assessable income and deductions income, deductions, and losses
GC 30: Defined terms for sections GC 29 to GC 31
1: For the purposes of this section and sections GC 29 GC 31 affected associate
a: 1 person is a loss attributing qualifying company and the other person is a shareholder in the loss attributing qualifying company:
b: the persons are associated under a provision of section OD 7 OD 8(3)
2: For the purposes of this section and sections GC 29 GC 31 limited-recourse amount
3: For the purposes of this section and sections GC 29 GC 31 limited-recourse loan
a: is not an excepted financial arrangement; and
b: involves the provision of money by a person ( lender borrower
c: has an effect, or has
i: relieving the borrower under the financial arrangement from the obligation to repay all or some of the money, whether the relief is contingent or not:
ii: requiring the borrower under the financial arrangement to make no repayment for a period of 10 or more years from the date on which the loan is made, other than repayments for the purpose of defeating the intent and application of this subpart:
iii: providing that the repayment of the money is in substance secured solely against assets that are employed in the arrangement; and
d: involves money that is provided by—
i: a lender who is not an associated person of the borrower under a provision of section OD 7 OD 8(3)
A: is not a person who regularly provides money to persons on arm's-length terms under arrangements that do not satisfy paragraphs (a) to (c):
B: is not resident in New Zealand under section OE 1 OE 2
ii: a lender who is an associated person of the borrower under a provision of section OD 7 OD 8(3) 1994 No 164 s ES 2 Subsection (3)(c) amended 1 October 2005 section 205(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by omitting the words a purpose or effect of achieving Subsection (3)(d) substituted 1 October 2005 section 205(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
GC 31: Deferral of surplus deductions from arrangement
1: This section applies for an income year to a participant in an arrangement to which this section and sections GC 29 GC 30
a: the participant is not a loss attributing qualifying company and has from the arrangement for the income year—
i: deductions, including any deduction under subsection (3) or section HG 16
ii: a total amount of assessable
b: the participant and the affected associates of the participant who are not a loss attributing qualifying company that has incurred a net loss from the arrangement for the income year, considered together, have from the arrangement for the income year—
i: deductions, including any deduction under subsection (3) or section HG 16
ii: a total amount of assessable
c: on the balance date, or the latest balance date, of the participant and affected associates of the participant for the income year, the arrangement involves a limited recourse loan for which the participant or an affected associate of the participant is a borrower.
2: If this section applies to a participant for an income year and an arrangement, the participant is treated as deriving in the income year an amount of assessable where—
a: is the amount for the income year by which the deductions, including any deduction under subsection (3) or section HG 16
b: is the total amount for the income year by which the deductions, including any deduction under subsection (3) or section HG 16
a: the participant; and
b: the affected associates of the participant who are not a loss attributing qualifying company and who each have for the income year allowable deductions, including any allowable deduction under subsection (3) or section HG 16
c: is the lesser of—
a: the total amount for the income year by which the deductions, including any deduction under subsection (3) or section HG 16
i: the participant; and
ii: the affected associates of the participant who are not a loss attributing qualifying company that has incurred a net loss from the arrangement for the income year; and
b: the total of limited-recourse amounts that, on the balance date or the latest balance date of the participant and the affected associates of the participant, the participant and the affected associates of the participant have undischarged obligations to repay as part of or for the purposes of the arrangement.
3: A participant who has an amount of assessable income
4: For the purposes of subsection (1) and of paragraph (b) of the definition of item c
a: involves the use, as part of the arrangement, of—
i: a put or call option that is not a contract for the sale for future delivery of goods at market value:
ii: a contract of insurance or guarantee; and
b: does not give rise to assessable 1994 No 164 s ES 3 Subsection (1)(a)(i) substituted 1 October 2005 section 206(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (1)(a)(ii) amended 1 October 2005 section 206(1)(b)(i) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word assessable income Subsection (1)(a)(ii) amended 1 October 2005 section 206(1)(b)(ii) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by omitting the words and losses Subsection (1)(b)(i) substituted 1 October 2005 section 206(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (1)(b)(ii) amended 1 October 2005 section 206(1)(d)(i) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word assessable income Subsection (1)(b)(ii) amended 1 October 2005 section 206(1)(d)(ii) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by omitting the words and losses Subsection (2) amended 1 October 2005 section 206(2)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word assessable income Subsection (2) substituted 1 October 2005 section 206(2)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (2) substituted 1 October 2005 section 206(2)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (3) amended 1 October 2005 section 206(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the words amount of assessable income amount of income Subsection (4)(b) amended 1 October 2005 section 206(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by inserting the word assessable income
GD: Non-market transactions
Contents
Trading stock
GD 1: Sale or other disposal
1: Subject to subsections (1B) and (2)
a: the trading stock is, for the purposes of this Act, treated as having been sold at and realised at its market price on the date of the sale or other disposition:
b: the price which under this section the trading stock is deemed to have realised is treated as income of the person selling or otherwise disposing of the trading stock:
c: the person acquiring the trading stock is deemed to have purchased the trading stock at the price which under this section the trading stock is deemed to have realised. Exclusion
1B: Subsection (1) does not apply to a share disposed of by a share user to a share supplier, or by a share supplier to a share user, under a share-lending arrangement.
2: For the purposes of this section,—
a: the creation or grant (other than in favour of a proprietor or grantor) of a right to take timber must be treated as a sale or other disposition of trading stock of a kind referred to in paragraph (b)(iv) trading stock
b: a sale or other disposition of land with standing timber on the land, unless the land is subject to a right in favour of the seller to take timber, is deemed to include a sale or other disposition of trading stock of a kind referred to in paragraph (b)(iv) trading stock
i: timber comprised in ornamental or incidental trees, as evidenced by a certificate given under section 44C
ii: subject to a forestry right (as defined in section 2 Land Transfer Act 1952
iii: subject to a profit à prendre granted before 1 January 1984.
3: This section, with any necessary modifications, applies in any case where a share or interest in any trading stock is sold or otherwise disposed of without consideration in money or money's worth or for a consideration that is less than the market value of the share or interest at the date of the sale or other disposition.
3A: Subsection (3) does not apply to land with standing timber that is subject to a right to take standing timber.
4: This section does not apply in respect of any trading stock that—
a: is transferred to a person under a relationship agreement; or
b: is donated, or supplied for consideration worth less than the market value of the trading stock, to a person—
i: for use in a farming, agricultural, or fishing business that is affected by a self-assessed adverse event; and
ii: by a donor or supplier who is not associated with the person. 1994 No 164 s GD 1 The heading to section GD 1 amended 1 October 2005 section 207(1) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting the words Sale or other disposal Sale Subsection (1) amended 1 July 2006 section 112(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the words subsections (1B) and (2) subsection (2) Subsection (1B) inserted 1 July 2006 section 112(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (4) substituted 1 October 2005 section 207(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (4) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting the words relationship agreement matrimonial agreement Subsection (4)(b) substituted 1 July 2006 section 112(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
GD 2: Distribution of trading stock to shareholders of company
Section GD 2 repealed 1 October 2005 section 63 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 Remuneration
GD 3: Payment of excessive salary or wages, or allocation of excessive share of profits or losses, to relative employed by or in partnership with taxpayer
1: Where—
a: any taxpayer carries on any business or undertaking and employs or engages any relative, or, being a company other than a close company, employs or engages any relative of a director or shareholder of the company, to perform services in connection with that business or undertaking; or
b: any taxpayer carries on business in partnership with any person, whether or not any other person is a member of the partnership, and—
i: any relative of the taxpayer is employed or engaged by the partnership to perform services in connection with the business; or
ii: where 1 of the partners is a company, any relative of a director or shareholder of the company is employed or engaged by the partnership to perform services in connection with the business; or
c: any taxpayer carries on business in partnership with any relative or with any company a director or shareholder of which is a relative of the taxpayer or, being a company, carries on business in partnership with any relative of a director or shareholder of the company, whether or not any other person is a member of the partnership,— and the Commissioner is of the opinion that the remuneration, salary or wages, share of profits, or other income payable to or for the benefit of that relative or that company, or the share of losses to be borne by that relative or that company, under the contract of service, employment, or engagement or the terms of the partnership exceeds such an amount as is reasonable having regard to the nature and extent of the services rendered, the value of the contributions made by the respective partners by way of services or capital or otherwise, and any other relevant matters, the Commissioner may for the purposes of this Act allocate the total profits, income or losses of the business or undertaking, without taking into account any amount payable to that relative or company, between the parties to the contract or the partners or any of them in such shares and proportions as the Commissioner considers reasonable, and the amounts so allocated are deemed to be income or losses of persons to whom those amounts are so allocated and of no other person.
2: Where any sum paid or credited by a company, being or purporting to be remuneration for services rendered by any person who is a relative of a director or shareholder of the company, is allocated to that company in accordance with subsection (1), the amount so allocated to the company is deemed to be a dividend paid by the company to that person and received by that person as a shareholder of the company.
3: This section applies whether the contract of service or employment or the partnership was entered into before or after the commencement of the tax year.
4: This section does not apply to a bona fide contract of employment or to a bona fide contract of partnership.
5: For the purposes of this section, a contract of employment or a contract of partnership is deemed to be bona fide if it complies with the following conditions:
a: the contract is in writing or by deed signed by all the parties to it:
b: no partner and no person employed or engaged under the contract was under the age of 20 years at the date on which the contract was signed:
c: the contract is binding on the parties to the contract for a term of not less than 3 years and is not capable of being terminated by any of those parties before the expiry of that term except for the reasons specified in sections 36 38
d: each party to the contract has—
i: real and effective control of the remuneration, salary or wages, share of profits, or other income to which the party is entitled under the contract:
ii: real and effective liability for the share of losses to be borne by the party under the contract:
e: the remuneration, salary or wages, share of profits, or other income payable to a relative, or to a company a director or a shareholder of which is a relative, does not constitute in whole or in part a gift for the purposes of the Estate and Gift Duties Act 1968 1994 No 164 s GD 3
GD 4: Payments to taxpayer's
spouse, civil union partner or de facto partner No deduction may, except as expressly provided in this Act, be made in respect of any payments of any kind made by a taxpayer to his or her spouse, civil union partner or de facto partner section GD 3 spouse, civil union partner or de facto partner 1994 No 164 s GD 4 The heading to section GD 4 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse The heading to section GD 4 amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner Section GD 4 amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting spouse or civil union partner spouse Section GD 4 amended 1 April 2007 section 3(2) Income Tax Amendment Act 2005 by substituting spouse, civil union partner or de facto partner spouse or civil union partner
GD 5: Excessive remuneration by close company to shareholder, director, or relative
Where any sum paid or credited by a close company, being or purporting to be remuneration for services rendered by any person who is a shareholder or director of the company or a relative of any such shareholder or director, exceeds such amount as in the opinion of the Commissioner is reasonable, the amount of the excess is denied as a deduction of the company, and is, for the purposes of this Act, deemed to be a dividend paid by the company to that person and received by that person as a shareholder of the company: provided that this section does not apply in any case where the Commissioner is satisfied—
a: that the person to whom the sum is paid or credited is an adult employed substantially full time in the business of the company and participating in the administration or management of the company; and
b: that the determination by the company of the amount so paid or credited to that person was not influenced by the fact that the person is a relative of a shareholder or director of the company; and
c: that the person is resident in New Zealand. 1994 No 164 s GD 5 Superannuation and life insurance
GD 6: Value of loans provided by superannuation fund deemed to be income of fund
1: Where any superannuation fund in any income year has, directly or indirectly and whether by 1 transaction or by a series of transactions, provided to a member of that superannuation fund in that income year any loan that would be a fringe benefit if it were provided by an employer to an employee in respect of that employee's employment, the value of the loan so provided is deemed to be income derived by the superannuation fund in that income year.
2: For the purposes of subsection (1), but subject to subsection (3), the value of the loan is the amount, if any, by which the amount of interest that would have accrued on that loan in respect of that income year had that interest been calculated on the daily balance of that loan at the prescribed rate of interest exceeds the amount of interest that, whenever it accrues, arises in respect of that loan to the member during that income year.
3: Where the loan is a loan that was made on or before 31 March 1989, and the rate of interest payable on the loan is not subject to review, the prescribed rate of interest is deemed to be—
a: in the case of a loan made before 1 April 1985, the non-concessionary rate of interest for the tax year in which the agreement to make the loan was signed or, where the agreement was not in writing, the making of the loan was agreed to by all the parties to the loan:
b: in the case of a loan made on or after 1 April 1985, the prescribed rate of interest that applied during the quarter in which the agreement to make the loan was signed or, where the agreement was not in writing, the making of the loan was agreed to by all parties to the loan. 1994 No 164 s GD 6
GD 7: Distribution of property to policyholders
For the purposes of section GD 1
a: that property is deemed to be trading stock; and
b: the life insurer is deemed to be a company; and
c: holders of policies of life insurance for which the life insurer is the insurer are deemed to be shareholders of the life insurer. 1994 No 164 s GD 7 Section GD 7 amended 1 October 2005 section 113 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the expression section GD 1 sections GD 1 and GD 2
GD 8: Superannuation schemes
1: For the purposes of the life insurance rules, where any person is the trustee of a superannuation scheme and provides any life insurance to members or beneficiaries of that scheme, the provision by that trustee of any benefit to any member or beneficiary of that scheme is, subject to subsections (2) to (6), treated as if it were the provision of life insurance.
2: Notwithstanding subsection (1) or any other provision of the life insurance rules, where any person is the trustee of a superannuation fund (other than a superannuation fund to which property is transferred under an arrangement approved by the Government Actuary under Part 6
3: Notwithstanding subsection (1) or any other provision of the life insurance rules, where in any tax year any person is the trustee of a superannuation fund which is in respect of that tax year a qualifying superannuation scheme, that person is deemed in respect of that superannuation fund and that tax year not to carry on the business of life insurance.
4: For the purposes of this section, a superannuation fund is a qualifying superannuation scheme
a: the superannuation fund is registered by the Government Actuary under the Superannuation Schemes Act 1989
b: no trustee of the superannuation fund is a company carrying on the business of providing life insurance to which the Life Insurance Act 1908
c: the superannuation fund was—
i: established by an employer or group of employers who are associated persons to provide benefits only to persons who are, in respect of any such employer or in respect of any other associated person who is an employer and subsequent to the establishment of the superannuation fund agrees to make contributions to the fund,—
A: employees; or
B: in the case of deferred benefits relating to a previous period of employment, former employees; or
C: in the case of benefits arising in respect of membership of the superannuation fund by those employees or former employees, relatives or dependants of those employees or former employees; or
ii: constituted under the National Provident Fund Restructuring Act 1990 National Provident Fund Act 1950 Government Superannuation Fund Act 1956
A: employees; or
B: in the case of deferred benefits relating to a previous period of employment, former employees; or
C: in the case of benefits arising in respect of membership of the superannuation fund by those employees or former employees, relatives or dependants of those employees or former employees,— of any employer who agrees to or is required to make contributions to the fund or is accepted as a contributor to the fund or on whose behalf contributions are made to the fund; or
iii: not being a superannuation fund of the kind referred to in subparagraph (ii), constituted under—
A: the National Provident Fund Restructuring Act 1990
B: the National Provident Fund Act 1950
C: the National Provident Fund Restructuring Amendment Act 1997
d: the only beneficiaries of the superannuation fund are natural persons to whom—
i: any of paragraph (c)(i)(A) to (C) or (ii)(A) to (C) applies; or
ii: paragraph (c)(iii) applies— except to the extent that an employer of employees who are members of the superannuation fund may have a contingent interest in any surplus in the superannuation fund; and
e: except in the case of a superannuation fund to which paragraph (c)(iii) applies, and subject to subsection (5), each employer—
i: is required by the trust deed of the superannuation fund or by any Act under which the superannuation fund is constituted to make; or
ii: in that tax year is making; or
iii: in that tax year is having made on the employer's behalf— superannuation contributions to the superannuation fund to provide to a significant extent the benefits payable by the superannuation fund, not being merely nominal contributions or contributions only to meet the costs of administration and management of investments of the superannuation fund; and
f: the superannuation fund has not been established or utilised in a manner which has the effect of defeating the intent and application of the life insurance rules,— and where an application in writing has been made for the purposes of this subsection to the Government Actuary by the trustee of that superannuation fund and the Government Actuary is satisfied that the superannuation fund is in respect of that tax year a superannuation fund to which the preceding paragraphs of this subsection apply.
5: Where in respect of any tax year a superannuation fund fails to meet the requirements of subsection (4)(e), that fund is nevertheless treated as complying with that paragraph if the Government Actuary is satisfied that each employer would be required by the trust deed of the superannuation fund, or by any Act under which the superannuation fund is constituted, to make superannuation contributions to the superannuation fund to provide to a significant extent the benefits payable by the superannuation fund, not being merely nominal contributions or contributions only to meet the costs of administration and management of investments of the superannuation fund, were it not that the assets of the fund exceed the accrued benefits of all members and other beneficiaries of the fund.
6: Where the Government Actuary ceases to be satisfied that any superannuation fund is a superannuation fund to which subsection (4)(a) to (f) apply, that superannuation fund ceases to be a qualifying superannuation scheme from such date as the Government Actuary may specify.
7: The Government Actuary must, as soon as practicable after determining under subsection (4) or (6)—
a: whether or not a superannuation fund is in respect of any tax year a fund to which subsection (4)(a) to (f) apply; or
b: that a superannuation fund has ceased to be a fund to which those paragraphs apply,— notify the trustee of the superannuation fund accordingly.
8: Any person who is dissatisfied with any such determination of the Government Actuary may object to the determination in accordance with section 23 Tax Administration Act 1994 1994 No 164 s GD 8 Leases
GD 10: Leases for inadequate rent
1: Where any property owned by any person or by 2 or more persons (whether jointly or in common) or by any partnership is leased to a relative of any of those persons or of any member of the partnership or to a related company or by a company to any person and the rent is less than an adequate rent for that property or the lease makes no provision for the payment of rent,—
a: there is deemed to be payable under the lease a rent that is equal to an adequate rent for the property, and that rent is deemed to be payable by the lessee to the lessor on the days provided in the lease for payment of the rent, or, if no rent is payable under the lease, on each day of the term of the lease on a pro rata basis, and is deemed to be income derived by the lessor on the days on which the rent is deemed to be payable under this paragraph; and
b: the rent deemed to be payable under paragraph (a) is deemed to accrue from day to day during the period in respect of which it is payable, and is apportionable accordingly.
2: This section applies with respect to any leased property only if and to the extent that it is used by the lessee in the derivation of assessable income or exempt income.
3: This section applies whether the lease was granted before or after the commencement of the tax year.
4: In this section,— adequate rent lease lessor lessee related company rent 1994 No 164 s GD 10 Other non-market transactions
GD 11: Financial arrangements rules
If the Commissioner is satisfied that the parties to a financial arrangement were, at the time the financial arrangement is entered into, acquired, varied, sold, or transferred, dealing with each other in a way that defeats the intention of the financial arrangements rules, the Commissioner may deem the consideration to be that which independent parties dealing at arm's length would give. 1994 No 164 s GD 11
GD 12: Non-market transactions for incurring film production expenditure
1: A person must reduce the deduction allowed to them under section DS 2
a: the Commissioner considers that the person (person A) and a person who supplied goods or provided services to person A in relation to the film (person B) were not dealing with each other at arm's length in relation to the goods or services; and
b: person A incurred more film production expenditure than person A would have incurred if person A and person B had been dealing with each other at arm's length.
2: If subsection (1) applies, the deduction must be reduced to an amount equal to the film production expenditure that the Commissioner thinks person A would have incurred if person A and person B had been dealing with each other at arm's length. 1994 No 164 s GD 12(1), (1A)
GD 12A: Film production expenditure if payments postponed or contingent
For the purposes of sections DS 2 EJ 7 EJ 8
a: payment for the goods or services has been deferred by agreement between the supplier of the goods or services and any other person, and the Commissioner thinks that the period between the time that the goods or services are supplied and the time of payment for them is excessive; or
b: liability for the payment is contingent. 1994 No 164 s EO 4(12)
GD 12B: Manipulation of arrangements to incur film production expenditure
If the Commissioner considers that 2 persons have made arrangements so that section DS 2 EJ 7 EJ 8
a: the deduction that a person is allowed under section DS 2
b: the deduction allocated under section EJ 7 EJ 8 1994 No 164 s GD 12(2)
GD 13: Cross-border arrangements between associated persons
1: Subject always to its express provisions, the purpose of this section is to require a taxpayer, who enters into a cross-border arrangement with an associated person for the acquisition or supply of goods, services, or anything else at a consideration which reduces the taxpayer's net income, to substitute an arm's length consideration when calculating the taxpayer's net income.
2: This section only applies to require the substitution of an arm's length amount of consideration in the case of an arrangement—
a: that involves the supply and acquisition of goods, services, money, other intangible property, or anything else; and
b: where the supplier and acquirer are associated persons; and
c: where the supplier and acquirer are—
i: 2 persons each not resident in New Zealand (unless each enters into the arrangement for the purposes of a business carried on by the person in New Zealand through a fixed establishment in New Zealand); or
ii: a person resident in New Zealand and a person not resident in New Zealand unless—
A: the non-resident is entering into the arrangement for the purposes of a business carried on by the non-resident in New Zealand through a fixed establishment in New Zealand; and
B: the New Zealand resident has not entered into the arrangement for the purposes of a business carried on by the New Zealand resident outside New Zealand; or
iii: 2 persons each resident in New Zealand if either or both enter into the arrangement for the purposes of a business carried on by the person outside New Zealand.
3: If the amount of consideration payable by a taxpayer under such an arrangement exceeds the arm's length amount, then for all purposes of the application of this Act in relation to the income tax liability for any tax year of the taxpayer, an amount equal to the arm's length amount is deemed to be the amount payable by the taxpayer in substitution for the actual amount.
4: If the amount of consideration receivable by a taxpayer under such an arrangement is less than the arm's length amount, an amount equal to the arm's length amount is deemed to be the amount receivable by the taxpayer in substitution for the actual amount for all purposes of the application of this Act in relation to—
a: the income tax liability for any tax year of the taxpayer; or
b: the obligation of the taxpayer under subpart NH to make a withholding or deduction from the amount; or
c: the obligation of any person other than the taxpayer to make a withholding or deduction under Part N from the amount.
5: Subsection (4) does not apply if the taxpayer is neither resident in New Zealand nor entering into the arrangement for the purposes of a business carried on in New Zealand through a fixed establishment in New Zealand, and—
a: the amount is a deduction of the other party (or, in the case of an interest-free loan, would be a deduction but for the application of subpart FG if an arm's length amount of interest were substituted) and is interest, royalties, or an insurance premium; or
b: the amount is a dividend receivable on a fixed rate share.
6: For the purposes of this section, the arm's length amount of consideration must be determined by applying whichever 1 (or combination) of the methods listed in subsection (7) produces the most reliable measure of the amount completely independent parties would have agreed upon after real and fully adequate bargaining.
7: The arm's length amount of consideration must be calculated under any 1 (or a combination) of—
a: the comparable uncontrolled price method; or
b: the resale price method; or
c: the cost plus method; or
d: the profit split method; or
e: comparable profits methods.
8: The choice of method or methods for calculation and the resultant application of the method (or methods) must be made having regard to—
a: the degree of comparability between the uncontrolled transactions used for comparison and the controlled transactions of the taxpayer; and
b: the completeness and accuracy of the data relied on; and
c: the reliability of all assumptions; and
d: the sensitivity of any results to possible deficiencies in the data and assumptions.
9: The arm's length amount of consideration is determined by the taxpayer under subsections (6) to (8), and the amount so determined is the arm's length amount for the purposes of subsections (3), (4), and (10), unless—
a: the Commissioner can demonstrate another amount to be a more reliable measure of the arm's length amount; or
b: the taxpayer has not co-operated with the Commissioner in the Commissioner's administration of this section in relation to that taxpayer and the non-cooperation has materially affected the Commissioner in that administration,— in either of which events the Commissioner determines the amount under subsections (6) to (8) for the purposes of subsections (3), (4), and (10).
10: If—
a: the amount of consideration payable by a taxpayer for an acquisition is less than an arm's length amount or the amount of consideration receivable by the taxpayer for a supply exceeds an arm's length amount (that acquisition or supply being referred to in this subsection as the compensating adjustment arrangement
b: in the same tax year or in the immediately preceding or succeeding tax year, either—
i: an amount of consideration payable by the taxpayer is adjusted down under subsection (3); or
ii: an amount of consideration receivable by the taxpayer is adjusted up under subsection (4); and
c: the adjustment down (or up) is in respect of an arrangement for acquisition (or supply) with the same other party and—
i: involving goods, services, money, other intangible property, or anything else of the same type as that supplied and acquired in the compensating adjustment arrangement; or
ii: where the amount of consideration actually payable (or receivable) is set having regard to the amount of consideration actually payable (or receivable) under the compensating adjustment arrangement,— then for all purposes of the application of this Act in relation to the income tax liability for any tax year of the taxpayer (or, if the amount is receivable by the taxpayer, to the obligation of the taxpayer or any other person to make a withholding or deduction from the amount under Part N
11: If—
a: an arm's length amount of consideration is substituted under subsection (3) or (4) in respect of an arrangement entered into by a taxpayer; and
b: the other party to the arrangement (or, if the other party is a controlled foreign company, any person with an income interest in the controlled foreign company) applies to the Commissioner in writing within 6 months after an assessment is made in respect of the taxpayer which reflects the substitution; and
c: the Commissioner considers it is fair and reasonable to do so, having regard to any adjustment made under a double tax agreement or any other matter, and has notified the other party,— then the substitution so applies for all purposes of the application of this Act in relation to the other party—
d: excluding the determination of whether and the extent to which the other party has derived or been paid a dividend; and
e: including, in any case where the other party is a controlled foreign company, the calculation of branch equivalent income or branch equivalent loss in respect of the other party and the resultant calculation of the attributed CFC income or attributed CFC loss or attributed CFC net loss of any person.
12: Except to the extent that subsection (11) applies, an adjustment under any of subsections (3), (4), and (10) has no effect on any obligation of the taxpayer to make a withholding or deduction in respect of the amount under Part N, other than under subpart NH.
13: In this section,— acquisition
a: subject to paragraph (b), includes obtaining the availability of any thing; and
b: does not include the mere receipt, or retention, by a company of consideration for issue of a share (unless the share is a fixed rate share) amount insurance premium section FC 13 supply
a: subject to paragraph (b), includes making any thing available; and
b: does not include the mere payment, and subsequent continuing making available, by a person to a company of consideration for issue of a share (unless the share is a fixed rate share). 1994 No 164 s GD 13
GD 14: Attributing interests in FIFs
1: Subsection (2) applies if—
a: a person disposes of an attributing interest in a FIF; and
b: they calculate the FIF income or loss from the interest for the period ending with the disposal using the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method; and
c: they received no consideration for the disposal or consideration that was below the market value of the interest at the time.
2: The person is treated as having disposed of the interest for an amount equal to its market value at the time.
3: Subsection (4) applies if—
a: a person acquires an attributing interest in a FIF; and
b: they calculate the FIF income or loss from the interest for the period after the acquisition using the comparative value method, the deemed rate of return method, the fair dividend rate method, or the cost method; and
c: the consideration (if any) is not equal to the market value of the interest at the time.
4: The person is treated as having acquired the interest for its market value at the time. 1994 No 164 s CG 23(5), (6) Subsection (1)(b) substituted 1 April 2007 section 93(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 93(3) Subsection (3)(b) substituted 1 April 2007 section 93(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 See section 93(3) Subsection (3)(c) substituted 1 October 2005 section 62 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
GD 15: Disposal of timber, or right to take timber, or standing timber to associated person
1: This section applies when—
a: a person ( person A
b: as a result, person A has an amount of income under section CB 22 CB 23
2: The deduction that person A is allowed for the timber, or the right to take timber, or the standing timber must not be more than the amount of the income.
3: The deduction that the associated person is allowed for the cost of acquiring the timber is calculated on the basis that the associated person acquired the timber for the total of—
a: the cost to the associated person of acquiring the timber; and
b: the amount (if any) that person A is denied a deduction for by subsection (2). 1994 No 164 s DL 1(1)
GD 16: Disposals of ETS units at below market value
When this section applies
1: This section applies when—
a: a person (the transferor transferee
b: the disposal is not a surrender or conversion under the Climate Change Response Act 2002
c: the disposal is for—
i: no consideration; or
ii: an amount of consideration that is less than the market value of the ETS unit at the time of disposal. Disposal treated as being for market value
2: For the purposes of this Act, the consideration received by the transferor and provided by the transferee is treated as being equal to the market value at the time. amount ETS unit surrender Section GD 16 added 26 September 2008 section 65 Climate Change Response (Emissions Trading) Amendment Act 2008
GE: Non-market transactions: specific
Contents
GE 1: New Zealand Raspberry Marketing Council
1: This section applies upon the making of regulations to dissolve the New Zealand Raspberry Marketing Council, the Raspberry Marketing Export Authority, and the District Raspberry Marketing Committees, established under the Raspberry Marketing Regulations 1979
2: In this section, council current grower District Committee grower Raspberry Marketing Authorities (Dissolution) Regulations 1999
3: When the Raspberry Marketing Authorities (Dissolution) Regulations 1999
a: assessable income for growers, current growers, or the District Committees under section BD 1
b: a dividend.
4: When the Cold Storage Nelson Limited shares owned by the Nelson Raspberry Marketing Committee vest in Rubus Investments Nelson Limited, the vesting—
a: is treated as the consideration received by Rubus Investments Nelson Limited for the issue of its shares to the current growers of the Nelson Raspberry Marketing Committee in accordance with the formula in the Raspberry Marketing Authorities (Dissolution) Regulations 1999
b: does not give rise to—
i: assessable income for Rubus Investments Nelson Limited under section BD 1
ii: a dividend.
5: The issue of shares to the current growers of the Nelson Raspberry Marketing Committee by Rubus Investments Nelson Limited in accordance with the formula in the Raspberry Marketing Authorities (Dissolution) Regulations 1999
6: A distribution made by the council to the District Committees on dissolution is treated as a distribution made by a company to its shareholders on dissolution.
7: A distribution made by any 1 of the committees to a grower or a current grower on dissolution is treated as a distribution made by a company to its shareholders on dissolution. 1994 No 164 s GE 1
GZ: Terminating provisions
Contents
GZ 1: Pre-1974 agreements purporting to alter incidence of tax
Where any arrangement has been made or entered into before 1 October 1974 and the Commissioner is satisfied, in respect of that arrangement, or in respect of a part of that arrangement, that the terms or conditions of that arrangement or of that part (being legally binding terms or conditions which were agreed upon in writing before that date) prevent the discontinuance of that arrangement or of that part,—
a: sections BG 1 GB 1
b: so long as sections BG 1 GB 1 section 108 of the Land and Income Tax Act 1954 section 9 of the Land and Income Tax Amendment Act (No 2) 1974 1994 No 164 s GZ 1
H: Treatment of net income of certain entities
Contents
HB: Consolidated groups of companies
Contents
HB 1: Returns, assessments, and liability of consolidated group
1: Where and to the extent that any 1 or more companies are in any income year members of the same consolidated group,—
a: the nominated company must make a single return of income of those companies for that income year and those companies must not make separate returns of income for that income year, except to the extent that any such company is not a member of the group for part of the income year:
b: that single return of income must, if the Commissioner so requires, include such form of accounts detailing the separate affairs of each of those companies as the Commissioner may specify:
c: for the purposes of determining the availability under this Act of credits for set-off against the income tax liability of the consolidated group in respect of that income year, the group is treated as if it were a single company:
d: a single assessment must be made by the nominated company for those companies for that income year as if the companies were a single taxpayer, and a separate assessment for each company for that income year must not be made except to the extent that the company is not a member of the group for part of the income year,— and each of those companies is, subject to this section, jointly and severally liable for the amount of income tax assessed in respect of that consolidated group and that income year, and that joint and several liability is in substitution for any income tax liability of those companies under this Act individually in respect of taxable income for that income year (to the extent that the taxable income relates to a period when the company is a member of the consolidated group).
2: Subsection (1) does not apply to impose on a company that has ceased to be a member of a consolidated group joint and several liability for any amount of income tax assessed in respect of the consolidated group and any income year to the extent that—
a: the assessment is made after the later of—
i: the date on which the company is treated for the purposes of this Act as having ceased to be a member of the group; and
ii: the date on which occurred the event that caused the company to cease to be treated as a member of the group; and
b: the amount of income tax so assessed exceeds the amount (if any) assessed before that date in respect of the consolidated group and the income year; and
c: the Commissioner is satisfied that the application of this subsection will not significantly prejudice any recovery or likely recovery of any amount of income tax for the income year, and notifies the company and the consolidated group accordingly.
3: The nominated company of a consolidated group may, at any time before making an assessment of income tax in respect of the consolidated group and any income year, apply to the Commissioner requesting that only 1 or more specified companies in the consolidated group be treated as jointly and severally liable for the income tax liability of that group for that income year.
4: The Commissioner must give written approval of any application made under subsection (3) where satisfied that recovery or likely recovery of income tax assessed for that income year will not be significantly prejudiced by limiting the joint and several liability for that tax to the company or companies specified in the application.
5: Where the Commissioner approves an application under subsection (4),—
a: subsection (1) does not apply to impose on any company other than the companies specified in the Commissioner's written approval joint and several liability for income tax assessed in respect of the consolidated group for the income year to which the approval relates, except to the extent that—
i: the specified companies default in meeting their liability for that income tax assessed; and
ii: the Commissioner determines that the income tax liability of the consolidated group that is attributable to the taxable income of the other company is to be recovered from the other company:
b: sections MB 29 and MB 30 1994 No 164 s HB 1 Section HB 1(5)(b) amended 1 October 2007 section 114(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
HB 2: Taxable income to be calculated generally as if group were single company
1: Notwithstanding any other section of this Act, for the purposes of ensuring that a consolidated group is generally liable to income tax as if it were a single company, when calculating the taxable income for all or part of any income year of a company which is for that income year or part income year a member of the consolidated group (that year or part year being in this subsection referred to as the relevant period section HB 1
a: an amount derived in the relevant period by the company that—
i: is derived from a transaction or other arrangement with any other company that is a member of the same consolidated group; and
ii: would not be income if the company and the other company were 1 company,— is not income except to the extent that—
iii: it arises by virtue of a disposition of trading stock of the company; or
iv: the amount arises under section EW 31
v: the amount arises under section EW 31
vi: the amount is a dividend under section CD 3(1) section FD 4
b: any expenditure or loss incurred in the relevant period by the company—
i: that is incurred by virtue of a payment or disposition to, or other transaction or arrangement with, any other company that is a member of the consolidated group; and
ii: for which the company would be denied a deduction if the company and the other company were 1 company,— is denied as a deduction except—
iii: to the extent that it arises by virtue of an acquisition of trading stock by the company; or
iv: for the purposes of and in accordance with section FD 10
c: where any expenditure or loss or amount of depreciation loss incurred in the relevant period by the company (not being expenditure or loss that is denied as a deduction by virtue of paragraph (b))—
i: would be denied as a deduction but for this paragraph ; and
ii: would be allowed as a deduction if the consolidated group were 1 company by virtue of any connection between the incurring of that expenditure or loss or amount of depreciation loss and the deriving of assessable income or the carrying on of any business by any other member of the consolidated group,— the expenditure or loss or amount of depreciation loss is allowed as a deduction for the relevant period; and
d: where any expenditure or loss or amount of depreciation loss incurred in the relevant period by the company (not being expenditure or loss that is denied as a deduction by virtue of paragraph (b))—
i: would be allowed as a deduction but for this paragraph ; and
ii: would be denied as a deduction if the consolidated group were 1 company,— the expenditure or loss or amount of depreciation loss is denied as a deduction for the relevant period, except to the extent that it is interest in respect of money borrowed from a person that is not a member of the consolidated group; and—
iii: is allowed as a deduction under section DB 7 DB 8
iv: would be allowed as a deduction under section DB 7 DB 8
e: where any amount derived in the relevant period by the company—
i: would not be income but for this paragraph ; and
ii: would be income of the consolidated group if it were 1 company, by virtue of any purpose for which any property was acquired or any connection between that amount and the carrying on of a business by any other member of the consolidated group or otherwise,— the amount is treated as income for the relevant period; and
f: in applying any provision of this Act (such as section EW 17
2: Where—
a: any company which is a member of a consolidated group of companies incurs any expenditure or loss; and
b: that expenditure or loss would, if the group of companies were a single company, be taken into account under this Act in determining the cost of any property; and
c: but for the application of this subsection, that expenditure or loss would not be taken into account in determining under this Act the cost of any property of a member of the consolidated group,— that expenditure or loss is taken into account in determining the cost of any property of members of the consolidated group. 1994 No 164 s HB 2 Subsection (1)(c)(i) amended 1 April 2005 section 94(1) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting ; and ; or Subsection (1)(d)(i) amended 1 April 2005 section 94(2) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting ; and ; or Subsection (1)(e)(i) amended 1 April 2005 section 94(3) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting ; and ; or
HC: Special partnerships
Subpart HC repealed 1 October 2005 section 208 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Contents
HC 1: Special partnerships
Section HC 1 repealed 1 October 2005 section 208 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
HD: Partnerships
Contents
HD 1: Assessment of partners, co-trustees, and joint venturers
1: Where amounts are derived or incurred by 2 or more persons jointly, whether as partners, co-trustees, or otherwise,—
a: in the case of co-trustees, they include such amounts that would be income or deductions if the co-trustees were a single taxpayer resident in New Zealand in a joint calculation of taxable income and are jointly and severally liable for the resulting income tax liability:
b: in the case of partners there is no joint assessment, but each partner must, in calculating their taxable income, take into account their share of the income that they jointly derive from the firm:
c: in any case other than that of co-trustees or partners, each person jointly deriving or incurring such amounts must, in calculating their taxable income, take into account their share of the income that they jointly derive.
2: This section does not apply with respect to the income derived by, and deductions allowed to, an airport operator from activities that, in relation to that airport operator, are activities as an airport operator. 1994 No 164 s HD 1
HE: Unit trusts
Contents
HE 1: Unit trusts
For the purposes of this Act,—
e: income derived by the trustees of a unit trust is deemed to be income derived by that unit trust; and
f: the trustees of a unit trust are liable to income tax as agent of the unit trust; and
g: sums periodically appropriated or paid for manager's and trustee's remuneration out of income derived by the trustees of a unit trust are treated as expenditure incurred in the production of that income. 1994 No 164 s HE 1
HE 2: Group investment funds
1: The trustee of a group investment fund for any income year must make separate returns of—
a: category A income of the group investment fund; and
b: category B income of the group investment fund.
1A: Any income derived by the trustee of a group investment fund from the investments and funds of the group investment fund is, to the extent that—
a: the income is category A income of the group investment fund, deemed to be income to which the trustee of the group investment fund is beneficially entitled:
b: the income is—
i: income derived from the investments and funds of any designated group investment fund; or
ii: category B income of the group investment fund,— deemed to be income derived by a trustee and the trustee of the group investment fund must make returns and be liable accordingly in accordance with sections CX 34 DV 1 to DV 4 GC 14 HH 1 to HH 6 HZ 2
2: For the purposes of this section, the current value of the investments and funds referred to in paragraphs (a) and (b) of the definition of protected amount
3: In this section,— designated sources
a: any trust, other than the trust under which the group investment fund is established, being a trust—
i: that is created—
A: by will or codicil or by order of court varying or modifying the provisions of any will or codicil; or
B: on any intestacy (including any partial intestacy), or by order of court varying or modifying, in relation to any estate, the application of the law relating to the distribution of intestate estates; or
C: by order of court; or
D: by any enactment; or
E: for the purpose of administering any funds, being compensation or other money arising from the death of, or injury to, any person; or
F: in order to vary the terms of a will or codicil or, in relation to any estate, to vary the application of the law relating to the distribution of intestate estates, in either case for the sole purpose of effecting a settlement out of court of an application made or proposed to be made under the Family Protection Act 1955 Law Reform (Testamentary Promises) Act 1949
ii: that is not carried on for the private pecuniary profit of any individual and the funds of which are, in the opinion of the Commissioner, applied, wholly or principally, for benevolent, philanthropic, cultural, or public purposes within New Zealand,— where the trustee of the group investment fund is a trustee of the trust first referred to in this paragraph protected amount
a: the current value of the investments and funds from designated sources invested as at that time in the group investment fund; and
b: the current value of the investments and funds that were invested in the group investment fund as at 22 June 1983 as if those investments and funds had continued to be so invested up to the time first mentioned in this definition other than the part of those investments and funds that on that date were attributable to amounts from designated sources,— and for the purposes of this definition the investments and funds that were invested in the group investment fund as at 22 June 1983 are deemed to include—
c: any money deposited between 15 June and 23 June 1983 with the trustee of the group investment fund being money so deposited for investment in the group investment fund; and
d: any money deposited between 22 June and 16 July 1983 with the trustee of the group investment fund, being money so deposited for investment in the group investment fund which was, on or before 22 June 1983, subject to a binding commitment to deposit that money specified value 1994 No 164 s HE 2
HF: Mutual associations
Contents
HF 1: Profits of mutual associations in respect of transactions with members
1: Where in any income year an association enters into transactions with its members, or with its members and other persons, any amounts derived in that income year from those transactions which would be income of the association if the transactions were not of a mutual character is deemed to be income of the association derived in that income year (such an association being referred to in this section as an association to which this section applies
2: Subject to subsection (3), an association to which this section applies is allowed a deduction in an income year for the lesser of—
a: the aggregate of the amounts of rebates, being rebates that—
i: are paid by the association to its members in respect of their transactions with the association in that income year, being transactions that are taken into account in determining the net income or net loss of the association; and
ii: are calculated by reference to the amounts of those transactions, whether or not, in any case, any rebate is limited or reduced by reference to the amount of the share or interest of a member in the capital of the association; and
b: an amount calculated in accordance with the following formula: a – (b + c) where—
a: is the total of the assessable income attributable to those transactions
b: is the total of the deductions to which the association is entitled other than under this subsection and which are attributable to that assessable income
c: is the total of any amounts distributed to members in that income year by way of a cash distribution in respect of which a determination is made under section ME 35(1)(a)
3: Where an association to which this section applies is a statutory producer board,—
a: any amount allowed as a deduction under subsection (2) in respect of rebates paid by the producer board is the amount specified in subsection (2)(a), and nothing in subsection (2)(b) or (4) or the proviso to subsection (5) applies in relation to any such deduction; and
b: the statutory producer board may elect whether the amount is allowed as a deduction in the income year in which the rebates were paid or for the income year in which occurred the transactions in respect of which the rebates were paid; and
c: where any member of the statutory producer board to whom such a rebate is paid is itself a mutual association to which this section applies, the amount of the rebate is deemed to be income of that association derived in the income year in which the rebate is allowed as a deduction to the statutory producer board in accordance with its election under paragraph (b).
4: In subsection (2)(b), any expenditure or loss (being expenditure or loss that is allowed as a deduction under this Act) incurred by the association in the income year must be apportioned between the transactions referred to in paragraph (a)(i) of that subsection and the transactions (being transactions that are taken into account in determining the net income or net loss of the association) in that income year with persons other than its members.
5: Where any rebate or part of a rebate paid to any member by an association to which this section applies is paid in respect of any transactions which are of such a nature that any payments in respect of those transactions by that member to the association, or by the association to that member, would be taken into account in determining the taxable income of that member, that rebate, or that part of a rebate, is income (otherwise than as a dividend) of that member: provided that where that rebate, or that part of a rebate, exceeds so much as is attributable to it of the deduction allowed under subsection (2), the amount of the excess is deemed to be a dividend derived by that member.
6: For the purposes of this section, a rebate is deemed to have been paid to a person when it has been credited in account or otherwise dealt with in the person's interest or on the person's behalf.
7: Where a rebate or part of a rebate is satisfied—
a: by the issue of fully paid-up or partly paid-up shares in an association (being a company) to which this section applies; or
b: by giving credit in respect of the whole or part of the amount unpaid on any shares in any such association,— that rebate or part of a rebate is deemed not to be a bonus issue.
8: Every reference in this section to transactions as being transactions of an association with its members or transactions of members of an association with the association and as being, in either case, transactions that are taken into account in determining net income or net loss of the association is taken as a reference to transactions of any 1 or more of the following classes:
a: the purchase or other acquisition by the association of trading stock from a member of the association, whether that trading stock is sold or otherwise disposed of by the association to a member of the association or to any other person:
b: the sale or other disposition by the association of trading stock to a member of the association, whether that trading stock was purchased or otherwise acquired from a member of the association or from any other person:
c: the supply of any services by a member of the association to the association:
d: the supply of any services by the association to a member of the association:
e: the borrowing by the association of money from a member of the association to the extent to which that money is applied in lending money to a member or members of the association:
f: the lending by the association of money to a member of the association:
g: in relation to an association that is a statutory producer board, produce transactions, and the payment of levies to the statutory producer board by its members.
9: In this section,— association member
a: is liable in respect of that year to pay a levy to the statutory producer board; or
b: during that year, supplies produce or goods to the statutory producer board, in terms of the body's primary statutory functions rebate
a: is made by way of a distribution of profits of the association; and
b: is made not later than 6 months after the end of the trading year of the association in respect of which the payment is made,— but does not include any such payment to the extent that it forms part of a cash distribution in respect of which the association has made a determination under section ME 30(1)(a) ME 35(1)(a) section CD 18 CD 24 1994 No 164 s HF 1
HG: Qualifying companies
Contents
HG 1: Qualifying company regime
Subject to the express provisions of this subpart, any company that—
a: is owned by 5 or fewer natural persons as counted in accordance with section OB 3
b: is a flat-owning company within the meaning of subsection (1)(b)(ii) of that section—and that otherwise meets the requirements of that section may, by making the appropriate elections,—
c: make distributions to its shareholders of its gains in such a fashion that the distributed gains are treated for taxation purposes; and
d: where the company has only 1 class of shares, allocate its net losses to its shareholders in such a fashion that the net losses are treated for taxation purposes,— in like manner to that which would have occurred had the company been a partnership. 1994 No 164 s HG 1
HG 2: Determination of effective interest in company
For the purpose of determining a person's effective interest in a company in respect of any income year,—
a: the person's voting interest and market value interest in the company at any time is determined in accordance with sections OD 2 to OD 5 sections OD 3(3)(c) OD 4(3)(c)
b: where the person's voting interest or market value interest varies at any time during the income year, the person's voting interest or market value interest for that year is equal to the weighted average of the person's voting interest or market value interest, as the case may be, for the whole of the income year:
c: in the case of a person who has made a shareholder election under section HG 4(1)
i: the person (or, in the case of an election made under section HG 4(2) section HG 5(1) section HG 5(1)(b)
ii: if the shareholder election was made after the commencement of the income year, the person's voting interest and market value interest is determined in relation to that part of the income year that starts with the earliest day of the income year on which the person was a shareholder in the company, whether or not that date precedes the date on which the election was made:
d: in the case of a majority shareholder who has made a shareholder election under section HG 4(3)
i: the effective interest of the minority shareholder in respect of which the majority shareholder has elected to be liable is determined exclusive of any effective interest for which the minority shareholder is personally liable by virtue of an election made by the minority shareholder under section HG 4(1)
ii: where the majority shareholder's election is revoked under section HG 5(1) section HG 5(2)(d) section HG 5(1)(b) section HG 5(2)(d) 1994 No 164 s HG 2
HG 3: Director elections, and revocation of director elections
1: A company is only a qualifying company where all persons who are directors of the company at the time of the notice of election have, by notice to the Commissioner in such form as the Commissioner may allow, elected that the company should become a qualifying company.
2: Any election under this section takes effect,—
a: if no later income year has been specified in the notice of election, on the first day of the income year of the company that succeeds the income year in which the notice is received by the Commissioner; or
b: in any case where a later income year has been so specified, on the first day of such later income year,— and remains effective until the date upon which a revocation of that election takes effect in accordance with this section.
3: Notwithstanding subsection (2), any election under this section in relation to any company that has not previously been required to furnish an annual return of income under the Income Tax Act 1976 Tax Administration Act 1994 section 37
4: A director election may be revoked only by resolution of the board of directors notified to the Commissioner in such form as the Commissioner may allow.
5: Any such revocation takes effect on the later of—
a: the beginning of the income year in which the notice of revocation is received by the Commissioner; or
b: the beginning of such other income year as may be specified in the notice. 1994 No 164 s HG 3
HG 4: Shareholder elections
1: A company may only be a qualifying company where each shareholder in that company who is sui juris has, by notice to the Commissioner in such form as the Commissioner may allow,—
a: elected that the company should become a qualifying company; and
b: elected to be personally liable in respect of each income year during which the election is at any time in effect for such percentage of—
i: the income tax liability for that income year of that company; and
ii: any income tax payable in respect of that income year in accordance with an election by the company under this section as a shareholder in another company,— as is equal to the shareholder's effective interest in the company for the relevant income year.
2: Where any shareholder in a company is a trustee, that trustee is not treated as having made an election in accordance with subsection (1) or (3) unless both the trustee and any 1 or more natural persons who are sui juris (being in each case a beneficiary of the trust, or, where no beneficiary of the trust is sui juris, being a natural person (who may also be the trustee) assuming liability on behalf of beneficiaries) have, by notice to the Commissioner in such form as the Commissioner may allow,—
a: elected that the company should become a qualifying company; and
b: elected to be personally (in the case of any such beneficiary or natural person (who may also be the trustee) assuming liability on behalf of beneficiaries), or to the extent of the net assets subject to the trust (in the case of the trustee), jointly and severally liable in respect of each income year during which the election is at any time in effect for such percentage of any income tax liability for that income year of the company and of any income tax for which the company may be liable in respect of that income year in accordance with an election by the company under this section as a shareholder in another company as is equal to,—
i: in the case of an election made in accordance with subsection (1), the effective interest in the company of the trustee as a shareholder of the company for that income year; or
ii: in the case of an election made in accordance with subsection (3), the effective interest of the relevant other shareholder in the company for that income year.
3: Where—
a: the effective interest of any shareholder (in this subsection referred to as the minority shareholder
b: any 1 or more other shareholders (in this subsection referred to as the majority shareholders
i: elected that the company should become a qualifying company; and
ii: elected to be personally and (in the case of more than 1 majority shareholder) jointly and severally liable for each income year during which the election remains in effect for such percentage of any income tax liability for that income year of the company and of any income tax payable by the company in respect of that income year by virtue of an election by the company under this section as a shareholder in another company as is equal to the minority shareholder's effective interest in the company at the time of election and subsequently from time to time,— the minority shareholder is, for the purposes only of section OB 3(1)(f) subsection (1)
4: Any election made in accordance with this section in relation to any company takes effect,—
a: in the case of an election made at a time when the company is not already a qualifying company,—
i: if no later income year has been specified in the notice of election, on the first day of the income year of the company that succeeds the income year of the company in which the notice is received by the Commissioner; or
ii: in any case where a later income year has been specified, on the first day of that later income year; or
b: in the case of an election made at a time when the company is already a qualifying company, on the date on which the Commissioner receives notice of the election.
5: Notwithstanding subsection (4)(a), any election under this section in relation to any company that has not previously been required to furnish an annual return of income under the Income Tax Act 1976 Tax Administration Act 1994 section 37 1994 No 164 s HG 4
HG 5: Revocation of shareholder elections
1: A shareholder election made by any person may be revoked by that person by notice furnished to both the Commissioner and the company in such form as the Commissioner may allow, and any such revocation, subject to sections HG 6 HG 7
a: for the purposes only of section OB 3(1)(f)
i: if no later income year has been specified in the notice of revocation, on the first day of the income year in which the notice is received by the Commissioner; or
ii: on the first day of such later income year as may be specified in the notice:
b: for the purpose of determining in any appropriate case the effective interest in the company of the person making the revocation, on the date on which both the Commissioner and the company have received notice of the revocation or on such later date as may be specified in the notice of revocation.
2: A shareholder election made by any person is deemed to be revoked—
a: upon the death of the person:
b: upon the sale or other disposal of all the shares in the shareholding in relation to which the election was made (unless those shares are sold or otherwise disposed of to an existing shareholder in the company for whose shareholding a valid shareholder election is already in effect):
c: in the case of an election made under section HG 4(2)
d: in any case where the effective interest in the company of a minority shareholder in respect of whom an election has been made under section HG 4(3)
e: in any case where the effective interest or aggregate effective interests in the company of any majority shareholder or shareholders who have made an election under section HG 4(3)
f: in the case of an election jointly made by 2 or more persons, upon any revocation or deemed revocation taking effect in respect of any 1 of those persons and that election,— and any such deemed revocation, subject to sections HG 6 HG 7 section OB 3(1)(f) 1994 No 164 s HG 5
HG 6: Period of grace for new elections following death, revocation of shareholder election, or issue of new shares
1: A company does not cease to be a qualifying company at any time as a result only of the death of a shareholder or any other person, if—
a: that company would have been a qualifying company at that time but for that death; and
b: that company meets (and, subject to this section, subsequently continues to meet) all the requirements of section OB 3(1)
i: the period of 12 months immediately succeeding that death; or
ii: such extended period as the Commissioner may allow on the application of the company, the personal representative of a deceased shareholder, or any other person who may make any relevant shareholder election.
2: A company does not cease to be a qualifying company by reason only of a failure to comply with section OB 3(1)(f)
a: in the case of a revocation made by a person by notice to both the Commissioner and the company under section HG 5(1)
i: the period of 63 days immediately succeeding the date of receipt by the company of the notice of revocation; or
ii: such extended period as the Commissioner may allow on the application of the company or of a person who may make an election in respect of the shareholding:
b: in the case of a shareholder election deemed to be revoked under any of section HG 5(2)(b) to (e)
i: the period of 63 days immediately succeeding the event that gave rise to the deemed revocation; or
ii: such extended period as the Commissioner may allow on the application of the company or any person who may make a shareholder election in respect of the shareholding:
c: in the case of a jointly made shareholder election deemed to be revoked under section HG 5(2)
3: A company does not cease to be a qualifying company by reason only of a failure to comply with section OB 3(1)(f)
a: the acquisition of shares in the company by a person other than an existing shareholder (whether by purchase, issue, or otherwise); or
b: an existing shareholder becoming sui juris—if, within the period of 63 days following the date upon which the shares were acquired or the shareholder became sui juris, or within such extended period as the Commissioner may allow on the application of the new shareholder or the newly sui juris shareholder, or of any other person who may make a shareholder election in respect of the relevant shareholding, a valid shareholder election is made in respect of that shareholding. 1994 No 164 s HG 6
HG 7: Date on which non-complying company ceases to be qualifying company, and Commissioner's power to defer
1: Where a company ceases to comply with any of the requirements of section OB 3(1)
2: Where in respect of any company that would, but for this subsection, cease on the first day of any income year to be a qualifying company by reason of any event occurring or failing to occur at or by any particular time within that income year, the Commissioner is satisfied that—
a: at the particular time the company did not know and could not reasonably be expected to have known or ascertained that it would so cease to be a qualifying company, whether by reason of—
i: a reasonable expectation that the company would continue to qualify as a qualifying company by virtue of a substitute election or other appropriate event occurring within any period specified in or allowed under section HG 6 HG 15(3)
ii: a reasonable expectation that the company would not fail to comply with section OB 3(1)(d)
iii: a reasonable belief that qualifying company dividend income derived by a trustee referred to in section OB 3(1)(c)(ii) or otherwise; and
b: having regard to—
i: the period of time that has elapsed between the beginning of the income year and the date of failure to comply with any of the requirements of section OB 3(1)
ii: the period of time that has elapsed between the date of failure to comply with any of the requirements and the date on which that failure became known, or could reasonably be expected to have become known, to the company; and
iii: any transactions of the company during any such period; and
iv: any other relevant circumstances,— it would be unduly harsh or otherwise inappropriate to treat the company as having ceased for the purposes of this Act to be a qualifying company,— the Commissioner may, on the application of the company supported by such accounts or other information as the Commissioner may require, defer until the first day of a later income year than that specified under subsection (1) the date on which the company will be treated as ceasing to be a qualifying company; and this Act and the Tax Administration Act 1994 1994 No 164 s HG 7
HG 8: Liability of electing shareholder for income tax of company
1: Where any person elects in accordance with any of section HG 4(1)
a: the Commissioner may assess that person and, where the Commissioner does so, the person is liable as agent under this Act accordingly, as if the person were an agent for the company, for such percentage of the income tax payable by the company (including any income tax payable by the company by virtue of a shareholder election made by the company) in respect of any income year during which the company is a qualifying company and the election is at any time in effect as is equal to that person's effective interest (and, where appropriate, the effective interest of a minority shareholder) in the company in respect of the income year; and
b: no assessment of the company in respect of that income tax precludes an assessment of that person for the income tax, and no assessment of that person in respect of the income tax precludes an assessment of the company for the income tax.
2: Where a person who is liable under this section for a percentage of the tax payable by a qualifying company first acquires shares in the company, or sells or otherwise disposes of that person's whole shareholding in the company, during an income year, the Commissioner may reduce the percentage of tax for which the person is liable if—
a: the person satisfies the Commissioner, with the support of adequate accounts and such other information as the Commissioner may require, that the proportion of the company's tax liability that is attributable to the part of the income year in which the person was a shareholder in the company is smaller than the proportion that that part income year bears to the whole income year; and
b: the Commissioner is satisfied in all the circumstances that it would be appropriate to reduce the person's liability to tax accordingly— and, where the Commissioner so reduces the percentage of tax liability, the person's liability under this section is determined in relation to that reduced percentage accordingly. 1994 No 164 s HG 8
HG 9: Taxation of shareholders in qualifying companies
1: Where any qualifying company pays a dividend to any shareholder resident in New Zealand, the provisions of section HG 13
2: Where for any income year a loss attributing qualifying company has a net loss, the provisions of sections HG 16 HG 17
3: Notwithstanding any other provision of this Act, where in any income year any shareholder in a qualifying company incurs any interest expenditure in respect of money borrowed to acquire shares in that company, section DB 6
3A: For the purposes of subsection (3), where the associated person is associated with more than 1 shareholder in the qualifying company, the amount of any non-cash dividends (other than taxable bonus issues) derived by that person from that company in the income year is apportioned among the shareholders associated with the person in proportion to the effective interest in the company held by each of those shareholders in the relevant income year.
4: For the purpose only of determining whether a deduction is allowed under section DB 6
a: section HG 13
b: those distributions are treated as excluded from the definition of dividend
5: For the purposes of subsection (3), dividends to which section CD 28 section CD 28(3) 1994 No 164 s HG 9
HG 10: Taxation of qualifying company
Notwithstanding any other provision of this Act,—
a: sections CW 9 to CW 11 section CW 9
b: section IG 2(2)
i: the loss of any other company; or
ii: a payment made to any other company,— unless the other company is also a qualifying company. 1994 No 164 s HG 10 Section HG 10(a) amended 30 March 2017 section 392(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
HG 10B: Dividends derived by qualifying companies
When this section applies
1: This section applies when a company derives a dividend (the derived dividend
a: the derived dividend is derived less than 7 years after the company ceases to be a qualifying company; and
b: section CW 10 CW 11
c: the company paid a dividend that section HG 13(1)(a) or (1A) Dividend not exempt income
2: The derived dividend is not exempt income under section CW 10 CW 11 section CW 9 company dividend exempt income qualifying company Section HG 10B inserted 30 March 2017 section 393(1) Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017
HG 11: Taxation on election to become qualifying company
1: Where at any time any company not a qualifying company becomes a qualifying company, that company is liable to pay a special tax by way of an income tax known as qualifying company election tax
1A: If a company is not a qualifying company and ceases to exist when it amalgamates with a qualifying company, the amalgamated company is liable to pay a special tax by way of income tax known as qualifying company election tax.
1B: If subsection (1A) applies, subsection (2) applies to the amalgamated company as if—
a: the reference to the relevant time
b: all references to the time or income year in which the company became a qualifying company, however expressed, were read as referring to the time at which the amalgamating company ceases to exist.
2: The amount of qualifying company election tax payable by any company is an amount (not being less than nil) calculated in accordance with the following formula: where—
a: is the aggregate of any amounts which would be dividends for the purposes of this Act if, at the time (referred to in this section and section HG 12 relevant time
a: the company had disposed of all its tangible and intangible property (other than cash) to an unrelated person at the relevant time for amounts of cash equal to the market value of such property at the relevant time; and
b: the company had repaid or otherwise met all of its liabilities at the relevant time (not being income tax payable as a result of the disposition of property or meeting of liabilities) for amounts of cash equal to the market value of such liabilities to a purchaser of such liabilities at the relevant time; and
c: the company had then been liquidated and any amounts of cash remaining (whether arising from the disposition or otherwise) had been distributed to its shareholders (without imputation credits or dividend withholding payment credits attached); and
d: paragraph (i) of item j transitional capital amount
b: is the aggregate of the assessable income which would be derived by the company at the relevant time from taking the actions described in paragraphs (a) and (b) of item a
c: is, subject to subsection (4), the aggregate of the following amounts:
a: the amount of the balance in the company's imputation credit account immediately before the time at which the company became a qualifying company:
b: the amount of the balance in the company's dividend withholding payment account immediately before the time at which the company became a qualifying company:
c: any amount of income tax that—
i: is payable by the company in relation to an income year earlier than that in which the company became a qualifying company; and
ii: has not been paid by the company before the time it became a qualifying company; and
iii: is tax that, when paid, gives rise to a credit to the company's imputation credit account under section ME 4 less the amount of any income tax refund due in respect of any such earlier income year that is paid to the company, or credited or available to be credited in payment of any income tax liability of the company, after the time it became a qualifying company, and that gives rise, when paid or credited, to a debit to the company's imputation credit account under section ME 5
d: any amount of dividend withholding payment that—
i: is payable by the company in relation to dividends received before the time the company became a qualifying company; and
ii: has not been paid by the company before that time,— less the amount of any refund of dividend withholding payment made or due after that time to the company in relation to dividend withholding payment paid in respect of dividends received before that time
d: is the basic rate of income tax for companies, expressed as a decimal, stated in schedule 1, part A, clause 5
3: Where in any income year (in this section referred to as the relevant year) any company not a qualifying company becomes a qualifying company, that company is not entitled by virtue of any of sections IE 1 IE 3 IE 4 IF 1 IF 3
3A: If a company that is not a qualifying company amalgamates with a qualifying company and ceases to exist on amalgamation during an income year (referred to as the relevant year), the amalgamated company is not entitled by virtue of any of sections IE 1 IE 3 IE 4 IF 1 IF 3
4: For the purposes of this section, there is deducted, when calculating the amount of item c 1994 No 164 s HG 11
HG 12: Payment of qualifying company election tax
1: Every company liable to pay qualifying company election tax in accordance with section HG 11
a: make payment to the Commissioner of the qualifying company election tax no later than the company's terminal tax date for the tax year in which the relevant time, as defined in section HG 11(2)
b: at the same time as making that payment, furnish to the Commissioner a return in a form prescribed by the Commissioner, setting out such details as are required in that form.
2: Subject to this section, and to sections 94 139B Tax Administration Act 1994 Tax Administration Act 1994 section 139B Tax Administration Act 1994 section BB 1 income tax tax
a: the provisions listed in section OB 6(3)
b: the provisional tax rules; or
c: sections 120KB to 120KE Tax Administration Act 1994 1994 No 164 s HG 12 Section HG 12(2)(c) amended 1 October 2007 section 115 Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006
HG 13: Dividends from qualifying company
1: Where any qualifying company pays a dividend to any person (in this section referred to as the shareholder
a: that dividend is exempt income of the shareholder to the extent to which the dividend exceeds the aggregate of—
i: the amount calculated in accordance with the following formula: where—
a: is the amount of the imputation credit deemed to have been attached to the dividend in accordance with subsection (3) (which amount is zero where no imputation credit is attached)
b: is the amount of the dividend withholding payment credit deemed to have been attached to the dividend in accordance with subsection (4) (which amount is zero where no dividend withholding payment credit is attached)
c: is the basic rate of income tax for companies, expressed as a decimal, stated in schedule 1, part A, clause 5
ii: the amount of the dividend which would not be a dividend if paragraph (i) of item j transitional capital amount and the amount of any such imputation credit or dividend withholding payment credit is, for the purposes of this Act, deemed to be attached to that part of the dividend which is not exempt income; and
aa: sections CW 9 to CW 11
b: the whole of that dividend does not constitute resident withholding income for the purposes of the RWT rules; and
c: where for any income year—
i: the shareholder has a late balance date; and
ii: the dividend is derived in the period between the preceding 31 March and that balance date,— the dividend is, notwithstanding section 38
1A: For the avoidance of doubt, a dividend that is paid by a qualifying company to any trustee shareholder and that is, or that becomes, beneficiary income of a beneficiary resident in New Zealand is exempt income of the beneficiary to the same extent as if the beneficiary were the shareholder referred to in section HG 13(1)(a)
2: Notwithstanding the imputation rules or the dividend withholding payment rules, no qualifying company may attach—
a: an imputation credit to any dividend paid by that company except in accordance with subsection (3); or
b: a dividend withholding payment credit to any dividend paid by that company except in accordance with subsection (4).
3: A qualifying company that is an imputation credit account company is, with respect to any dividend (not being a non-cash dividend other than a taxable bonus issue) paid during any imputation year while that company is a qualifying company, deemed to have attached an imputation credit to that dividend equal to the lesser of—
a: the maximum imputation credit which may be attached to that dividend by virtue of section ME 8(1)
b: an amount calculated in accordance with the following formula: where—
a: is the balance in the company's imputation credit account on the last day of the imputation year in which the dividend is paid, being the balance before any debit is made for the attachment in accordance with this subsection of imputation credits to dividends paid by the company during the imputation year
b: is the amount of the dividend before attachment of any imputation credits
c: is the aggregate amount of all dividends (not being non-cash dividends other than taxable bonus issues) paid by the company during the imputation year before attachment of any imputation credits.
4: A qualifying company that is a dividend withholding payment account company is, with respect to any dividend (not being a non-cash dividend other than a taxable bonus issue) paid during any imputation year while that company is a qualifying company, deemed to have attached a dividend withholding payment credit to that dividend equal to the lesser of—
a: the maximum dividend withholding payment credit which may be attached to that dividend by virtue of sections MG 8(1) MG 10(1) section MG 10(1)
b: an amount calculated in accordance with the following formula: where—
d: is the balance in the company's dividend withholding payment account on the last day of the imputation year in which the dividend is paid, being the balance before any debit is made for the attachment in accordance with this subsection of dividend withholding payment credits to dividends paid by the company during the imputation year
e: is the amount of the dividend before attachment of any dividend withholding payment credits
f: is the aggregate amount of all dividends (not being non-cash dividends other than taxable bonus issues) paid by the company during the imputation year before attachment of any dividend withholding payment credits.
5: Where a company has in any imputation year paid any dividends (not being non-cash dividends other than taxable bonus issues),—
a: the amount of any imputation credit attached to any of those dividends in accordance with subsection (3) is, for the purposes of section ME 5
b: the amount of any dividend withholding payment credit attached to any of those dividends in accordance with subsection (4) is, for the purposes of section MG 5
c: the company must complete a company dividend statement in accordance with section 67(1)
i: detail the extent (if any) to which any of the dividends are assessable income and the extent (if any) to which any of the dividends are exempt income by virtue of subsection (1); and
ii: be completed by the 31 May first succeeding the last day of the imputation year in which the dividends were paid; and
d: the company must complete a shareholder dividend statement in accordance with section 29
i: detail the extent (if any) to which any of the dividends are assessable income and the extent (if any) to which any of the dividends are exempt income by virtue of subsection (1); and
ii: be given by the 31 May first succeeding the last day of the imputation year in which the dividends were paid; and
e: in addition to the information to be included in a shareholder dividend statement under paragraph (d), the company must, where it is requested to do so by the shareholder, include in the shareholder dividend statement a statement of the amount of non-cash dividends paid to the shareholder during the imputation year.
6: Sections ME 5(1)(i) MG 5(1)(i)
a: subsections (3) and (4) apply with respect to the imputation year in which occurs the day (in this subsection referred to as the relevant date
b: there is a debit recorded in the company's imputation credit account on the relevant date equal to the lesser of—
i: the excess (if any) of the balance in the company's imputation credit account on the relevant date (being that balance before the attachment of any imputation credits in accordance with subsection (3)) over the amount of such credits attached in accordance with subsection (3); and
ii: any debit (and, if more than 1, the greatest in amount) which would have arisen before the relevant date to the company's imputation credit account by virtue of the application of section ME 5(1)(i)
c: there is a debit recorded in the company's dividend withholding payment credit account on the relevant date equal to the lesser of—
i: the excess (if any) of the balance in the company's dividend withholding payment credit account on the relevant date (being that balance before the attachment of any dividend withholding payment credits in accordance with subsection (4)) over the amount of such credits attached in accordance with subsection (4); and
ii: any debit (and, if more than 1, the greatest in amount) which would have arisen before the relevant date to the company's dividend withholding payment credit account by virtue of the application of section MG 5(1)(i) 1994 No 164 s HG 13 Section HG 13(3)(a) substituted 6 October 2009 section 809(1) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section HG 13(3)(a) amended 19 December 2007 section 105(1) Taxation (Business Taxation and Remedial Matters) Act 2007 Section HG 13(4)(a) substituted 6 October 2009 section 809(2) Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 Section HG 13(4)(a) amended 19 December 2007 section 105(2) Taxation (Business Taxation and Remedial Matters) Act 2007
HG 14: Loss attributing qualifying companies
A company is in respect of any income year a loss attributing qualifying company to which section HG 16
a: the company is at all times in the income year a qualifying company; and
b: each share in the company carries at all times in the income year the same—
i: right to exercise voting power and participate in any decision-making at any time concerning—
A: the distributions to be made by the company; and
B: the constitution of the company; and
C: any variation in the capital of the company; and
D: the appointment or election of directors of the company; and
ii: right (in terms of priority, amount payable per share, and otherwise) to receive or have dealt with in the shareholder's interest or on the shareholder's behalf—
A: profits that may be distributed at any time by the company; and
B: distributions of assets of the company on any acquisition, redemption, or other cancellation by the company of its shares or other reduction in or return of share capital of the company, whether on its liquidation or otherwise,— as each other share in the company; and
c: a notice in such form as the Commissioner may allow electing that the company be a loss attributing qualifying company—
i: is executed by each person who is sui juris and is at the date on which the notice is furnished a shareholder or a director in the company; and
ii: is received by the Commissioner before the first day of the income year, or, in the case of a company that has not previously been required to furnish an annual return of income under the Income Tax Act 1976 Tax Administration Act 1994 section HG 4(5)
iii: subject to section HG 15
d: no share in the company has, at any time during that income year, in the opinion of the Commissioner, been subject to any arrangement or series of related or connected arrangements for the purpose, or for purposes including the purpose, of making the company a company to which this section applies so as to defeat the intent and application of this section. 1994 No 164 s HG 14
HG 14A: Minority shareholders in loss attributing qualifying companies
For the purposes only of section HG 14 section HG 14(c) section HG 14(c)
a: any 1 or more other shareholders in the company whose effective interests in that company at that time aggregate 50% or more have executed the notice required by section HG 14(c)(i)
b: all the conditions required by section HG 14 section HG 14(c)(i) 1994 No 164 s HG 14A
HG 15: Revocation of loss attribution elections
Sections HG 3(4) HG 5 HG 6 HG 7 section HG 14 HG 14A section HG 3(1) section HG 4(1) 1994 No 164 s HG 15
HG 16: Net losses of loss attributing qualifying company to be attributed to shareholders
1: Subject to section HG 17
a: each shareholder who has an effective interest in the company for that income year is deemed to incur an amount of loss equal to the net loss of the company for that income year multiplied by the shareholder's effective interest in the company for that income year; and
b: subject to subsection (2), the amount of loss deemed to be incurred by each shareholder is treated for the purposes of this Act as if it were a loss incurred by that shareholder in deriving assessable income of that shareholder for that income year (except to the extent that the net loss of the company includes an attributed CFC loss or a FIF loss, in either of which cases the shareholder's amount of attributed loss is treated for the purposes of this Act as if it were attributed CFC loss or FIF loss, as the case may be, of the shareholder); and
c: the company is not entitled to carry that net loss forward in accordance with any of sections IE 1 IE 3 IE 4 IF 1
2: Where, in respect of any company, any shareholder in that company, and any income year,—
a: either the company, the shareholder, or both have a non-standard balance date for that income year; and
b: the company has a later balance date for the income year than the shareholder; and
c: by reason of the difference in balance dates it is not practicable for the shareholder to ascertain, within the time allowed in accordance with section 37
d: the shareholder elects that this subsection applies by applying accordingly the provisions of this Act,— the amount of any net loss of the company so attributable to the shareholder in respect of that income year is, notwithstanding section 38
3: Notwithstanding subsections (1) and (2), where and to the extent that, in relation to any loss attributing qualifying company and any income year of that company,—
a: any shareholder has a part of that company's net loss attributed to that shareholder in accordance with subsections (1) and (2); and
b: that company's net loss results in a reduction in the aggregate value of shares in that company; and
c: that shareholder suffers no, or substantially no, part of such reduction, due to any factor or factors, including any right of the shareholder or any other person to sell any thing, or any right of any other person to require that shareholder or any other person to sell any thing,— the shareholder is, for the purposes of this Act in respect of that income year, deemed to have no part of that company's net loss attributed to that shareholder in accordance with this section.
4: Where the attribution of any amount of a company's net loss is denied to a shareholder under subsection (3), that amount—
a: is not attributed to any other shareholder; and
b: may not be carried forward by the company under any of sections IE 1 IE 3 IE 4 IF 1 1994 No 164 s HG 16
HG 17: Attributed CFC losses and FIF losses
1: Where a foreign loss election is deemed in accordance with this section to be in effect in respect of a loss attributing qualifying company in any income year,—
a: the amount of any attributed CFC loss and any FIF loss of the company for the income year is not included within any net loss attributed to and deemed to be incurred by shareholders under section HG 16(1)(a)
b: the company may carry that amount of attributed CFC loss or FIF loss forward to a succeeding income year subject to and in accordance with section IE 3 IE 4
2: A foreign loss election is deemed to be in effect in respect of any income year of a loss attributing qualifying company where—
a: the company is at all times in the income year a qualifying company; and
b: a notice in such form as the Commissioner may allow, executed by each person who is sui juris and is at the date on which the notice is furnished a shareholder in the company, electing that the company is to retain any attributed CFC losses and FIF losses, has been received by the Commissioner before—
i: the first day of the income year; or
ii: in the case of a company that has not previously been required to furnish an annual return of income under the Income Tax Act 1976 Tax Administration Act 1994 section HG 4(5)
c: no revocation of the foreign loss election is in effect for that income year.
3: A foreign loss election under this section may be revoked only by furnishing to the Commissioner a notice of revocation, in such form as the Commissioner may allow, executed by all persons who are sui juris and are shareholders in the company at the time of the notice of revocation, and, subject to subsection (4), any such revocation takes effect—
a: where no later income year is specified, on the first day of the income year of the company in which the notice of revocation was received by the Commissioner; or
b: on the first day of such later income year as is specified in the notice.
4: Any revocation of a foreign loss election under this section does not apply in respect of any attributed CFC loss or FIF loss of the company that—
a: has been carried forward under section IE 3 IE 4
b: arose for the company in an earlier income year. 1994 No 164 s HG 17
HG 18: Company that ceases to be loss attributing qualifying company also ceases to be qualifying company
Where any company which is a loss attributing qualifying company for any income year ceases to be a loss attributing qualifying company for the immediately succeeding income year, that company is also deemed, for the purposes of this Act, and notwithstanding any other provision of this subpart, to have ceased to be a qualifying company on the first day of that immediately succeeding income year, but without prejudice to any ability of that company subsequently to become once again a qualifying company. 1994 No 164 s HG 18
HH: Trusts
Contents
HH 1: Interpretation
1: For the purposes of this section, where any person (in this subsection referred to as the first person
b: where such settlement is of a nominal amount made at the request of any other person,— that other person is, in relation to that settlement, deemed to be the settlor and not the first person.
2: For the purposes of this section and the trust rules, without limiting the situations in which a person is a settlor by reason of that person indirectly undertaking any of the transactions specified in paragraph (a) settlor settlor section EX 5(1) sections EX 2 to EX 7
3: For the purposes of this section and the trust rules, where a trustee of a trust (in this subsection called the first trust second trust paragraph (a) settlor
4: For the purposes of this section and the trust rules, where any person has, directly or indirectly, acquired any rights or powers in relation to a trustee or settlor of an existing trust, and that acquisition has the purpose or effect of enabling the person to require the trustee of the trust to treat the person or any other person nominated by that person as a beneficiary of that trust, the person is deemed to be a settlor of that trust.
5: Subject to subsection (6), for the purposes of this section and the trust rules, a trust is a charitable trust
6: For the purposes of this section and the trust rules, no trust is a charitable trust in relation to any tax year if, in that tax year, a business is carried on by or on behalf of the trustees of that trust and, in the carrying on of that business, any benefit or advantage, whether or not in money or money's worth, or any income of any of the kinds referred to in sections CB 5 to CB 21 CB 27 CB 28 CC 1 CC 3 to CC 7 CC 9 CD 1 CE 1 CE 8 CF 1 CG 3 CQ 1 CQ 4 CZ 6 FF 3 FF 4
a: who is a settlor or trustee of the trust by which the business is carried on; or
b: who is a shareholder or director of the company by which the business is carried on; or
c: who is a settlor or trustee of a trust that is a shareholder of the company by which the business is carried on; or
d: where that person and that settlor or trustee or shareholder or director referred to in any of paragraphs (a) to (c) are associated persons by virtue of section OD 7 OD 8(3) and that person is able, by virtue of that capacity as settlor or trustee or shareholder or director or associated person, in any way (whether directly or indirectly) to determine, or to materially influence in any way the determination of, the nature or the amount of that benefit or advantage or that income or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived; and for the purposes of this subsection—
e: a person is, in relation to a trust, deemed to be a settlor of the trust and to gain a benefit or advantage in the carrying on of a business of the trust, in any case where that person has disposed of or disposes of, to the trust, any asset that is used by the trust in the carrying on of that business, and where that person retains or reserves an interest in that asset or where that asset will revert to that person:
f: the deriving by any trustee of any rents, fines, premiums, or other revenues from any asset is, in any case where any person, being a person of any of the kinds referred to in paragraphs (a) to (d), has disposed of or disposes of, to the trust, any asset that is used by the trustee in the deriving of those rents, fines, premiums, or other revenues, and where that person retains or reserves an interest in that asset or that asset will revert to that person, deemed to be the carrying on of any business by the trustee:
g: income is deemed not to be derived by any person of any of the classes referred to in paragraphs (a) to (d) in any case where the income consists of interest on money lent that, in the opinion of the Commissioner, is payable at not more than current commercial rates, having regard to the nature and term of the loan:
h: a person is not, by reason only that the person renders professional services to any trust or company by which a business is carried on, considered to be able to determine, or to materially influence the determination of, the nature or the amount of any benefit or advantage or income afforded to, or received, gained, achieved, or derived by that person or the circumstances in which it is or is to be so received, gained, achieved, afforded, or derived, in any case where that ability to so determine or to so materially influence results from the rendering by that person, in the course of and as part of the carrying on as a business of a professional public practice by that person, of professional services to the trust or company by which the business first mentioned in this paragraph is carried on; and, for the purposes of this paragraph, Public Trust, the Maori Trustee, and any trustee company are each deemed to be a person carrying on as a business a professional public practice.
7: For the purposes of this section and the trust rules, where any property of the kinds described in paragraph (b) corpus
8: This section and the trust rules do not apply to any unit trust or to any group investment fund to the extent to which it is treated as a company for the purposes of this Act.
9: Where a trust that is deemed for the purposes of this Act to be a company becomes a superannuation fund, the trust is for the purposes of this Act deemed to have been wound up on the date that it becomes a superannuation fund.
10: For the purposes of this section and the trust rules, where any person resident in New Zealand makes a settlement as an employer for the benefit of 1 or more employees on the terms of a trust established or created principally for the purpose of providing retirement benefits to beneficiaries who are natural persons, which trust is neither a foreign superannuation scheme nor a superannuation fund, that person is, in relation to that settlement, deemed not to be a settlor of that trust. 1994 No 164 ss HH 1, CF 2(3A)(b) Subsection (7) amended 1 April 2005 section 64 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 by inserting paragraph (b) the definition
HH 1A: Treatment of settlements on trust
For the purposes of this subpart, if a settlement is made on a trust and further settlements are made on the same terms, a trustee of the trust may treat all settlements as 1 trust. 1994 No 164 s HH 1A
HH 2: Trusts settled by persons before becoming resident
1A: This section applies to a trust if—
a: a settlor of the trust is a natural person who on a day (the transition day
i: becomes a New Zealand resident who is not a transitional resident:
ii: ceases to be a transitional resident and continues to be a New Zealand resident; and
b: the trust would be a foreign trust in relation to a distribution made from property of the trust if the distribution were made on the day immediately before the settlor became a New Zealand resident.
1: A settlor, trustee, or beneficiary of the trust may, within 12 months of the transition day, elect under section HH 4(7)
2: Where an election has been made in accordance with subsection (1), for the purposes of the definition of taxable distribution
a: the trust is deemed to be a foreign trust to the extent to which any distribution from that trust consists of income, capital profits, or capital gains derived by the trustee of the trust before the date on which the election was made; and
b: the trust is deemed to be a qualifying trust to the extent to which any distribution from the trust consists of income, capital profits, or capital gains derived by the trustee of the trust on or after the date on which the election was made if the trustee's obligations under this Act and the Tax Administration Act 1994
3: Where an election has not been made in accordance with subsection (1), for the purposes of the definition of taxable distribution
a: the trust is deemed to be a foreign trust to the extent to which any distribution from that trust consists of income, capital profits, or capital gains derived by the trustee of the trust before the date on which expires 12 months from the transition day election expiry date
b: the trust is deemed to be a non-qualifying trust to the extent to which any distribution from the trust consists of income, capital profits, or capital gains derived by the trustee of the trust on or after the election expiry date.
4: For the purposes of subsections (2) and (3), the income, capital profits, or capital gains derived in the part of the tax year before the election to pay tax was made or before the election expiry date, as the case may be, must be calculated at the option of any trustee, settlor, or beneficiary of the trust who is required to satisfy the income tax liability in respect of the taxable income of the trustee of the trust as—
a: the amount calculated in accordance with the following formula: where—
a: is the income, capital profits, or capital gains derived by the trustee of the trust during the tax year in which the election is made or in which the election expiry date falls
b: is the number of days in the tax year which fall before the day on which the election is made or before the election expiry date; or
b: the income, capital profits, or capital gains derived by the trustee of the trust in the part of the tax year which falls before the day on which the election is made or before the election expiry date. 1994 No 164 s HH 2 Subsection (1A) inserted 1 October 2005 section 116(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 116(3) Subsection (1) substituted 1 October 2005 section 116(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 See section 116(3) Subsection (3)(a) amended 1 October 2005 section 116(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting the transition day the day on which the settlor first became resident in New Zealand See section 116(3)
HH 3: Income of beneficiaries
1: The income of any person in any tax year includes any beneficiary income and any taxable distribution derived other than from a non-qualifying trust by that person in that tax year.
2: Where any beneficiary, other than a beneficiary of a community trust, derives in any tax year beneficiary income or a taxable distribution, the trustee must in respect of that beneficiary income or taxable distribution satisfy the income tax liability of the beneficiary as agent of the beneficiary.
3: Notwithstanding any other provision of this Act, where any person resident in New Zealand ceases to be resident in New Zealand and, within a period of not more than 5 years from the day upon which that person ceased to be resident, that person again becomes resident in New Zealand, for the purposes of this section that person is deemed to derive, on the day on which that person again becomes resident in New Zealand, any amount which would have been income of the person, if the person had during that period remained in New Zealand, as beneficiary income from a foreign trust or a non-qualifying trust or taxable distributions derived by that person during the period commencing with the day on which that person ceased to be resident in New Zealand and ending on the day on which that person again became resident in New Zealand: provided that this subsection does not apply to beneficiary income or taxable distributions derived by that person prior to 16 December 1988 (being the date upon which the Income Tax Amendment Act (No 5) 1988
4: Where any person derives in any tax year any taxable distribution from a trust which is, in relation to that distribution, a non-qualifying trust, that taxable distribution is not income of the person and the person is liable for tax by way of an income tax in respect of that taxable distribution at the rate specified in schedule 1 provided that where in that tax year the person has any net loss or net loss carried forward to which relief would be given under section IE 1 IF 1 where—
a: is such part of the net loss or net loss carried forward as the person claims must be taken into account by virtue of this proviso
b: is the minimum rate specified in schedule 1
c: is the rate specified in schedule 1 and, to the extent to which any net loss or net loss carried forward is taken into account by virtue of this proviso, the loss may not be offset by the person against the person's net income or carried forward by the person.
5: Distributions (not being beneficiary income) derived by any beneficiary in that beneficiary's capacity as beneficiary in any tax year from any trust that is in relation to that distribution a qualifying trust is excluded from being income of the beneficiary, subject to subsection (5A).
5A: If the trustee of a community trust makes in a tax year a distribution to a person as a beneficiary of the trust and the distribution is not beneficiary income of the person, the distribution is income of the person in the tax year to the extent that the distribution does not represent—
a: trustee income derived by the trustee of the trust in or before the 2003-04 tax year:
b: the corpus of the trust:
c: capital profits or capital gains derived by the trustee of the trust:
d: a distribution, settlement, or dividend that is made to the community trust in the 2004-05 or 2005-06 tax year on the winding up of a trust or company, if—
i: the community trust provided the corpus of the trust and the trust would have been for charitable purposes but for the distribution, settlement, or dividend:
ii: the company is wholly-owned by the community trust and would have been established, maintained, and carried on for exclusively charitable purposes but for the distribution, settlement, or dividend.
6: This section does not apply to a Maori authority. 1994 No 164 s HH 3 Subsection (4) substituted 1 April 2005 section 65 Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005
HH 3A: Beneficiary income of minors
1: If a minor derives beneficiary income,—
a: a trustee of the trust from which the beneficiary income is derived must pay income tax on the beneficiary income as if the beneficiary income were trustee income:
b: despite section HH 3(1)
2: For the purpose of debiting and crediting a beneficiary's account within a trust, income tax paid by the trustee of a trust on beneficiary income is paid on behalf of the beneficiary, being a minor. 1994 No 164 s HH 3A
HH 3B: Exemption for beneficiary income $1,000 or less
Section HH 3A 1994 No 164 s HH 3B
HH 3C: Source of beneficiary income
1: Section HH 3A
a: made by a person who is neither a relative or legal guardian of the minor nor a person associated with the relative or legal guardian :
b: made by a relative, legal guardian, or associated person as an agent of the minor if the settlor has received the property from someone other than a relative, guardian, or associated person :
c: made by a relative, legal guardian, or associated person if the settlor is required by a court order to pay damages or compensation to the minor :
d: made by a relative, a legal guardian, or an associated person, against whom a protection order has been made under section 14 :
e: made according to a will, codicil, intestacy, or a court variation of a will, codicil, or intestacy if—
i: the minor is alive within 12 months of the date of the settlor's death :
ii: the minor has a brother, sister, half-brother, or half-sister who is alive within 12 months of the date of the settlor's death.
2: Subsection (1)(d) applies if—
a: the minor is a protected person, as defined in section 2
b: the settlement on the trust is made before the protection order is made or during the time the protection order is in force.
3: For the purposes of subsection (1)(d), a settlement on the trust may be made jointly with another person. 1994 No 164 s HH 3C Subsection (1)(a) amended 1 October 2005 section 95(a) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by omitting either Subsection (1)(a) to (d) (e)(i) amended 1 October 2005 section 95(b) Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting : ; or
HH 3D: Treatment of various settlements
1: If more than 1 settlement is made on a trust and 1 or more settlements are not of the type referred to in section HH 3C HH 3A
a: all the settlements that are not of the type referred to in section HH 3C
i: paragraph (a)(i) settlor
ii: paragraph (a)(ii) settlor
b: the settlements that satisfy paragraph (a)(i) settlor
c: the settlements that satisfy paragraph (a)(ii) settlor
1A: Subsection (1) does not apply if more than 1 settlement is made on a trust and none of the settlements are of the type referred to in section HH 3C
2: For the purposes of subsection (1)(b), a settlement is valued on the date of settlement.
3: This section does not apply if services are provided to a trust by a relative or a legal guardian of a minor or by a person associated with the relative or the legal guardian.
4: In subsection (3), services 1994 No 164 s HH 3D
HH 3E: Exceptions
1: Section HH 3A(1) Social Security Act 1964
2: Section HH 3A(1) 1994 No 164 s HH 3E
HH 3F: Definitions of guardian, minor, and relative
1: In sections HH 3C HH 3D guardian guardianship section 15
a: section 110(1)(a), (b), (c), or (d) of the Children, Young Persons, and Their Families Act 1989
b: section 31
c: section 53 of the Public Trust Office Act 1957
d: section 7(4)
2: In sections HH 3A to HH 3E LB 1 LB 1A minor
2A: In subsection (2), the balance date of the trust is the balance date for the income year in which the income, from which the distribution of beneficiary income is made, is derived.
3: In sections HH 3C HH 3D relative person A person B marriage or partnership
4: In subsection (3),—
a: persons are connected by blood relationship if within the fourth degree of relationship:
b: persons are connected by marriage or partnership if 1 person is in a marriage, civil union or de facto relationship with the other or with a person who is connected by blood relationship, adoption or guardianship to the other:
c: persons are connected by adoption if one has been adopted as the child of the other or as a child of a person who is within the third degree of relationship to the other:
d: persons are connected by guardianship if one is a guardian of the other. 1994 No 164 s HH 3F Subsection (1) amended 1 July 2005 section 151 Care of Children Act 2004 by substituting section 15 of the Care of Children Act 2004 section 3 of the Guardianship Act 1968 Subsection (1)(b) amended 1 July 2005 section 151 Care of Children Act 2004 by substituting section 31 of the Care of Children Act 2004 section 10B of the Guardianship Act 1968 Subsection (3) amended 26 April 2005 section 3(1) Income Tax Amendment Act 2005 by substituting marriage or partnership marriage Subsection (4)(b) substituted 26 April 2005 section 3(1) Income Tax Amendment Act 2005
HH 4: Trustee income
1: Subject to this section and sections CX 34 DV 1 to DV 4
2: A trustee is not entitled—
a: to any rebate of income tax; or
b: to be a cash basis person, unless the trustee meets the requirements of section EW 60
3: Subject to subsection (7) and section HH 2
a: any settlor of the trust is a New Zealand resident who is not a transitional resident; or
b: the trust is a superannuation fund; or
c: any trustee of the trust was resident in New Zealand and the trust is a testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that tax year or otherwise.
3A: In calculating the taxable income of a trustee to whom subsection (3) applies, and for no other purpose, the trustee is deemed not to be a non-resident for the purposes of section BD 1(4)(b) sections EW 9 EW 11 LC 1 MF 11
3B: If a trustee resident in New Zealand derives in a tax year any foreign-sourced amount, that amount is exempt income if no settlor of the trust is at any time in the tax year a New Zealand resident who is not a transitional resident
a: a superannuation fund; nor
b: a testamentary trust or an inter vivos trust where any settlor of the trust died resident in New Zealand, whether in that tax year or otherwise.
3BB: Subsection (3B) does not apply for an income year to the resident foreign trustees of a foreign trust to which sections 22(2)(fb) 59B
a: is not a qualifying resident foreign trustee for the income year; and
b: is convicted of an offence under section 143A
c: has committed the offence in relation to information relating to the income year.
3BC: Subsection (3BB) does not apply for an income year to the resident foreign trustees of a foreign trust if a resident foreign trustee is convicted of an offence under section 143A(1)(b)
a: the conviction is in relation to information relating to the income year; and
b: the information is supplied to the Commissioner after the conviction is entered.
4: Subject to subsection (5), where, in relation to any trust (not being a charitable trust) and any tax year, a trustee of the trust derives trustee income, and a settlement was made to or for the benefit of the trust or on the terms of the trust by any person after 17 December 1987 (whether or not that person or any other person may have also made a settlement on the terms of that trust on or before 17 December 1987), any settlor of the trust who is resident in New Zealand at any time during that tax year is liable as agent of the trustee for any income tax payable by the trustee (other than income tax payable by the trustee in the trustee's capacity as agent) and, if there is more than 1 such settlor, those settlors are, in respect of that income tax payable, jointly and severally so liable.
5: Subsection (4) does not apply to—
a: any settlor of a trust in any tax year where at all times during that tax year (or, where a settlement is first made to or for the benefit of that trust or on the terms of that trust during that tax year, at all times from the day of that settlement until the end of that tax year) a trustee of that trust is resident in New Zealand; or
b: any settlor of a superannuation fund; or
c: any settlor of a trust (being a natural person) who was at the time of any settlement by that settlor on the trust not resident in New Zealand and who had not at the time of any settlement previously (at any time after 17 December 1987) been resident in New Zealand, unless the settlor elects to satisfy the income tax liability in respect of the taxable income of the trustee under subsection (7); or
d: any settlor of a trust to the extent to which that settlor can establish to the satisfaction of the Commissioner by making full disclosure of all relevant facts that the liability of that settlor to satisfy the income tax liability of the trustee exceeds the liability which that settlor should bear by comparison to other persons who have made a settlement to or for the benefit of the trust or on the terms of that trust having regard to the respective settlements made by that settlor and those other persons; or
e: any settlor of a trust to the extent to which the trustee income is derived by virtue of the application of the financial arrangements rules to any amounts remitted by the settlor under any financial arrangement where section EW 31 provided that paragraph (d) does not apply in determining the nature and extent of the obligations of the trustee of the trust and whether those obligations have been satisfied for the purposes of the definition of qualifying trust
6: Where in any tax year an amount is income under subsection (3) and—
a: either—
i: no settlement was made to or for the benefit of the trust or on the terms of the trust after 17 December 1987 and, where any election has been made under section HZ 2
ii: the only settlements made to or for the benefit of the trust or on the terms of the trust have been made by settlors who, at the time of the settlement, were not resident in New Zealand nor had previously (at any time after 17 December 1987) been resident in New Zealand and, where an election has been made under section HZ 2
b: the trustee is at all times during that tax year resident outside New Zealand,— the amount is exempt income under subsection (3): provided that this subsection does not affect the income tax liability of any settlor of a trust under sections HH 1 HH 2 provided also that for the purpose of determining whether a trust is or remains a qualifying trust or is deemed to be a qualifying trust, and for the purpose of the application of the definition of qualifying trust
7: In relation to any trust and any tax year, any trustee, settlor, or beneficiary of a trust may furnish to the Commissioner within the prescribed period for furnishing an annual return of income for that tax year, or within such other period as may be specified in section HH 2
7B: In relation to any trust and a distribution, a trustee is treated as electing to satisfy the income tax liability (other than income tax payable in the capacity of agent) of the trustee, determined as if the trustee were a New Zealand resident and the trust had a settlor who is a New Zealand resident, if—
a: the trust is a qualifying trust for the period beginning at the start of the income year in which a settlement is first made to, for the benefit of, or on the terms of, the trust and ending before the date on which the trust ceases to be a qualifying trust as described in paragraph (b); and
b: the trust ceases to be a qualifying trust because the trust does not meet the requirements in paragraph (a)(i) and (ii) of the definition of qualifying trust
c: the trustee indicates that the trust is a qualifying trust in the return of income for each income year ending after the trust ceases to be a complying trust, as described in paragraph (b), and before the distribution.
7C: A trustee who is treated under subsection (7B) as choosing to satisfy an income tax liability has the income tax liability referred to in that subsection for the income years in the period beginning at the start of the income year in which the trust ceases to be a complying trust, as described in subsection (7B)(b), and ending on the date of the distribution.
8: This section does not apply to a Maori authority. 1994 No 164 s HH 4 Subsection (3)(a) substituted 1 October 2005 section 117(1) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Subsection (3B) amended 1 October 2005 section 117(2) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 by substituting at any time in the tax year a New Zealand resident who is not a transitional resident resident in New Zealand at any time during the tax year Subsections (3BB) (3BC) inserted 1 October 2006 section 117(3) Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 Section HH 4(7B) inserted 24 February 2016 section 286 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 Section HH 4(7C) inserted 24 February 2016 section 286 Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016
HH 5: Existing trusts becoming subject to tax
Where, in relation to any trust and any tax year, amounts derived by the trustee of that trust on or after any date in that tax year are trustee income, but would not have been trustee income had they been derived immediately before that date (other than only as non-resident withholding income),—
a: the cost for the purposes of this Act at that date of the premises, plant, machinery, equipment, and trading stock of that trust is deemed to be, at the option of any person who is liable for any income tax payable by the trustee,—
i: the historical cost of the asset, less accumulated amounts of depreciation loss (if any), or other value at that date used for the purposes of income tax calculations in any country or territory in which there has been a liability to income tax in respect of the trustee income of the trust (being a value not higher than the market value at that date); or
ii: the value which would be used for the purposes of this Act at that date calculated as if the trustee income of that trust had at all times been assessable income under this Act (other than only as non-resident withholding income):
b: the consideration for a financial arrangement on that date is, at the option of the person who is liable for income tax payable by the trustee,—
i: the market value of the financial arrangement on that date; or
ii: the absolute value of the result of the formula— consideration paid to the person + expenditure – consideration paid by the person – income where— The following table is small in size and contains a formula. consideration paid to the person is the consideration paid to the person for all periods before the accounting period expenditure is expenditure that would have been incurred under the financial arrangements rules for all periods before the accounting period consideration paid by the person is the consideration paid by the person for all periods before the accounting period income is income that would have been derived under the financial arrangements rules for all periods before the accounting period. 1994 No 164 s HH 5
HH 6: Distributions from trusts
1: Subject to subsection (2), where in any tax year any distribution from a trust is made to a beneficiary by any trustee, that distribution is, for the purposes of sections HH 1 HH 2
a: the income derived by the trustee in that tax year (whether, as between the parties to the trust, the income is treated as derived by a beneficiary or not) less any deductions in that tax year required to be taken into account under this Act for the purpose of calculating net or taxable income, not being income deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust in that tax year; and
b: to the extent to which the distribution exceeds the amount specified in paragraph (a), income derived by the trustee in preceding tax years (not being beneficiary income) during which the trust was in existence less any deductions in that tax year required to be taken into account under this Act for the purpose of calculating net or taxable income, not being amounts deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust; and
c: to the extent to which the distribution exceeds the amounts specified in paragraphs (a) and (b), profits derived during that tax year by the trustee of the trust from realisation of a capital asset of the trust or any other capital profit or capital gain realised during that tax year by the trustee (not being amounts required to be taken into account under this Act for the purpose of assessing income tax) less any capital loss incurred by the trust in that tax year (not being a loss required to be taken into account under this Act for the purpose of assessing income tax), not being profits or gains deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust in that tax year; and
d: to the extent to which the distribution exceeds the amounts specified in paragraphs (a), (b), and (c), the distribution is deemed to be out of the amount specified in paragraph (c) for preceding tax years during which the trust was in existence, not being amounts deemed by this section to have constituted part of any earlier or contemporaneous distribution from that trust; and
e: to the extent to which the distribution exceeds the amounts specified above, corpus of the trust.
2: Subsection (1) does not apply—
a: to any distribution from a trust which is a qualifying trust (other than a qualifying trust in relation to which an election to pay income tax on trustee income has been made for the purposes of section HZ 2
b: to any distribution from a trust—
i: created by will or codicil or by an order of court varying or modifying the provisions of any will or codicil; or
ii: created on any intestacy or partial intestacy; or
iii: on which no settlement was made after 17 December 1987,— and the trustee has no discretion as to the source nature and amount of distributions to beneficiaries, including but not limited to the classification of trust property as capital or income; or
c: to any distribution that is a distribution only by virtue of the application of paragraph (b)(i) or (ii) of the definition of distribution
d: to any distribution from a trust which is one to which section HH 2(2) and in such case except in the case of a distribution specified in paragraph (c) of this subsection the distribution is deemed to consist of such amounts as reflect the terms of the trust or the terms of the exercise of the discretion of the trustee, and, in the case of a distribution specified in paragraph (c), the distribution is a taxable distribution.
3: Subject to subsection (2), where and to the extent to which in relation to any distribution the records maintained in relation to any trust do not permit subsection (1) to be applied accurately to determine the constituent elements of any distribution, the distribution made is a taxable distribution.
4: For the purposes of this section, in determining in relation to any trust and to any beneficiary the constituent elements of any distribution, no amount of income or capital profits or gains derived by the trustee of the trust is treated as having been distributed to any other beneficiary of that trust if the effect is that any part or all of the distribution in question would be treated as not being a taxable distribution, unless that amount distributed to that other beneficiary was distributed in a bona fide transaction which placed the whole of that amount beyond the possession and control of the trustee in the trustee's capacity as trustee of that trust and which transaction did not itself constitute a settlement. 1994 No 164 s HH 6
HH 7: Commissioner may determine amount of trustee income
Where any person—
a: has failed to disclose for any tax year in accordance with section 59
b: has failed to disclose any information requested by the Commissioner under section 17
c: is unable to obtain sufficient information to calculate the trustee income of that trust for any tax year,— the Commissioner may determine the amount of trustee income for the tax year in such manner as the Commissioner considers fair and reasonable. 1994 No 164 s HH 7
HH 8: Income received by trustee after death of deceased person
Any amount received in any tax year by the trustee of the estate of a deceased person is deemed to be income derived by the trustee in that tax year if it does not represent income derived by the deceased person during that person's lifetime, but would have been included in that person's income if that person had been alive when it was received. 1994 No 164 s HH 8
HI: Maori authorities
Contents
HI 1: Application of Act to Maori authority
1: The application to a Maori authority of a provision that is not in the Maori authority rules is subject to the Maori authority rules.
2: A Maori authority may not—
a: offset any part of a net loss against net income of another taxpayer that is not a Maori authority:
b: offset net income against any part of a net loss of another taxpayer that is not a Maori authority:
c: amalgamate with a company that is not a Maori authority:
d: be part of a consolidated group that includes a company that is not a Maori authority:
e: be a co-operative company if a shareholder is not a Maori authority. 1994 No 164 s HI 1
HI 2: Eligibility to be Maori authority
The following persons are eligible to be a Maori authority:
a: a company that is established by an order made under Te Ture Whenua Maori Act 1993
b: the trustees of a trust that is established by an order made under Te Ture Whenua Maori Act 1993
c: a company that owns land that is subject to Te Ture Whenua Maori Act 1993
d: the trustees of a trust who own land that is subject to Te Ture Whenua Maori Act 1993
e: the Maori Trustee in the Maori Trustee's capacity as an agent for an owner of land that is subject to Te Ture Whenua Maori Act 1993
f: a Maori Trust Board, as defined in section 2
g: the Crown Forestry Rental Trust, established by deed in accordance with section 34
h: Te Ohu Kai Moana Trustee Limited, established in accordance with section 33
i: Aotearoa Fisheries Limited, established in accordance with section 60
ia: a company that is—
i: established by a mandated iwi organisation to be an asset-holding company, as contemplated by section 12(1)(d)
ii: recognised by Te Ohu Kai Moana Trustee Limited as a mandated iwi organisation under section 13(1)
ib: the trustees of a trust that is recognised by Te Ohu Kai Moana Trustee Limited as a mandated iwi organisation under section 13(1)
j: the trustees of the trusts that are established by Te Ohu Kai Moana Trustee Limited in accordance with sections 79 92
k: a company that—
i: on behalf of Maori claimants, receives and manages assets that are transferred by the Crown as part of the settlement of a claim under the Treaty of Waitangi
ii: is contemplated by the deed of settlement of the claim as performing the functions referred to in subparagraph (i):
l: the trustees of a trust who—
i: on behalf of Maori claimants, receive and manage assets that are transferred by the Crown as part of the settlement of a claim under the Treaty of Waitangi
ii: are contemplated by the deed of settlement of the claim as performing the functions referred to in subparagraph (i). 1994 No 164 s HI 2 Paragraphs (h) (i) (j) substituted 29 November 2004 section 214 Maori Fisheries Act 2004 See clause 3 Maori Fisheries (Appointed Day) Order 2004 Paragraphs (ia) (ib) inserted 29 November 2004 section 214 Maori Fisheries Act 2004 See clause 3 Maori Fisheries (Appointed Day) Order 2004
HI 3: Election to become Maori authority
1: A person who is eligible to be a Maori authority may elect to become a Maori authority by giving notice to the Commissioner.
2: Upon receiving a notice of election by a person, the Commissioner must give to the person a notice accepting the election.
3: A person who elects to become a Maori authority becomes a Maori authority—
a: on the first day of the income year in which the person gives notice of the election to the Commissioner, if paragraph (b) does not apply:
b: on the first day of the income year immediately succeeding the income year in which the person gives notice of the election to the Commissioner, if the person nominates that date in the notice of the election.
4: An election by a person to become a Maori authority ceases to be effective if the person—
a: gives notice to the Commissioner that the election is cancelled, whereupon the election ceases to be effective from the date that is given in the notice:
b: ceases to be a Maori authority.
5: A person who is a Maori authority under this Act at the end of the 2003-04 tax year ceases to be a Maori authority at that time unless the person—
a: is eligible at the beginning of the 2004-05 tax year to be a Maori authority; and
b: gives to the Commissioner a notice of an election to become a Maori authority that the Commissioner accepts at or before the end of the 2004-05 tax year. 1994 No 164 s HI 3 Subsection (3) substituted 1 October 2005 section 209 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
HI 4: Distributions by Maori authority
1: The following amounts are treated as distributions by a Maori authority:
a: an amount that is paid or credited by the Maori authority to a member in any manner or under any name:
b: an amount that is applied by the Maori authority exclusively for the member:
c: an amount that is advanced by the Maori authority to a member to the extent to which the making of the advance is not a bona fide investment by the Maori authority but is virtually a distribution of income:
d: if property is disposed of by the Maori authority to a member without consideration in money or money's worth, or for a consideration that is less than the market value of the property, the amount by which the market value of the property is more than the amount of consideration:
e: if property is disposed of by a member to the Maori authority for a consideration that is more than the market value of the property, the amount by which the market value of the property is less than the amount of consideration:
f: a taxable bonus issue.
2: A distribution by a Maori authority to a member that, but for this subsection, would be a dividend for the member—
a: is treated as being a distribution by the Maori authority to the member; and
b: is treated as not being a dividend paid by the Maori authority to the member except for the purposes of section CW 10
3: A Maori authority that is a co-operative company may make a notional distribution to a member under section ME 35 1994 No 164 s HI 4 Subsection (1)(e) amended 1 October 2005 section 210 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 by substituting consideration: consideration: Subsection (1)(f) inserted 1 October 2005 section 210 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 Subsection (3) amended 1 April 2005 section 96 Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 by substituting ME 35 ME 5
HI 5: Amount distributed to member by Maori authority
1: An amount distributed by a Maori authority to a member is—
a: income of the member, if the amount is a taxable Maori authority distribution or a notional distribution:
b: not income of the member, otherwise.
2: Subject to subsection (3), an amount distributed by a Maori authority to a member is a taxable Maori authority distribution
a: derived by the Maori authority in the 2004-05 tax year or a subsequent tax year; and
b: not exempt from tax in the hands of the Maori authority.
3: A cash distribution by a Maori authority to a member is not a taxable Maori authority distribution if the Maori authority—
a: makes the distribution in respect of a notional distribution; and
b: has made a determination under section ME 35
4: A taxable bonus issue that is made by a Maori authority to a member is a taxable Maori authority distribution. 1994 No 164 s HI 5 Subsection (4) inserted 1 October 2005 section 211 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
HI 6: Proportional allocation required if distribution includes amount other than taxable Maori authority distribution
If a Maori authority makes a distribution that consists of a taxable Maori authority distribution and another amount, the Maori authority must allocate an equal proportion of each type of distribution to every member to whom the distribution is made. 1994 No 164 s HI 6
HI 7: Distribution includes Maori authority credit attached and RWT deducted
For the purposes of this Act, the income of a member includes the amount of a Maori authority credit attached, or treated as being attached under section NF 8A 1994 No 164 s HI 7
HI 8: Treatment of companies and trusts that elect to apply this subpart
Table HI 8: Transitional rules
The following table is small in size and contains 6 columns. Column 1 is headed Row. Column 2 is headed If. Column 3 is headed becomes. Column 4 is headed then and reverts to being. Column 5 is headed then. CONSEQUENCES OF CHANGE IN ENTITY STAUS FOR PURPOSE OF MAORI AUTHORITY RULES Row If becomes then 1 a company a Maori authority (a) the company ceases to be an imputation credit account company and the rules relating to a company ceasing to be an imputation credit account company apply; and (b) retained earnings, accumulated profits, and capital reserves are treated as an amount from which may be made a distribution that is not a taxable Maori authority distribution. 2 a trust a Maori authority trustee income is treated as an amount from which may be made a distribution that is not a taxable Maori authority distribution. 3 a Maori Authority a company (a) the Maori authority may transfer a credit balance that is not a in the Maori authority credit account to the company's imputation rity credit account, and section MK 8 (b) taxable income derived by the Maori authority in the 2003-04 or an earlier tax year is available subscribed capital. 4 a Maori authority a trust that is not a Maori authority taxable income derived by the Maori authority is treated as trustee income Row If becomes and reverts to being then 5 a Maori authority a company that is not a Maori authority a Maori authority (a) market value calculations are required in accordance with section HI 9 (b) the company must apply row 1. 6 a Maori authority a trust that is not a Maori authority a Maori authority (a) market value calculations are required in accordance with section HI 9 (b) the trust must apply row 2. How to use this table Read columns from left to right according to the row that fits your situation.
1: If a company becomes a Maori authority, the company must apply row 1 of table HI 8.
2: If a trust becomes a Maori authority, the trust must apply row 2 of table HI 8
3: If a Maori authority is a company and ceases to be a Maori authority, the former Maori authority must apply row 3 of table HI 8.
4: If a Maori authority is a trust and ceases to be a Maori authority, the former Maori authority must apply row 4 of table HI 8. 1994 No 164 s HI 8 Row 4 of Table HI 8 was substituted 1 October 2005 section 212 Taxation (Venture Capital and Miscellaneous Provisions) Act 2004
HI 9: Market value calculations
1: This section applies to a company or the trustees of a trust that, having ceased to be a Maori authority, become a Maori authority again.
2: For the purposes of this Act, such a company is treated as—
a: disposing of its property immediately before becoming a Maori authority for a consideration that is the market value of the property on the date of disposal; and
b: acquiring the property of the Maori authority for a consideration that is the market value of the property on the date of the disposal referred to in paragraph (a).
3: The market value of the property is the market value for both the company and the Maori authority.
4: For the purposes of this Act, such trustees are treated as—
a: disposing of the trust's property immediately before becoming a Maori authority for a consideration that is the market value of the property on the date of disposal; and
b: acquiring the property of the Maori authority for a consideration that is the market value of the property on the date of the disposal referred to in paragraph (a).
5: The market value of the property is the market value for both the trustees and the Maori authority.
6: For the purpose of applying depreciation provisions, the cost to a Maori authority of property that is affected by this section is the lower of—
a: the market value of the property on the date of acquisition; and
b: the original cost of the property to the company or the trust. 1994 No 164 s HI 9
HJ: Superannuation
Contents
HJ 1: Government Superannuation Fund
The Government Superannuation Fund Authority is liable for income tax in the same manner in all respects as if the Fund were a superannuation scheme that is a trust and the Government Superannuation Fund Authority were the trustee of that scheme. 1994 No 164 s HJ 1
HK: Agency
Contents
Agents generally
HK 1: Agent to make returns and be assessed as principal
1: A person who is an agent for a principal under this Act or under the Tax Administration Act 1994
a: make all assessments that the principal is required to make; and
b: furnish all tax returns that the principal is required to furnish; and
c: satisfy the income tax liability of the principal.
2: A person who is an agent under subsection (1) is not entitled to a rebate other than a rebate to which the agent's principal is entitled. 1994 No 164 s HK 1
HK 2: Rate and amount of tax payable by agent
Except where otherwise expressly provided by this Act, the rate of tax used to calculate an agent's income tax liability must be determined by reference to the taxable income of the principal, but it must be charged and payable in the same proportion as the income subject to section HK 1 1994 No 164 s HK 2
HK 3: Liability of principal not affected
1: Nothing in this Act relating to an agent is to be so construed as to release the principal from liability to make assessments, furnish returns, and to be charged with tax.
1A: With the Commissioner's agreement, a principal may agree with their agent that the principal will—
a: make an assessment that the agent would be required to make; and
b: furnish a return that the agent would be required to furnish; and
c: satisfy an income tax liability that the agent would be required to satisfy.
2: No assessment of the agent precludes an assessment of the principal for the same tax, nor does an assessment of the principal by the Commissioner preclude an assessment of the agent by the Commissioner for the same tax, and the principal and agent are jointly and severally liable for all tax for which the agent is liable.
3: When 2 or more persons are liable as agents in respect of the same tax, they are jointly and severally liable for it. 1994 No 164 s HK 3
HK 4: Agent may recover tax from principal
When an agent pays any tax, the agent may recover the amount so paid from the agent's principal or may deduct the amount from any money in the agent's hands belonging or payable to the agent's principal. 1994 No 164 s HK 4
HK 5: Agent may retain from money of principal amount required for tax
An agent may from time to time during the tax year, or at any later time, retain out of any money belonging or payable to the agent's principal such sums as may reasonably be deemed sufficient to pay the tax for which the agent is or may become liable. 1994 No 164 s HK 5
HK 6: Assessment deemed authority for payment of tax by agent
An assessment made by the Commissioner is, as between an agent and the agent's principal, a sufficient authority for the payment by the agent of the tax so assessed and the agent is entitled as against the agent's principal to reimbursement accordingly. 1994 No 164 s HK 6
HK 7: Agents to be personally liable for payment of tax
1: Every person who is an agent is personally liable for the income tax liability of the person in respect of the person's taxable income as agent.
2: When the Commissioner is satisfied that an agent has no money of the agent's principal with which the agent can pay the tax, and that the agent has not paid away any such money after an assessment in respect of the agent has been made, and that immediate enforcement of payment by the agent would be a cause of hardship, the Commissioner may set a new due date for payment of the tax assessed as payable in the notice of assessment. 1994 No 164 s HK 7
HK 8: Relation of principal and agent arising in effect
When the Commissioner is satisfied that any person carrying on business in New Zealand (in this section referred to as the agent principal 1994 No 164 s HK 8 Special cases of agency
HK 9: Guardian of person under disability to be agent
Every person who, as guardian, manager, or otherwise, has the receipt, control, or disposition of any income derived by a person under any legal disability is for the purposes of this Act and the Tax Administration Act 1994 1994 No 164 s HK 9
HK 10: Liability of mortgagee in possession
For the purposes of this Act and the Tax Administration Act 1994 1994 No 164 s HK 10
HK 11: Liability for tax payable by company left with insufficient assets
1: This section applies where—
a: any arrangement has been entered into in relation to a company; and
b: an effect of that arrangement is that the company is unable to satisfy under this Act a liability (called in this section the tax liability
i: income tax:
ii: a civil penalty:
iii: an amount payable under Part 7
c: it can reasonably be concluded that—
i: a director of the company at the time of entry into the arrangement who had made all reasonable inquiries into the affairs of the company would have anticipated at that time that the tax liability would be, or would be likely to be, required to be satisfied by the company under this Act; and
ii: a purpose of the arrangement was to have the effect specified in paragraph (b).
2: This section does not apply to—
a: any arrangement to which the Commissioner is a party; or
b: any arrangement to the extent that the Commissioner is satisfied that the tax liability is less than or equal to any amount of income tax—
i: arising under this Act as a direct result of the performance of the arrangement; and
ii: the liability for which has been duly satisfied under this Act; or
c: any arrangement entered into at a time when the company is under statutory management under the Reserve Bank of New Zealand Act 1989 Corporations (Investigation and Management) Act 1989
3: Where any arrangement to which this section applies has been entered into, all persons who were directors of the company at the time the arrangement was entered into are, subject to subsection (6), jointly and severally liable for the tax liability as agent of the company.
4: Where any arrangement to which this section applies has been entered into, any person who was—
a: a controlling shareholder at the time the arrangement was entered into; or
b: a person who had a voting interest or market value interest in the company (calculated, in any case where the person is a company, as if the person were not a company) at the time the arrangement was entered into, where it could reasonably be concluded, having regard to the materiality of the benefit derived by the person from the arrangement, that the person was a party to the arrangement,— is liable as agent of the company for—
c: the tax liability (excluding a civil penalty or an amount payable under Part 7
i: the market value of the person's direct and indirect shareholding in the company at the time of entry into the arrangement; and
ii: the value of any benefit derived by the person from the arrangement; and
d: that proportion of a civil penalty or an amount payable under Part 7 (excluding the civil penalty or the amount payable under Part 7
5: A limitation placed on the liability of any person under subsection (4) applies notwithstanding section HK 3(3)
6: Notwithstanding subsection (3), a director is not liable under that subsection for any tax liability of the company where the Commissioner is satisfied that the director derived no benefit from the arrangement and either—
a: the director has, at the first reasonable opportunity after becoming aware of the arrangement, or of those aspects of the arrangement that render it subject to this section,—
i: formally recorded with the company his or her dissent in relation to the arrangement; and
ii: notifie